User Charge Revenues for Wastewater Treatment Plants--Insufficient To Cover Operation and Maintenance

Billions of dollars in federal grants have been made to municipalities throughout the nation to construct publicly owned wastewater treatment plants. Once the plants are constructed, municipalities are responsible for raising sufficient monies from system users to properly operate and maintain these plants. GAO made a review to determine whether user charge revenues collected by municipalities are sufficient to properly operate and maintain the treatment plants; whether such costs are fairly and equitably distributed among system users; and whether sufficient revenues are being generated to pay for replacing major capital items in the plants.

GAO found that half of the 36 municipal treatment plants randomly selected for review were not charging users enough to cover operation and maintenance costs and were relying on other municipal revenue sources for funds. Also, 40 percent were not charging all users their fair and equitable share of costs. Thus, the future successful operation of the costly treatment facilities may be in jeopardy, and the nation's clean water goals may not be achieved. Replacing the thousands of federally funded plants will require billions of dollars. Current federal legislation is silent on the sources of funds for plant replacement. Only three of the municipalities reviewed are now setting aside replacement funds. Twenty-three indicated that they would return to the federal government for replacement funding. The need to eventually replace major equipment items can significantly strain local financial resources. Inequitable user charge systems allow a few users to benefit while many users pay excessive charges. GAO believes that such subsidies violate a basic intent of the user charge concept, equity. Fifteen of the 36 municipalities had not met the grant requirement of making a periodic review and of updating their user rates and classes to meet increased costs or changing operating conditions. Neither the Environmental Protection Agency nor the states have follow-up programs to verify a municipality's compliance with user charge grant conditions, and no enforcement program exists under which penalties could be assessed for noncompliance.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Hugh J. Wessinger Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 275-5489