By Hope Thomson, Project Director at the SOG Environmental Finance Center
The SOG EFC primarily collaborates with public service providers, including local governments and institutions that manage water, wastewater, stormwater, and other essential environmental services for communities. Its overarching goal is to enhance the financial sustainability of these utilities while ensuring strict compliance with quality standards that protect public health and the environment. While many opportunities exist to support these entities, not all communities receive their water or wastewater services from a centralized provider.
Decentralized water users—those relying on wells for drinking water and septic systems for wastewater—also need support to maintain safe water quality, manage costs, and protect the surrounding environment. Research has shown that these users may face additional health risks from contaminated wells or malfunctioning septic systems. A study by Eaves et al. from UNC Chapel Hill’s Gillings School of Global Public Health found that a quarter of wells in North Carolina exceeded maximum contaminant limits for various heavy metals. Addressing these issues often requires costly and time-intensive solutions, highlighting the need for proactive support and resources.
The SOG EFC sought to better understand decentralized water users and their options for improving water and sewer access. With support from the North Carolina Collaboratory, the center explored two key pathways: connecting to centralized services or sustainably maintaining decentralized systems. A crucial factor in these decisions is cost, which impacts users, utilities, and other stakeholders. By analyzing and comparing these costs, the center provides valuable insights and tools to help decentralized users make informed decisions about improving their water and wastewater services.
Cost to Users – Connecting to Centralized Services
If connecting to a centralized service provider, such as a local government utility, a decentralized user will need to pay upfront to cover the cost of tapping into the system. These fees vary by utility but often cover the “parts and labor” associated with connecting the home. Some of these physical infrastructure improvements may include installing a water meter and pipe extension from the main line to the house. Additionally, connecting the structure’s plumbing to the short-line may be costly.
Once a user is connected, they are responsible for paying their monthly water and/or sewer bill. This will vary by utility and an individual’s usage throughout a month. The SOG EFC prepares a yearly dashboard detailing statewide water and sewer rates for decentralized users curious about their monthly bills. The dashboard is open to the public to use.
There are also resources available from various sources online to estimate household water usage, which can vary greatly depending on the size of a structure and the appliances and individuals it contains.
If a decentralized user chooses to remain decentralized, costs can vary widely. For water access, users often explore point-of-use (POU) filters (water being filtered at an individual faucet, for example) or point-of-entry (POE) filters (water being filtered where it enters the structure). POU filters can range from just $10 to over $1,500, while POE filters can range from $200 to $12,000, depending on the system. Importantly, the type of filter required will depend on what contaminants of concern need to be filtered out. These filters also require maintenance and regular replacement, which carries additional costs.
Cost to Utility
Most local government utilities in North Carolina operate as public enterprises, meaning they must generate enough revenue to cover both current and future costs. These costs can be substantial, as water and wastewater services are capital-intensive industries that require significant investments in infrastructure construction and maintenance. Additionally, utilities must adhere to strict regulatory standards designed to protect public and environmental health, making cost-cutting while maintaining compliance a challenge.
Beyond current expenses, utilities must also plan for future needs, such as system expansions to accommodate growing populations. For example, adding a significant number of new customers may require expanding treatment plants, a cost that may—or may not—be factored into existing rate structures. As a result, projects that increase utility costs, such as extending service to new users, undergo careful financial evaluation.
Connecting new users comes with substantial connection costs, which are often passed on to the customer. However, if the new customer is located outside municipal limits and is annexed into the town or city, cost structures can change. The financial and operational impacts of annexation on utility expenses can be complex and vary by location. To learn more about annexation and its relationship to the extension of services, see the School of Government’s Coates Canon blog post from 2011.
Funding Opportunities
Funding for supporting decentralized users can be sourced from multiple agencies and levels of government – but it may be restricted by the type of applicant or what projects can be covered. A few examples of possible funding and financing streams are included below:
- The Water Well Trust funds low-income homeowners to assist in constructing new wells or septic systems and repairs. Loans are provided up to $15,000 at a fixed 1% interest rate.
- Localized programs provided by a municipality or a county may help cover the cost of decentralized rehabilitation, such as Wake County’s Well and Septic Repair Program, or may target connections to a centralized system, such as the City of Durham’s Septic-to-Sewer Project.
- North Carolina’s State Revolving Funds project eligibilities include options to help decentralized users. On the drinking water side, this could include extending lines or creating a new community water system to address contaminated wells. This could include upgrading, removing, or replacing septic systems on the wastewater side. Importantly, these two funds require a public entity, such as a local government, to be the applicant. Homeowners or decentralized communities hoping to access these funds would need to do so through collaboration with their utility.
Need technical assistance? The SOG Environmental Finance Center is here to help!
The School of Government Environmental Finance Center offers free one-on-one technical assistance for small water systems. If you are interested in our support, fill out our Technical Assistance Request Form or contact us at efc@sog.unc.edu.