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Lessons from Income Surveys:
Financial Impacts of a Wastewater Project on Rural, Low-Income Residents

Contributing Writer
Donald Schwartz

Construction of a wastewater collection and treatment system in a rural community usually results in a large financial impact on local residents. Monthly or quarterly user fees bring an unanticipated added expense to household budgets.
Funding sources—typically state or federal programs for rural communities—often base financial packages (i.e., low-interest loans and/or grants) on several factors, the largest of which may be the perceived ability of the “typical” resident in the service area to pay an “acceptable” user fee. These “acceptable” fees are often linked to the income level of residents, under the assumption that the higher the income, the higher the user fee that can be supported (and the lower the amount of grant funding).
In Pennsylvania, as in other states, a statistic commonly used to estimate “typical” income levels is the median household income (MHI). To calculate a median, individual household incomes are ranked from lowest to highest, with the income of the household at the mid-point being the median (i.e., one-half the households have incomes above the median, and one-half below).
A median has a distinct advantage over an average in calculations related to income, since even a few high-income households in a small, rural community can skew the average to a higher level than is truly indicative of the typical household. For example, the impact of a household with an income of $1,000,000 will be significantly greater than that of the same household at $100,000 on the average income for a small, rural community. However, the impact on the MHI will be the same—just one more high-income household.
MHI data is available from the U.S. Bureau of Census throughout Pennsylvania. However, the data is only collected every 10 years, and the areas for which data is available often do not directly match the areas being considered for a wastewater system. As a result, Rural Housing Improvement, Inc. (RHI), of the Northeast Rural Community Assistance Program (RCAP) is often called upon by funders in Pennsylvania, as an impartial third party, to conduct income surveys to assist in the funding process.
While calculation of an MHI in a community serves a valid purpose, it is only one measure of the impact of a wastewater project on the finances of local residents. What follows is a detailed review of the results of three income surveys conducted in rural Pennsylvania communities in 1999 and 2000, with some lessons learned for all entities involved in planning and funding wastewater systems.
Methodology
Each income survey was initiated by consultation between Northeast RCAP staff and local officials, after prior approval by funding agency officials. The study area was defined, and local officials developed a numbered list of residents (including renters), as well as a map of the area to assist with door-to-door efforts. Northeast RCAP staff urged local officials to advertise the survey in local media and by posting information at post offices, community meeting halls, and other public locations.
The income surveys began with a mailing to each residential address. The packet mailed to each household included (1) a cover letter describing the project and the income survey process, (2) a simple survey form with a single question asking for household income, and (3) a stamped envelope with a return address to Northeast RCAP. The survey form contained a listing of all items defined by the Census Bureau as income, to assist the residents in completing the form. After allowing two to three weeks for forms to be returned, Northeast RCAP staff followed up with door-to-door surveying. An attempt was made to contact all residents who had not responded to the mail survey.
Communities Surveyed
The first income survey, conducted in 1999, occurred in Black Creek Township, Luzerne County. The majority of residents were in the village of Weston, with a small percentage in the village of Nuremberg. Both Weston and Nuremberg include primarily older homes, with a few newer residences on the outskirts. There is a large retired population, as in much of rural Pennsylvania.
The first survey conducted in 2000 was in Wayne Township, Schuylkill County. More than half of the residents in the survey area lived in two manufactured housing communities (also known as mobile home parks) along a busy, two-lane highway. The remainder of the households were split among older homes adjacent to the highway, and in the village of Friedensburg, as well as some newer homes at one end of the service territority.
The final survey conducted in 2000 was in West Pennsboro Township, Cumberland County. The survey encompassed the village of Plainfield, an old community with new development occurring at its periphery. The Plainfield area is a bedroom community for the nearby capital of Harrisburg, as well as the City of Carlisle.
Survey Results
The results of the three surveys are summarized in Table 1. The MHI was lowest in Wayne Township ($27,024), increased slightly in Black Creek Township ($28,754), and was highest in West Pennsboro Township ($32,300). The ranking of these results is not surprising. More than half the residents of Wayne Township live in manufactured housing communities, and the survey area in Black Creek Township includes a high proportion of retired residents. The residents of West Pennsboro Township benefit from greater economic opportunities in the Harrisburg-Carlisle area.
The response rate to the survey was similar in Black Creek Township and Wayne Township (69.9 percent and 67.6 percent, respectively), and much lower than in West Pennsboro Township (91.4 percent). The high level of response in West Pennsboro Township can be attributed to (1) an extremely high rate of contamination of individual wells, resulting in a desire for wastewater collection and treatment; and (2) excellent advertisement and community outreach by West Pennsboro Township officials. There was active opposition to the proposed wastewater projects in both Black Creek Township and Wayne Township.
Lessons from Income Surveys
Lesson #1: Be Careful About Comparing Apples to Oranges
Census data is available every 10 years. With each passing year after the acquisition of new data, the published information becomes more and more outdated. One way to attempt to correct this problem is to add an inflation factor to the census data. One funder in Pennsylvania used average inflation factors of 0.27 and 0.31 in 1999 and 2000, respectively. This means that township-wide estimates of income in 1999 and 2000 were calculated by adding 27 percent and 31 percent to 1990 census data. The results are shown in Table 1 on page 10. These estimates exceeded the results obtained from income surveys by about $4,000 (Black Creek Township) to $18,000 (Wayne Township). Why?
A typical township in rural Pennsylvania may contain one or more small, older villages, with homes 50 to 100 years old, surrounded by countryside dotted with newer homes. The villages are populated primarily with elderly residents on fixed incomes and those younger individuals who cannot afford more expensive housing. As a result, a townshipwide estimate of income—which includes the owners of the more expensive properties—will almost always be higher than in the areas of concentrated population. This effect can be seen most clearly in Wayne Township, where more than half the residents of the survey area lived in manufactured housing communities—a stunning difference of more than $18,000 between survey data and census-adjusted data.
So, Lesson #1 is quite clear: When using income data as a factor in funding calculations for a wastewater project, be sure that the data applies to the population in the study area. Comparing apples to oranges could have a significant financial impact on the residents in low-income communities.
Lesson #2: A Median Is Just a Median
As stated earlier, the MHI is a very useful statistic and certainly gives a better overall estimate than an average of the ability of residents to pay a wastewater user charge. But a median is just a median. The MHI is merely the midpoint of ranked household incomes and tells you nothing about the distribution of the individual household incomes. This is particularly important for the low-income households, which could be clustered anywhere between “$0” and the median.
For example, in Table 1, the MHI for Black Creek Township exceeds that of Wayne Township by more than $1,700. But 34.3 percent of the residents in Black Creek Township reported incomes of less than $20,000, versus 30.5 percent in Wayne Township, the “lower” income community. Black Creek Township also had almost double the percentage of lowest-income residents, those with incomes of less than $10,000 per year. If “acceptable” wastewater user charges are at least in part based upon the MHI, the impact on the larger, low-income population in Black Creek Township could easily be missed (see also Lesson #3 below).
Lesson #3: Real People Pay the Bills
The process of designing, building, and funding a wastewater project can become such an abstract exercise that while the impact on the average customer is considered, the impact on low-income residents can be overlooked. Real people pay the bills. Examine the Black Creek Township income survey results. More than one-third of the households reported gross annual incomes of less than $20,000. The current “acceptable” annual user rate for new systems in rural Pennsylvania, as established by government funders, is approximately $450 to $600. The financial impact of such user rates on households trying to survive on a gross income of less than $20,000 cannot be overstated.
It may thus be appropriate to delve more deeply into income statistics—either published or derived from income surveys—when using this information in calculating funding for wastewater projects. Perhaps it is time to use the wealth of data that will be available from the 2000 Census, as well as from income surveys, to tailor funding packages to more specifically meet the needs of rural communities. This is the final lesson to be learned from the experience of the Northeast RCAP in Pennsylvania.
Donald Schwartz is the Pennsylvania program manager for RHI, the Northeast Rural Community Assistance Program.

Donald Schwartz is Pennsylvania program manager for Rural Housing Improvement, Inc., the Northeast Rural Community Assistance Program. For more information about this article, contact Schwartz at (570) 321-7375 or by e-mail at dschwart@ptdprolog.net.