Solving America’s small water system challenges

Your path into water and wastewater began well before Central States. What motivated you?

Josiah Cox: My path into water and wastewater started with a personal connection to the outdoors. I grew up in Fulton, Missouri, in a family that spent a lot of time canoeing, hiking, camping and whitewater rafting. That early exposure to streams and rivers gave me a deep appreciation for clean water — and, eventually, a clear sense of what is at stake when water systems fail.

That interest became more concrete in high school, when I did a senior capstone project studying a stream near my house that was receiving wastewater from a local treatment plant. The stream was biologically impacted — it had eutrophication, which is not enough oxygen — and that project helped me understand how science, engineering and environmental stewardship intersect. I later went to the University of Kansas expecting to pursue medicine, but I found myself increasingly drawn to environmental science and water chemistry. In fact, I participated in biological survey work which kept me outside doing the sort of work that I loved.

After college, I worked with engineering firms and eventually started an environmental consulting division focused on waste allocation studies. That is, determining how much discharge a receiving water body can absorb without harming aquatic life or beneficial uses.

This was back in the early 2000s when accelerated housing construction was occurring. Former pastureland was rapidly being converted into new subdivisions. In Missouri, the Conservation Coalition won a lawsuit against the Missouri Department of Natural Resources for failing to enforce the Clean Water Act, after more than 80% of the state’s streams were excluded from water quality reviews and unchecked waste loads severely degraded water quality. I did the second waste load allocation study in Missouri history as a private consultant. That field work put me face to face with small communities struggling to operate essential systems.

Over time, it led me into design, construction, operations and eventually to Central States. Yet, the throughline for me has always been the same. Small communities are often asked to manage complex infrastructure without the resources, technical expertise or capital needed to keep up. I want to be part of the solution to fix this problem.

What does the small water and wastewater crisis look like today?

Cox: The small-system crisis is not something on the horizon — it is already here. The United States has an extraordinarily fragmented water and wastewater sector, with tens of thousands of systems serving relatively small customer bases. The country has roughly 85,000 water and sewer utilities today and about 90,000 Clean Water Act violations each year — more violations than systems. The systems with fewer than 3,000 connections are often where the most acute health and environmental violations occur, and they are also the systems least able to absorb the cost of major upgrades. In fact, 75% of the chronic violations are happening in our small water systems.

That fragmentation matters because many small utilities lack the technical, managerial and financial capacity to keep pace with today’s requirements. Some are run by volunteers or small associations. Others were developer-owned systems that did not receive sustained reinvestment after residential housing lots were sold. In each case, however, the result is the same. Communities inherit infrastructure that may be essential but is no longer financially or operationally sustainable.

The symptoms can look different from one community to the next — boil-water notices, sanitary sewer overflows, failing treatment plants, building moratoriums or new compliance mandates — but they share a common root of decades of underinvestment layered on top of rising expectations for safety, environmental performance and resilience.

How does Central States’ model address the challenge of fragmentation?

Cox: Central States addresses fragmentation by creating scale without requiring every community to be physically interconnected. Water is different from power because electrons can move long distances relatively cheaply, while water cannot. That means scale has to come from aggregating ownership, operations, capital planning and technical expertise across many systems, rather than connecting every service territory with pipes.

The model starts by identifying systems that are already in distress. Across the country, every water and wastewater system operates under a federal permit, with drinking water systems permitted to dispense water and wastewater systems permitted to discharge. We have focused on states with high concentrations of small systems and elevated levels of non-compliance, then engaged regulators directly. We then engage regulators around a simple proposition to acquire troubled systems, make the necessary investments and bring them back into compliance. In many cases, regulators already know which systems need help.

The challenge is finding an entity with the capital, expertise and patience to solve the problem over time. We explain our business model, our ability to acquire and repair troubled systems and the potential implications for customers. Whether a community is facing a health or environmental violation, an unfunded mandate, an economic constraint or a pending treatment requirement such as PFAS, these systems usually need more than a one-time fix. They need a durable, long-term operating platform.

That approach reflects a broader shift from episodic repairs to system stewardship. By combining data, regulatory engagement, capital planning and operating expertise, Central States can prioritize the highest-risk assets first while building a path toward long-term compliance. The value of scale is not only financial. It also gives small communities access to professional management, technical resources and investment discipline that would be difficult to sustain on their own.

California is considering a clearer regulatory template to prioritize corporate acquisitions of failing water systems. Are more states beginning to embrace this approach as a way to accelerate consolidation, investment and modernization?

Cox: Yes. State regulators increasingly understand that small water and wastewater systems can create outsized problems, even though they represent a relatively small share of the regulated utility sector. When a small system runs out of water, fails on a holiday weekend or causes a serious environmental problem, it quickly becomes a public health, operational and political crisis.

The challenge is that local officials often have access to loans or state funding but raising rates to repair failing water or wastewater infrastructure is politically difficult. As a result, the investment needed is delayed, problems compound and systems can reach a point where the required fixes and technical expertise exceed what the community can manage on its own.

What happens on day one after Central States assumes ownership of a distressed system?

Cox: Central States’ mission is to bring safe, reliable and environmentally responsible water resources to every community in the United States. When we assume ownership of a distressed system, that mission becomes very practical: Identify the immediate risks, restore basic operating capability and begin moving the system toward compliance.

The first step is making triage investments by replacing failed pumps, repairing electrical panels, securing sites with fencing and locks, addressing rusted vents and restoring treatment equipment that has fallen out of service. At this stage, the priority is often not advanced engineering but simply making the system safe, functional and observable again so it can operate as originally designed. Once basic operations are restored, Central States can collect better data on pump run times, flows and operating conditions, which helps determine whether the long-term answer is rehabilitation, replacement or connection to a nearby system.

What is interesting is that when long-neglected facilities are brought back online, homeowners may complain about noise because the plant is finally running as intended. Those complaints can be a sign that basic operations have been restored, even if the community is still adjusting to what a functioning facility sounds like.

What's a real-life example of what it takes to get systems back online?

Cox: An example I can share involved acquiring 205 water and wastewater systems from an electric cooperative that had purchased them out of bankruptcy and was operating under a 20-year federal consent decree. Central States stepped into that obligation and spent about a year working with the Department of Justice to secure the time needed to make the improvements required to bring the systems back into compliance.

The work began by identifying standard operating procedures and a plant-by-plant assessment of what could be repaired, what had to be replaced and where nearby systems could be consolidated into an upgraded facility. In some cases, structurally failing plants had no remaining useful life, while in others Central States looked for ways to reuse existing assets, take older plants offline and build economies-of-scale through shared treatment capacity.

The transition from triage to full compliance required detailed engineering, permitting and, in some cases, state regulatory approval for technologies that may be proven elsewhere but new to that jurisdiction. Central States has piloted approaches such as moving bed bioreactors for lagoon systems, using existing treatment areas while adding technology to meet modern EPA requirements, but major plant replacements can still take several years from engineering through construction before a system is fully compliant.

What about the hidden infrastructure problems below ground?

Cox: On the wastewater side, underground problems often show up as infiltration and inflow — groundwater entering cracked pipes, leaking manholes or failing conveyance systems. We take a targeted approach: identify the worst sources first, reduce the biggest flows and phase larger investments so the rate impact is moderated for customers.

On the drinking water side, the problem is often lost water. Once meters and monitoring are in place, we can compare production to billed consumption and begin locating leaks. Technologies such as acoustic leak detection can help narrow the problem, but the key is disciplined data collection and prioritization.

How do you balance immediate fixes with long-term modernization?

Cox: The process is iterative for us. First, we turn the system back on and gather real data through remote monitoring, pump run times, flows and operating conditions. Then we determine what it will take to bring the system into final compliance. Sometimes the answer is rehabilitation. Sometimes the assets are structurally failing and must be replaced.

Where possible, we try to reuse and refurbish existing equipment to control costs. In other cases, we look for nearby systems that can be served by an upgraded facility, allowing us to take older plants offline and build scale through shared infrastructure. The goal is to invest wisely. That is, solve the urgent compliance problem while planning for a system that can meet modern requirements over the long term.

Modernization is not just replacing broken equipment. It is about creating durable operating systems, compliance pathways and investment models that allow communities to rely on safe water and wastewater service for decades. For small communities, the promise of scale is not abstraction — it is how essential infrastructure becomes sustainable.

How does affordability shape Central States’ investment strategy? We often hear that water rates are running far ahead of inflation. What does that look like?

Cox: It is important to view affordability over a longer period. In many communities, water and sewer rates have not kept pace with inflation for 25 to 30 years, leaving customers with an artificially low starting point. As a result, recent rate increases may appear large, but in many cases they reflect decades of underpricing.

For us, scale is the biggest affordability tool. If you can increase the denominator and spread costs across a larger customer base, many of the affordability challenges become more manageable. We have achieved the first statewide consolidated water and sewer tariffs in several states where that had not previously been the norm.

For customers, the benefit is that consolidated tariffs can turn large, unpredictable system-repair costs into a more manageable shared investment, helping communities afford reliable service and long-term compliance without bearing the full burden alone.