Call it a tale of two towns.

Burr in Otoe County is property-rich but income-poor. Nemaha in Nemaha County is nearly the opposite. Which town is better able to pay for sewer and water services?

The traditional answer would be Burr, with its lower median household income because it's more likely to receive government grants. Governments primarily rely on median household income for awarding sewer, water and other grants to communities.

Ray Supalla, Institute of Agriculture and Natural Resources agricultural economist, finds this traditional funding approach inequitable. He developed a formula that factors in wealth and income and produces a more realistic community economic snapshot.

Supalla calculates a community's per capita income, household income distribution and property valuation per household into his financial capacity index. He thinks this research creates a framework for an economically efficient, fair sewer and water assistance program that could apply to other policy issues, such as welfare reform, state aid to education or tax reform.

The index helps adjust for differences in towns such as Burr with high property valuations and low household incomes. He developed the index after surveying Nebraska's 439 incorporated towns under 5,000 population and ranking their ability to pay for sewer and water services. He ranked the towns from one to 439, with one being least able to pay and 439 being most able.

By the traditional measurement, Burr, population 75, is poor. Its $13,333 median household income is relatively low, ranking it 25th least able to pay of the 439 communities. But Burr's $61,516 property valuation per household places it among Nebraska's wealthiest small towns - 389th out of 439.

In contrast, Nemaha's high median household income of $21,875 ranks 313th.

But its lower property valuation per household, $26,778, ranks 58th. Nemaha, population 188, is relatively income-rich but property-poor.

Using Supalla's financial capacity index that accounts for both wealth and income, Burr ranks 281st and Nemaha ranks 154th in ability to pay for public services. Burr, considered poor by traditional measurements, is better able to pay for services than Nemaha.

As the federal government hands states more responsibility for funding sewer, water and other public services, small towns face higher costs and/or reduced services unless state or local governments can implement more efficient systems or increase existing funding levels, Supalla said.

Towns with many low-resource residents may need more government assistance for civic projects, but don't always get it, he added.

"Some towns are more aggressive and have more staff to apply for government grants."

Small towns want to and must meet public health and environmental requirements, Supalla said, but need flexibility in meeting them. For example, a small town may want to use a lagoon to treat wastewater rather than building an expensive water treatment plant.

Over time, Supalla said he hopes his research helps assure shrinking government dollars go to "the really needy towns."

This research was conducted for the Partnership for Rural Nebraska, a collaboration of NU, the State of Nebraska and the USDA.

- Molly Klocksin