We are no longer in ordinary times. Customers refuse to pay higher rates for a product that they perceive to be declining in quality. They are skeptical about a water utility's effectiveness and need to be continuously reassured that their money is being spent wisely. The timing of this skepticism and the need for reassurance could not come at a worse time for those of us in the water industry. The seemingly never ending and increasingly stringent regulations that govern our industry, increase the cost of providing safe water. The water industry is now faced with a similar problem that the private sector has recently dealt with, downsizing. To stay competitive, most businesses have had to explore ways to be more responsive to their customers. The water industry now must examine their operations in order to be more competitive. This competitiveness can be accomplished by measuring performance. Performance measurement is a product of Performance Based Budgeting (PBB), a budgetary concept that focuses on planned results. The utility is held accountable for achieving specific goals established at the beginning of the budget year. No longer is the effectiveness of a utility measured by how much it spends on solving a problem. The new realities dictate that utilities will be judged by their abilities to achieve cost effective results. As a budgeting concept, performance measurement has been a catalyst for change in the cities of Indianapolis, Milwaukee, Philadelphia, Portland, and Sunnyvale, California. Performance indicators are the basic components used in performance based budgeting. For the water utilities, there are specific performance indicators: the total cost of operations in dollars; miles of water mains maintained, repaired, or inspected; the number of leaks found; or customer satisfaction to name a few. The first step in developing a performance based budget is to prepare a mission statement. Next, all of the activities of the utility and the objects that are to be accomplished as a result of those actions need to be identified. PBB is a key management tool for the '90s.