Choice models and a referendum format contingent valuation survey are used to investigate household preferences for improved water services and decentralization levels (actual departmental administration vs. further decentralization to the municipality) in urban Matiguás, Nicaragua. Choice models suggest that households prefer the current departmental administration over municipal provision for service and capacity, but believe that the municipality would be more interested in improving services. Results also indicate that households are willing to pay an increment of at least 112 per cent above their current monthly water bill for reliable and safe drinking water services, regardless of administration type.