How bad is tap water?

DC water is about as bad as it gets. It would probably be more sanitary to have a your tank's water pumped up from the septic tank.
 
I agree you should worry about nitrates when adding water but the main problem with tap water is phosphates. Have it tested with a tds meter and see what that comes out too.

I would never add tap to a reef.

If you use tap water you must let it sit for 24hours so the chlorine evaporates before you add it. HOWEVER, if you plan to last a long time in this hobby and do more than fish only I would highly recommend spending money on a RO filter. I tried to do the cheap thing for the first year then I realized how good of an investment an RO fitler is. Plus lugging 5 gallon jugs up and down stairs suck! :)
 
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