Originally posted – Apr 24, 2014
Water covers approximately 70 percent of the Earth’s surface.
However, less than 1 percent of that is available for human use – such as agricultural, domestic, commercial, industrial and environmental needs. To make matters even trickier, global water consumption has tripled in the last 50 years.
Managing the supply and availability of water is one of the most critical natural resource issues facing the United States.
“There is the same amount of water on the Earth now that there was a million years ago,” said Greg Kail, director of communications for the American Water Works Association. “It’s just a question of how that water is dispersed. There is an element of unpredictability the utilities have to deal with. They’re listening to the climatologists talking about the predictions that water may be dispersed differently in the future.
“Without understanding exactly what water resources are going to be available to them in 50 or 60 years, they have to take an all-hazards approach,” he continued. “They have to understand clearly what their population is likely to be, and they need to understand where potential sources of water can come from and what technology they may have to implement in order to open up new sources – and all of that has to be built into their financial model.”
While one community may have few water supply concerns, another might have very acute problems.
And, as that fixed resource grows scarce, the need for conservation measures increases. With water use in the U.S. increasing every year, many regions are starting to feel the pressure. In the last five years, nearly every region of the country has experienced some kind of water shortages, according to WaterSense, a partnership program developed by the Environmental Protection Agency.
What’s more, as many self-service laundry owners can attest, the costs involved in the use and disposal of water are extremely localized. As a result, it’s not unusual to hear that sewer fees in some parts of the country are two to three times higher than the cost of water itself. And certainly the cost of water is on the rise as well.
“The trends are higher costs, and higher costs as related to energy,” said Adan Ortega, commissioner of the California State Water Commission. “If you combine the cost of the water supply and sewer fees, you’re going to find that the cost of water is going to go up.”
In fact, according to a USA Today study of 100 municipalities over a 12-year period, water prices at least doubled in more than a quarter of the locations and even tripled in a few of them – with cities like Philadelphia (+164%), San Francisco (+211%) and Atlanta (+233%) experiencing astronomical jumps in price.
What’s driving the trend toward higher water bills? The study pointed to a number of factors:
• The cost of paying off the debt on bonds municipalities issue to fund repairs or upgrades on aging water systems
• Increases in the cost of electricity, chemicals and fuel used to supply and treat water
• Compliance with federal government clean-water mandates
• Rising pension and health care costs for water agency workers
• Increased security safeguards for water systems since 9/11
For years, everything from antiquated sewer systems to water shortages to raised effluent standards have been blamed when an increase is passed on to self-service laundry owners. Sometimes, these are true needs that have to be met, and the problems can be resolved only by adding impact fees, surcharges and other cost increases. However, in some instances, politics plays a role and can be held responsible for the additional money you’ll be paying to continue to operate your laundry business.
Unfortunately, today, there seems to be no across-the-board rationale for price increases and the imposition of what can easily be referred to as an additional “tax” disguised as an impact fee.
As both city and suburban areas grow, they are taking their toll on aging and inadequate water and sewer systems. Many communities have enacted infrastructure renewal programs, but such upgrades are expensive.
“The state of infrastructure is a major waste of water,” Ortega said. “In older communities, the waste of water occurs not by the businesses or the residents, but by the infrastructure under the street.”
To make matters worse, federal funding for infrastructure projects is decreasing regularly – even as the government continues to place stricter environmental regulations on community water and sewer systems. These problems mean higher water and sewer rates, higher taxes or both.
Unfortunately, self-service laundries are perhaps hit harder than many other businesses when water and sewer costs skyrocket. The problem is nationwide, and it is only becoming more severe.
The issue is that when towns or cities experience growth, the water and sewer systems often are unable to accommodate that growth and increased volume. Water mains break, sewers back up and the cities are constantly cleaning up after these accidents. In addition, when a large rainfall occurs, retention ponds and sewers flood. This flooding can cause an overflow of wastewater into the water supply.
Thus, the only real answer to the problem of inadequate water and sewer systems is to upgrade or replace the infrastructure. This is, of course, extremely expensive, and most cities need to raise taxes or water rates to cover the costs. However, there are not many towns that are fully aware of the devastating effect these rates and tax hikes can have on coin laundries.
Why Water Rates Differ
The vast majority of current water and sewer systems are owned by the city or the district they serve. This means you can be paying a $5,000 impact fee for every washing machine in your store and $16 per unit of water, while the self-service laundry in a neighboring town may not even have an impact fee and is paying only $9 a unit.
Local communities have autonomy in determining local rates, and there are factors that make each city’s charges higher or lower than the next. These factors include:
• Accounting and financial reporting systems.
• Policies and financing mechanisms for long-term systems.
• Local rate methodologies (flat rates, subsidies, etc.).
• Differing amounts of rainwater flow and infiltration of wastewater into local systems.
Small towns located next to larger cities may suffer from inadequate water and sewer systems, and are unable to afford to run a line and tap into the city’s system. In addition, a poorer city may not have the funds to cover the water and sewer upgrades mandated by state and environmental agencies. Fines for non-compliance can reach $1,000 a day, and the state governments have the right to refuse plumbing hookups if a city’s infrastructure is not up to state-mandated standards.
“The rate picture is not easily carved up into geographical segments,” Kail explained. “Where you live is not necessarily going to determine if you pay a higher rate. You can have different pressures, based upon the history of your water system and the climate.
“If you’re in the Midwest, it’s more likely that your rate pressures are going to arise from infrastructure needs. If you’re in the Southwest, those costs may be driven by the need to invest in technology that will help provide a larger supply.”
The Future of Water Rates
In many places, water rates are going to continue to climb for a number of reasons, according to the AWWA.
“There are certainly those situations of drought, expanding populations and arid climate, where the water resource is the main reason for increases in price,” Kail noted. “They’re trying to develop new water sources or bring water in from other places. Sometimes they’re investing in desalination or water reuse, which allows a lower quality water to be used for industrial purposes and frees up fresh water for drinking.”
All of those conservation solutions come at a price. And, ultimately, that cost is passed on to the users of the water. However, that’s not the only factor impacting rates.
Again, perhaps the most common large impact is simply the need to reinvest in the water infrastructure.
“We estimate it will cost $1 trillion over the next 25 years to repair and expand drinking water infrastructure alone,” Kail said. “We don’t have a study that looks at the wastewater side of it, but there could be dramatic costs for communities if they have combined sewer overflow issues.
“Each water system is unique, and each has its own history and its own set of concerns. However, one thing to keep in mind is that smaller communities are more likely to be dramatically impacted, simply because they have fewer people to spread those costs across.”
By and large, older cities are going to have more of the older infrastructure. But the reality is that it’s not just the age of the pipes that determines whether or not they require repair or replacement. Other factors range from the type of construction materials used during different periods of time to differences in climate and soil; age is one of the largest factors but certainly not the only one.
Although infrastructure costs are huge, another factor is government regulation. As federal regulations are introduced or come into effect and water utilities have to build new treatment facilities or invest in different types of treatment, this can be very expensive – and those costs are again passed on to the customers.
“One of the major threats is what they call ‘California Creep,’ where California regulations begin to spread across the country,” Ortega noted. “It’s important to pay some attention to what happens in California because, on the regulatory front, it sets the tone for a lot of what happens around the country.”
And there are other cost factors, too.
“Sometimes a utility will switch its disinfectant to something that’s safer for the community, or it might have to invest in fencing or personnel, simply to make sure any suspicious activity is identified,” Kail said. “Those costs are sometimes related to computer systems that control valves and security cameras. Those costs have probably leveled out, but in some places, they continue to grow.”
Kail also pointed to a few trends in the water industry that may affect water usage and costs for laundry owners.
One of those trends revolves around technological advances in metering. Generally, bigger meters impact tap fees. However, these meters also are getting “smarter” – and the way in which utilities are able to capture information is improving.
Of course, from a coin laundry perspective, the faster your utility can receive information about dramatic changes in your water use the faster it can identify potential water leaks and other issues of that nature.
“There is a trend developing toward the increased use of lower quality waters for non-drinking uses,” Kail said. “A lot of that has to do with increases in the efficiency of membrane technology that allows utilities to use less energy to treat water, which means you’re going to see desalination not only of ocean water but also of brackish water that’s more inland, trapped in aquifers, which utilities used to not place much value on.
“That cost will continue to rise. It’s also fair to say that there is a sense that the EPA is going to take a look at a lot of the existing regulations and will introduce some stricter regulations in the years ahead.
“While there may be disagreement as to what new chemicals might be regulated, when the regulations are passed, those costs are going to be shouldered by the utilities and then the customers. In other words, the increased regulations will mean increased costs for the utilities and, therefore, increased water rates.”
The State of the Water Industry
The AWWA has been for¬mally tracking issues and trends in the water industry since 2004 through its State of the Water Industry study. Here are some of the key findings from the 2014 version of the association’s annual survey:
• The top five water industry issues identified for 2014 are:
1. State of water and sewer infrastructure
2. Long-term water supply availability
3. Financing for capital improvements
4. Public understanding of the value of water resources
5. Public understanding of the value of water systems and services
• Addressing water and sewer infrastructure needs – the most important water industry issue – could easily top $2 trillion over the next 25 years in the United States.
• Eight percent of respondents felt that water and wastewater utilities are not at all able to cover the full cost of providing service, and that nearly doubled to 15 percent when looking to the future. Ten percent of utility employees felt that their utilities were currently not at all able to cover the full cost of providing ser¬vice, and that figure is expected to increase to 14 percent in the future. Respondents clearly expressed that full-cost pricing is cur¬rently a challenge and one that will only become more diffi¬cult moving forward.
• Ten percent of utility employees felt their utilities will be challenged to meet anticipated long-term water supply needs, while approximately 60 percent indicated that their utili¬ties are very or fully prepared.
• Forty percent of respondents think the water industry is moderately prepared to address climate change; 12 per¬cent think the industry is not at all prepared while only 2 percent think it is fully prepared.
Given the current climate, the first thing any laundry owner should do to offset water and sewer costs, as well as pricey impact fees, is to know exactly what he or she is getting into. If you’re considering building a new coin laundry, learn which impact fees and surcharges will be imposed upon your business.
There are tens of thousands of water reclamation sites throughout the U.S. and each is authorized to act as its own entity. Therefore, each district has the authority to impose any and all costs it may deem necessary. Thoroughly examine what costs will be incurred for initial equipment set up and what other charges will be imposed once you have begun operation.
If you are currently operating in a district that has increased costs drastically, or has begun to impose additional charges, ask questions. Why are your costs rising? Is your store being charged on the basis of what you are actually consuming and disposing? Is your category unfairly lumped in with heavier water users that require additional methods to meet effluent standards? Is your water district making an allowance for water lost in evaporation? These are issues that you can fight and win.
Build a good, strong argument. Gather facts. This is where your thorough bookkeeping methods will come into play. This also is an area where it is both extremely necessary and beneficial to band together as an industry. Contact an organization that represents other coin laundry owners in your area and face the water district as a group. There is strength in numbers.
To turn the tide against rising impact fees, sewer surcharges and, in some areas, drought restrictions, the coin laundry industry needs to tell its story loud and clear.
Each time you interact with a local municipality or a water/sewer district, you can play a key role as a grassroots activist for the water-saving benefits of self-service laundries. Here are just a few of the facts, figures and themes that the industry needs to share with all who will listen:
- Coin laundries are water-conservative businesses. In fact, communities concerned about water usage ought to encourage the use of self-service laundries, which launder more pounds of clothes with fewer gallons of water compared to doing laundry at home.
- The addition of a new laundry in a given community does not create additional water consumption, rather is redistributes existing wash loads to be done more efficiently. This result is a net savings of water to that community.
- Commercial frontload washers may use more than 30 percent less water than typical residential washers.
- Self-service laundries can reduce the burden on sewer systems by requiring less incoming water to launder clothes and by the evaporation loss of water during the drying process – water that never reaches the sewer.
- Small businesses, such as self-service laundries, are forced to pass along increased costs of doing business to the customer. In most cases, those customers are often the least able to shoulder the burden of a cost hike.
- Coin laundries provide a basic public health service that is essential to the community. As a result, these businesses should be treated as the assets to the neighborhood that they truly are.
Attend city council meetings and voice your opinion. Bring along past bills, projected profit margins with and without the potential rate hikes in place, and any other materials that can back up your argument.
Upgrade and Maintain Your Equipment
In addition to fighting rate increases and impact fees at city hall, self-service laundry owners can – and should – look into replacing their older equipment with new, more efficient units. If your coin laundry’s washing machines are more than five years old, you may be paying too much for your utilities. High-efficiency units can lower water and sewer costs by as much as 35 percent to 50 percent.
“When you see an increase in the price of water, it makes water-efficient equipment more attractive, because it can pay for itself in a shorter amount of time,” Ortega said. “Although you have price increases, the application of technology could reduce the overall cost.”
And buying more energy-efficient washers these days can make you money above and beyond your utility bill savings. In fact, many cities will subsidize the purchase of high-efficiency washing machines, as well as low-flush toilets.
Water Evaporation Allowance
With regard to laundries’ wastewater and sewage bills, many local authorities have begun to grant self-service laundry operators a “water evaporation allowance” to account for the water that evaporates during the washing process, rather than being returned to the system for treatment.
In fact, a precedent for doing so exists in the allowances and rebates that are often provided to homeowners with large gardens or pools. However, there is an important distinction that laundry owners need to be aware of – in most cases, the homeowner is required to have a separate meter installed that measures the water going out through the outdoor tap. Typically, the homeowner pays the cost of installing the meter, as well as the cost of the additional account processing required. Most programs involve the meter being read once a year, with a rebate being issued that reflects the amount of water used for the garden or pool.
Having separate meters installed at a coin laundry is not usually a feasible or cost-effective option. But many sanitation authorities are granting allowances even without such meters, as the fact that some water remains in the clothing is indisputable.
As the range for water evaporation is estimated to be anywhere from 3 percent to 10 percent, the Coin Laundry Association believes a rate of 5 percent to be a reasonable average for coin laundry operators to request of their sanitation authorities. Many sewer authorities view coin laundries as valuable partners in the effort to conserve water and even go so far as to offer rebates to store owners who purchase more efficient machines requiring less water, thereby placing less demands on the system overall.
In addition, the CLA can provide its members with a Water Evaporation Allowance Toolkit, which contains all of the materials and basic information a laundry owner would need to request a water evaporation allowance from his or her local sewer authority. The toolkit includes background information, sample letters, checklists, worksheets and a PowerPoint presentation to be used to request an allowance. For more information, visit coinlaundry.org.
Time to Raise Your Vend Prices?
As some laundry owners will surely point out, vend prices in their areas may not have increased in years due to local competitive circumstances. Nevertheless, it is crucial for all self-service laundry operators to keep pace with rising utility costs to ensure the future health of their businesses.
To survive in 2014 and beyond, it’s crucial that you educate yourself on your marketplace’s water and sewer issues. Stay informed. Let your local lawmakers know how their decisions affect your small business.
Back at your store, purchase new equipment if and when necessary. Diligently maintain your current equipment. Take advantage of any rebates, grants or other programs offered in your marketplace to take some of the financial pressure off of your business’ bottom line.
Lastly, when pricing your services, be fair to yourself. Due to legislative initiatives and changes in the general economy, it appears there will be no letup in utility rate increases. If you don’t keep up now, you may fall behind to such an extent that it will be impossible to catch up – or even stay in business.
“In the future, we’re going to see more utilities exploring technology that allows them to take advantage of water resources that in the past were thought unusable,” Kail predicted. “We live in a time where we’re beginning to pay more attention to the value of water and to the value of the systems that deliver it and take it away. That’s a good thing, because it reminds us that we need to keep those systems strong and reliable, and we need to make sure there are resources for our use and expanding populations.
“We need to remember that it will come at a price, but the cost of water in our homes and businesses is still a bargain – and, if we plan with care as both the water industry and as the receivers of water, we can meet the challenges in a way that hopefully won’t cause sticker shock.”