Management experts and others in the real estate industry are always cautioning their co-op
and condo clients to keep an eye on the water consumption in their buildings. The water and sewage bill received quarterly from the New York City Department of Environmental Protection (DEP) typically eats away a large portion of the building's operating budget. Though water and sewage rates show no signs of going down, your building can reduce expenses if it develops an awareness of conservation measures and the willingness to implement savvy new strategies.
Prices Creeping Up
Would you leave your 19-inch color TV running 24 hours a day? asks Bob Bellini, Jr., vice president of Varsity Plumbing in Flushing, New York. If your kitchen faucet drips every 20 or 30 seconds 24 hours a day over the course of a year, the cost would be the same as the electricity you would spend by never turning off the television set. Approximately $230 a year. According to Bellini, one running faucet in one unit can cost a mid-sized building as much as $1,500 a year. In fact, in one mid-sized Queens co-op, leaks comprised 37 percent of the water bill. By eliminating these leaks, the building now sees an annual savings of $125,000 a year.
In 1980 water and sewer charges per 100 cubic feet of water, or 748 gallons, was 66 cents, recalls Philip Kraus, president of Fred Smith Plumbing and Heating Corporation, Inc. in Manhattan. Since then the price has gone up on an almost yearly basis at a rate of approximately six percent a year. As of July 1, 1997, water rates were $3.16 per 100 cubic feet of water.
According to Robert Grant, director of property management at Brooklyn-based Diversified Property Management, water and sewer charges have become one of the most inflationary items in property budgets, and water management has become a cutting edge issue. Ten years ago, a 234-unit co-op was charged $20,700 for the annual frontage water charges and sewer rents, Grant explains. Today that same property is charged over $80,900 annually.
According to a source at the DEP, the rates paid to that agency are used for maintaining and upgrading the water and sewer systems. The steady price increase has come as a result of the capital improvements that the DEP has undertaken in order to comply with federal mandates. A new water tunnel is being built to alleviate the strain on the city's antiquated infrastructure which has relied on just two tunnels to bring water from the upstate watershed since the turn of the century. Other ongoing projects include a filtration plant that is being installed at the Croton Reservoir and upgrades to sewage treatment plants to assist the clean-up of local waterways including the Hudson and East Rivers.
Despite the high cost of water, J. Brian Peters, managing director of Rose Associates, a property management firm in Manhattan, has found that conservation does not seem to be at the forefront of many board members' minds. We have had more success in the rental buildings we manage than the co-ops or condos. Probably 90 percent of the buildings we manage have been metered for a couple of years and although board members have seen metered water rates creep up a bit, the importance of conservation methods hasn't sunk in. Peters adds that it's very hard to do a mass installation of low flow toilets or reduced flow shower h ffb eads in co-op and condo buildings because this requires having access to every apartment and residents tend to see it as an invasion of their privacy.
Meters Will be Mandatory
Bellini points out that up until recently, under the DEP's flat-rate frontage system of water charge assessment which is based on the number of fixtures in the building, it didn't matter if you used one drop of water or one million gallons. The building always paid the same amount provided the city's rates didn't go up. However the DEP will switch to a more precise metered billing system by December 1998. According to Mitchell Barry, chief executive officer of Century Operating Corporation, a property management firm in Manhattan, Many co-op and condo buildings have not yet made the switch to the Universal Metering Program because they fear higher water bills, Barry says. But, in reality, many can expect to break even or decrease their bills with the changeover.
Century has been involved in a number of conversions and in many cases the buildings saved as much as 40 percent on their water and sewer bills, often without implementing additional conservation methods. A 108-unit co-op on West End Avenue saved roughly $25,000 a year by actual water metering, Barry says, without any conservation devices added. By participating in the city's Window of Opportunity programthat provides rebates covering from 70 to 100 percent of the cost of conversion to properties that make the change before the mandate deadline arrives December 31, 1998this property received approximately $7,000 in credit toward its meter installation costs.
Some people are going to find that putting in a meter will save a lot of money; others will find that they are hurt, adds Bellini. But the good news is that after the December 1 deadline for having the meter in place, there will be a transition period during which the building can remain on the old frontage billing system. They will be able to M-gear up' after the meter is in place, Bellini explains, to monitor the results to see if they're a winner or a loser under the new system.
If they're a winnermeaning that their water costs have decreasedthey'll want to go on the meter program right away. If they're a loser, they'll want to take advantage of the city's one year transition period during which they'll find and fix leaks, and educate shareholders and unit owners about conservation and the fact that they will now be paying for every drop of water that they are using. Buildings that participate in the city's Windows of Opportunity Program buy the right to have a two-year transition period. Bellini adds that this spring a sophisticated, yet inexpensive, water sub-metering product will be available to measure water consumption in each apartment so that every unit will pay their proper share.
Offsetting High Water Costs
According to Alan Rothschild, president of Vantage Group, Inc., a water cost management and analysis firm in Monroe, New Jersey, The general belief seems to be that conversion to metered rates spells financial disaster. For some buildings, this may unfortunately be true. But for the majority of New York City properties, metering can be a break-even situation and even a windfall. To control water and sewer costs, Rothschild recommends developing a physical and demographic property profile that can help make an accurate prediction of how much water the building should be using and how much it should spend annually on water and sewer costs.
Comparing this estimate to current water and sewer usage and charges lets management see potential areas for savings. In the case of metered buildings, Rothschild adds, it is even more critical to know your building's normal and acceptable water consumption. If you discover that you are using more, then you have found a source of cash flow dollars. A consumption analysis can help you determine usage efficiency and target areas of potential savings.
Water use analysis can also help a building make educated choices when selecting appropriate an ffb d effective retrofit devices. To offset escalating water costs, Kraus suggests that co-ops and condos convert to low-flow plumbing fixtures which are available at any plumbing supply house, survey the property for leaks and adhere to a regular maintenance schedule that includes correcting leaks. Educating all residents about the high cost of water, Kraus adds, so that they will report leaks promptly, is also very important. High-rise buildings that have a high-pressure heating system can also realize water savings by recycling the steam they have purchased from Con Edison. After it has been used in the heating system, the steam turns into water, Krause explains. Rather than discarding it, the water can be re-used for non-potable uses such as the HVAC system. It's free water.
Steam leaks is another area that is often missed. In buildings that are 30 to 40 years old, the underground pipes that lead to the boiler can become oxidized and pitted. According to Kevin Donohoe, director of management at Elm Management in Lake Success, which manages over 100 co-ops and condos, this type of leak can be detected by putting a sub-meter on the water feed. This allows the super to keep track of the water used by the boiler from week to week. And, in addition to looking for visible leaks on the floor, the super can walk on the concrete floor with no shoes to feel the hot spots that could signal an underground leak.
Donohoe adds that in smaller, older buildings that have one-pipe radiator systems, broken air vents can let out steam. A 70-unit building that has 350 radiators has 350 air vents, he explains. If you have 35 to 50 air vents with leaks a year, this translates into a gallon of water per vent a day. If this situation persists for four months, you lose 6,000 gallons of water.
Robert Grant of Diversified has been involved in setting up an in-house energy and water department to identify strategies for reducing water charges, correcting DEP bills, handling conversions to meters, installing retrofit water-saving devices, training staff to detect leaks and maintain weekly meter logs. According to Grant, a building can save up to 25 percent of its annual water bill in a properly planned conversion to water meters.
An interesting one-time benefit of voluntary conversion to meters is the recovery of money that has been escrowed one year in advance by banks holding underlying mortgages in co-ops. This can bring up to tens of thousands of dollars back into your building's cash flow during this one-year period, adds Grant. Prior to metered billing, New York City water rent and sewer charges were calculated on the basis of a building's frontage, Grant explains, and were billed annually at the beginning of the city fiscal year which runs from July 1 through June 30. New York City requires that all buildings that are billed on frontage pay one full year in advance every July.
The single most important component of Grant's water management program is the creation of 12-month charts for every property. Each month the super reads every meter at every property and enters the findings on Grant's spreadsheet which can be created manually or using computer software. When the bills come in, Grant explains. We compare DEP's usage to the usage we have recorded. This allows us to detect and report billing errors. We can also see variations in water consumption from month to month and year to year, alerting us to the existence of unreported leaks and running toilets. Once you're metered, Grant points out, water running is lost money.
Ms. Mosher is Managing Editor of The Cooperator.