Water: The Waste You Don’t Know About
Property owners are asking where they can save more money. We have helped them to reduce violation occurrence, to deal with problem tenants, to cure and prevent arrears, but how often does anyone think of their water? If there’s no visible leak, then it’s not broken, right? Wrong.
In NYC, the Water Board, a division of the Department of Environmental Protection (DEP) is in charge of water. It has a monopoly and in recent years has been hiking up fares in the tradition of Standard Oil. Unlike other utilities (gas, electricity, etc.) where New York State (NYS) has unbundled services so residents can choose their providers, water doesn’t offer that opportunity. That means residents are price takers. In recent years, residents have been taking quite a beating.
The important element for managing water charges is to make sure they are correct. The DEP makes mistakes and leaves errors on their books for decades. Also, when the DEP is correct, they still rarely do much to collect on overdue bills. Even if the DEP is correct, there is still a chance you’re paying too much. This, like so many other property management issues, all boils down two areas: personal attention and modern management techniques.
Lines need to be checked regularly. A faucet that leaks one drip per second wastes almost 20 gallons of water a month. That comes back to bite owners after just a short while. Imagine that the leaking water is hot. Now you’ve got water and the cost of heating it too.
Bills need to be monitored. The New York City Department of Environmental Protection routinely over bills you for your water and sewer usage. One reason is that the process of monitoring and billing is subject to human and technological errors. Other reasons for overbilling are:
- Estimated Bills – By definition, estimates are not accurate. Estimated bills occur when the DEP estimates water consumption based on past actual reads. Auditors can correct inaccurate estimates.
- Broken Meters – A faulty meter can generate inaccurate readings, resulting in abnormally high water bills. Auditors can verify readings and check the accuracy of meters.
- Frontage Billing – You may be billed for lines or fixtures you do not own. Auditors can obtain refunds for errors in frontage billing.
- Overlapping Billing – Dates on your billing cycle may overlap so that you are paying double for some water use. Auditors can catch and correct this.
If there’s even a question about accuracy, companies like AWS can give their expert advice on the best ways to investigate and cure the problem.
Even with the recent price hikes (7% CAGR over the past 10 years); NYC’s water induced hardships are still not nearly as bad as some other cities. In September 2008, the annual survey conducted by the NUS Consulting Group found that the average price of water in the United States soared by 7.3 percent for the period ending July 1, 2008. The survey, which includes 51 water systems located throughout the country, revealed the highest price paid was in Boston, MA at $5.76 per one thousand gallons (“KGal”).
“With so much attention being paid to oil and gasoline markets, Americans may neglect to notice the increases in their water charges,” remarked Richard Soultanian, co-president of NUS Consulting Group. “While U.S. prices are considered modest by international comparison, this most precious commodity is truly our sleeping giant in terms of cost impacting each and every consumer.”
They hope to install a $200 million automated meter-reading (AMR) system, but that will not be in place until 2010. AMR is more accurate than manual meter reading. An added bonus to AMR is that it is less expensive than manual meter reading.
There may not be much we can do to fight City Hall but we can certainly do our best to keep them honest and make sure we are the masters of our own destiny by monitoring water in the properties we manage.
Boosting Your Reserve Fund- Naturally
At this time of year, our clients’ minds invariably turn to high energy costs. With ‘heating season’ upon us (October 1-May 1) and both heating oil and natural gas’s recent summer peaks fresh in our minds, owners of commercial buildings, and condo/co-op board members are looking to make sure that their budget is big enough to keep their property or home warm. If they seize the opportunity this year, they could find that budgets are big enough to heat their places and protect them from a rainy day.
Natural gas seems to be an area attracting a lot of attention within the scope of energy costs. As I write this, natural gas prices, despite doubling during the summer, are currently lower than they were a year ago (see chart below).
That puts Natural Gas prices at levels lower than most of 2007, 2006 or even 2005.
This helps us at OGI Management answer a question than many clients frequently ask: “How do we increase our reserve fund?”
If boards or owners have increased their budgets for the 2008-2009 heating season based on prices from earlier in the year, this is a good time for us to lock in today’s price. The difference between today’s price and the price they had budgeted for can be used to build up reserves. We can help property owners with the best programs for cost savings and flexibility.
*Perhaps you’re not aware that New Yorkers can choose which company to buy natural gas from? We sort through the providers to find the best deals.
**Many gas providers offer the opportunity to buy at today’s rate for the entire season, year or multiple years. This is called locking in a rate. Clients can alternatively choose to “float” and pay the utility’s going rate, which eventually moves up or down with the market. That said, long-term (or mid-term) price movements can be hard to predict but are expected to rise over time.
Self management: Is it Right for You?
A Cautionary Tale for Co-ops and Condos
When it comes to the topic of Self Managing a building, I am biased. When looking to accomplish a detailed, time consuming task with significant financial and well being ramifications it’s best to look to an expert. Any expert.
That said, if you have ample time to manage the day-to-day operations in addition to emergencies that seem to arise regularly while you’re busy elsewhere or on vacation, self management may be your best option. The issue boils down to time and money. If you have the time and lack the resources to hire a specialist, you can become one yourself.
The degree to which you actually manage is up to you as a board or owner. Hiring employees to remove trash, replace bulbs and clean hallways can remove stress (or possibly create it) within small communities where members know one another. These tasks usually fall to a competent super and their staff.
Also, similar to large institutions that self insure, at a large enough size, it can make sense to bring the entire operation in house. Tudor city did this years ago and later offered management services to others for a fee with mixed results.
These seem to be the basic requirements before considering self-management:
• Competent and responsive board
• Shareholders who are available and willing to substitute their volunteer time for paid full-service managing agent’s time
• Super must be skilled, responsive, self-starting, resourceful and manageable.
• Building must be in good physical shape, with all major projects completed.
• Over 70 % of the units should be owner-occupied and the reserve fund should equal several months of maintenance.
• There should be no assessments in place or forecasted
• No sponsor-owned rentals serviced by the building’s managing agent (in condos or coops)
• Importantly, the ideal self-management candidate enjoys great shareholder relations. This includes no dissident factions, no illegal sub-lets, no illegal renovations/alterations, etc.