Water: What’s Ahead?

By Bob Nieman | Jan 29, 2010

Believe it or not… there’s roughly as much water on the earth today as there was millions of years ago. The big difference is how – and among whom – it’s distributed these days.

While one community may have few water supply concerns, another might have very acute problems.

“We tend to think that water doesn’t cost anything so we don’t have to protect it,” said Steve Maxwell, managing director at TechKnowledgey Strategic Group, a water industry management consulting firm. “The truth is that the planet has a fixed amount of water, while the population and industry continue to explode.”

And, as that fixed resource grows scarce, the need for conservation measures increases. In fact, according to the U.S. Government Accountability Office, even under non-drought conditions, at least 36 states anticipate water shortages by 2013.

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.

Everything from antiquated sewer systems to water shortages to raised effluent standards are 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 strong 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. To make matters worse, federal funding for such 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 problem 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 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 coin laundry in the 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 Future of Water Rates

In many places, water rates are going to continue to climb for a number of reasons, according to the American Water Works Association.

“There are certainly those situations of drought, expanding populations and arid climate, where the water resource is the main reason for increases in price,” explained Greg Kail, director of public affairs for the AWWA. “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.

“Probably the most common large impact is simply the need to reinvest in the water infrastructure,” Kail said. “That’s been an issue for many years.

“In 2001, we estimated that there was going to be $250 billion worth of additional investment needed over those current levels of spending just to replace and repair existing pipes in the ground.”

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.

“Infrastructure costs are big,” Kail noted. “The other one is regulations. 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.

“There are other costs, 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; 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.”

However, the rate increases themselves are the biggest current water industry trend. In the AWWA’s most Water and Wastewater Rates Survey, the average price for 1,000 gallons of tap water was $3.24.

“That cost will continue to rise,” Kail predicted. “It’s also fair to say that there is a sense that the Environmental Protection Agency 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.”

How to Survive

The first thing you can do to offset water and sewer costs, as well as pricey impact fees, is to know exactly what you’re 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 United States 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.

Fighting Back

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.

“When they open new laundries or apply for permits, coin laundry owners should promote the message that they help communities save water,” said Rami Kahlon, who serves as the director of the Division of Water and Audits at the California Public Utilities Commission. “That would get them more traction in California. I think the message that they help communities save water is not out there yet.”

Equipment Upgrades and Maintenance

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.

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.

“In California, we are under a mandate to reduce per capita water consumption by 20 percent by 2020,” Kahlon said. “The agency I work for has a water action plan, which we have been instituting since 2006, which will get us to the 20 percent reduction by 2020.

“Thus far, commercial customers have escaped a tiered rate system like we use with residential customers, because of the understanding that, if water is a key component of your business, having higher rates probably won’t affect conservation at your business,” he added. “However, it would reasonable to expect that commercial establishments also will one day face water use restrictions or higher rates for higher usage. To the extent that laundry owners can institute water-saving conservation measures, they probably should be doing so.”

Don’t Neglect Your Wastewater

“For laundry owners, I think where they dump their wastewater might be more important than the water supply itself,” Kahlon said.

In San Francisco, there is a municipal agency that sells water and also handles the wastewater, according to Kahlon. And the sewer rate for a coin laundry in the city is four times the rate of water; a dollar’s worth of water will cost store owners $4 to dispose of.

“Our state water resources control board oversees what gets dumped into the rivers and bays,” Kahlon explained. “And as those requirements get stronger, there will be more sewage treatment taking place – and self-service laundries are easy targets because their waste product is water.

“Also, because the rain isn’t falling, the city of Los Angeles, for example, isn’t going to be doing as much desalinization as it is water recycling, where that sewer water is treated and put back into the ground and pumped out again. If sewer companies are going to start spending more money treating wastewater because they’re going to put it back into the cycle, laundromats are going to be targets for that.”

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 Coin Laundry Association 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.

Water Recycling

When discussing wastewater and sewer rates, the issue of water recycling also arises. However, the technology has yet to take hold within the self-service laundry industry… due to a number of obstacles.

Jeff Lebedin, president of Aqua Recycle, a Georgia-based company that installs commercial water reclamation systems, sees four major stumbling blocks to recycling water in a self-service laundry setting.

“In general, coin laundries don’t fit our profile,” said Lebedin, in a recent interview with The Journal. “Number one, it’s often owner-operated. Number two, the owners are usually not that technically capable of managing the equipment and conducting the maintenance on their own. Number three, we are concerned about the types of items that are being washed. And, number four, the customers are using residential chemicals that are not designed properly for recycling, so we have to add additional chemicals to keep the system from potentially going septic or smelling.”

Lebedin, who has installed his systems in four self-service laundries to date, added that, while water recycling can certainly work effectively in a coin laundry, he doesn’t want to put his company in a position where there are going to be problems after the installation.

“We try to manage it on the front end and saying, ‘OK, if you want to do this, you’re going to have to do this, you’re going to have to do this and you’re going to have to do this,’” he explained. “We don’t want anyone to think this is a plug-and-play. We are taking wastewater, removing all of the contaminants and reusing it in the washing process. You have to take some real responsibility for that. It’s not plugging in a TV where you’ve got 300 channels instantly.”

Negative customer perception is another huge hurdle currently keeping water-recycling systems from becoming more commonplace in the industry. According to a number of laundry distributors, although such systems work well, a large percentage of laundry customers are still squeamish about washing their clothes in recycled water. Indeed, rather than heralding the fact that they’re running environmentally conscious operations, some laundry owners with such recycling systems prefer to not advertise this information at all.

“Your competitors can use the fact that you’re recycling water to their advantage by telling customers that they won’t get as good a quality wash with recycled water,” Lebedin admitted. “They can use it as a negative connotation, rather than a positive one.”

Lebedin said he would like to see the industry become more proactive as far as water recycling within its stores.

“I think, down the road, there may be some regulations, as water continues to be a problem,” he said. “It would help to see the coin laundry industry itself try to self-regulate one way or another in terms of controlling some of these variables before government officials start coming in and dictating it.

“As these municipalities continue to run out of money and as their facilities continue to deteriorate, they’re going to require businesses to chip in more and more,” he added. “And you’re going to see water and sewer rates continue to rise. You’re also going to see more and more regulations stating that laundry owners can’t discharge this kind of stuff without treating it first, one way or the other. Things are going to change and the more the coin laundry industry addresses it before it is addressed to them, the better chance it has of avoiding problems.”

Price It Right

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 2010 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.

“Utilities are trying to impress upon all of their customers the value of water service, because without that understanding it’s going to be difficult for elected leaders to muster the political will to support the needed increases,” Kail explained. “The reality is that tap water delivers public health protection, fire protection, support to the economy – as the coin laundry business certainly knows – and the overall quality of life that we’ve come to expect. Without a renewed understanding of that value, it’s going to be difficult to set rates that reflect the full cost of the service. You’re going to hear a lot about that from a lot of water utilities going forward.”