New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

No Quarter Given

The dirty clothes have been piling up for days, and the smell coming from the hamper has overwhelmed your apartment. With steely determination, you gather your detergent, a handful of change, and begin the trip down the 18 floors to the basement laundry room. But only after you've arrived do you realize, with shock and horror, that you're one quarter short.

The options are grim. Do you head back up to the apartment and scour under the couch pillows for a silver savior? Barter with the doorman in the lobby? Head out to the corner store? Disappointed and defeated, you retreat back upstairs, deciding the laundry can wait another day.

It's a familiar scenario that no longer needs repeating. Laundry rooms equipped with "smart cards" and coinless systems are making quarters obsolete by becoming the norm in most new laundry room installations. And depending on the size of your building, your laundry vendor is probably eager to offer this high-tech improvement to you.

If you've used a MetroCard to pay for a subway ride, you already know the basics behind smart cards. The laundry room systems essentially work the same way. You put money into a vending machine, indicate how much you want to add to your card, and the machine gives you back a piece of plastic that you can then use to operate the washer or dryer. Every time you do a load of laundry, the balance on your card is deducted by the price of a load of wash. Refill it using the same machine when the balance gets low, and say "so long" to rummaging for quarters. The value on your card never expires.

The vending machines and card readers for the washers and dryers are expensive, and to balance out the expenditure, the laundry room companies try to sign longer-term contracts. But they claim the upgrade is worthwhile, arguing the cards provide better accountability and audits, more convenience for the end-user, more revenue back to the building, and less downtime and service calls.

The machine that actually processes the cash and the cards is called a Value Transfer Machine (VTM). The type of VTM varies. Fowler Route Company, a New Jersey-based laundry vendor, offers three VTMs ranging in cost and features. Most VTMs only take cash because there needs to be a dedicated phone line installed to verify credit card transactions, but a few higher-end models, like Fowler's "Diamond Center VTM" accept bank ATM cards and credit cards. The VTM is the most expensive piece of equipment to install, ranging from around $3,300 up to $7,000, essentially limiting the laundry vendors to installing the card systems in buildings with over 50 units.

"Any of our renewals or new business, as long as it's upwards of 50 apartments, we recommend they go with this system," says Denise Savino-Erichsen, vice president of Automatic Industries, a laundry vendor that specializes in multiple dwelling buildings. Mark Sperry, vice president at Fowler, says his company will offer the card system to smaller buildings, but Fowler will typically seek out a longer lease agreement.

Other companies are experimenting with ways to provide the card systems to smaller buildings. Automatic Industries has recently started a smart card pilot program in a 22-unit co-op on West 82nd Street without installing an expensive VTM on the premises. Through the management office, the co-op purchased a few dozen smart cards with $50 already added to the card balance, one for all the shareholders who chose not to opt out of the program, plus a few extra cards. Management then billed each shareholder individually for the cards. When a shareholder wants to add more value to the card, he or she can get another one from the manager, who then sends the empty cards back to Automatic to be refilled.

When property manager Judith Straus alerted the shareholders about the switchover from coins to cards via a notice, she says nobody protested the abandonment of quarters. Straus told the shareholders that the co-op would be billing them for a $50 laundry card unless they said they weren't interested. "People who opted out did so because they didn't use the laundry room," she says. "Nobody opted out because they didn't like the idea of using the cards."

Board president Greg Pace says his building was so eager to switch to cards, it was even willing to offer the laundry company a higher percentage of the monthly revenue in order to convince them to retrofit the machines. Eventually, they didn't need to do that, but Pace says the switchover has been worthwhile for both the co-op and the laundry vendor. He's already used up a $50 card in the six weeks that the system has been in place. He suggests that because the quarter scavenger hunt has been eliminated, "people are washing more, they're doing smaller loads, and I think [Automatic is] going to make more money. It's really been a convenience for the homeowners and I think it'll work out in the end for the laundry company, too."

If your board wants to make the switch to smart cards, contact your manager. If you're already under contract with a laundry company, talk to them about the possibility of upgrading your existing system. If your laundry vendor thinks your building meets the criteria it's looking for, then the existing laundry machines need to be modified to accept the smart cards and a VTM needs to be installed in the laundry room. This work usually takes only a few days to be completed, and costs the co-op nothing.

There are a few ways to structure agreements with the laundry vendors. In a "route" agreement, the laundry company provides the equipment and service, collects all the money, and then pays the co-op back, either through a fixed amount each month or a percentage of the monthly revenue. In an equipment lease agreement, the co-op pays the laundry company a monthly fee to lease the equipment, but gets to keep all the money generated by the laundry room; leases are a way to come out on the right side of the Internal Revenue Service's so-called "80/20" income rules for cooperatives (only 20 percent of your income can come from commercial ventures). Or the co-op can purchase the washer, dryer and VTM machines itself, keeping 100 percent of the revenue. But Edward Kwitko, vice president of Hercules, says the VTMs require much more technical know-how in order to properly service them. "With the card system you have to deal with the software and reading the cards," he says. "You have to have the support."

Sperry says smart card systems generate more revenue than quarters and are better at preventing graft. Since card-users tend to load up their cards in advance, there's more money going into the machine up front. That revenue is counted up and processed regardless of whether or not the machine has been used. And because the machine keeps a detailed, digital record of deposits, it's virtually impossible for anyone to be skimming from the collection without it being flagged.

Make sure the shareholders know what to expect from the new system and how to use it. There's no going back to the coin days once the card system has been installed, and it's almost impossible for a coin and card system to coexist. Even though the card system isn't tremendously difficult to use, it's always a good idea to educate the shareholders and answer questions.

Josh Siegel, who is both the property manager and a board member in his 239-unit Hempstead co-op, says that his building made the switch to a coinless system about two years ago. To introduce the new cards, the board sent out a notice announcing a "grand re-opening" of the laundry room, and invited the shareholders down to see what was new. On top of adding the new VTM machine, Siegel says, Automatic installed new washers and dryers, changed the laundry room layout, installed new lighting, and repaired the floors and ceilings.

"We actually had a fairly large turnout," Siegel notes, adding that the shareholders had been consistently asking about laundry cards at the annual meetings. "It's very simple. They picked it up very easy, we really haven't had a problem with it."

Unless your shareholders are particularly fond of quarters, there's no reason why your board shouldn't consider upgrading to a card system for your laundry room. In most cases it won't cost your building anything, you'll most likely get your laundry room spruced up, and there's a chance that you could make some additional extra revenue each month. Think about it the next time you find yourself venturing beneath your sofa pillows with a flashlight.

 

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