New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

The Growing Line Item

Water is moving up the expense ladder

 

The cost of water used to be such a small portion of a building’s annual budget that it was filed under “miscellaneous items.” No more. On May 21, the city announced that water rates will rise by 12.9 percent in the coming fiscal year, which began July 1. It was the fourth straight year of double-digit increases, and it means that water is now almost twice as expensive as it was a decade ago.

“Now it’s equal to the cost of fuel to heat and cool a building,” says Jeffrey Weber, president of Weber-Farhat Realty, which manages 40 co-ops and condos in the city. “Water used to be a miscellaneous item that didn’t even amount to a line item on the operating budget. Now it’s about ten percent of most budgets.” While the figures differ from building to building – for some, it is four percent – no one disagrees that though there may be water, water everywhere, but the cost is going up.

Accountant Jay M. Menachem has, like property manager Weber, seen some buildings’ water bills rise to about 10 percent of the operating budget. In one eight-unit Manhattan co-op, for instance, the amount earmarked for water and sewer has leaped from 5.3 percent to 10 percent of the budget in the past five years. At a 196-unit co-op in Queens, on the other hand, the water bill has nearly doubled in the past decade – rising from $39,145 to $65,615 per year – yet the percentage of the budget dedicated to water rose only slightly, from 4.3 percent to 4.5 percent.

“The reason,” says Menachem, “is that a building’s three main expenses – real estate taxes, fuel, and water – have all been going up like crazy. The percentage of the budget devoted to any one item will depend on what other expenses are doing.” In other words, everything is relative, but none of the news is good.

More than half of what the city collects is used to pay off infrastructure debt. In the past decade, $13 billion – or about two-thirds – of the $19 billion in capital spending by the Department of Environmental Protection (DEP) has gone to projects mandated by the state and federal governments. In the past four years – when water prices have increased by double digits annually – the cost of paying off those projects has jumped 27 percent, to $837 million.

In announcing the latest rate hikes, Alan Moss, chairman of the city’s water board, noted that the city’s water system has been “neglected” for many years. Cas Holloway, commissioner of the DEP, which manages the city’s billion-gallon-a-day water supply, blamed “unfunded federal mandates.”

Holloway singled out the $1.4 billion Catskill and Delaware Ultraviolet Light Disinfection Facility, which, he says, was forced on the city with little regard to “whether the investment is needed right now.” Other costly projects include the $2.8 billion Croton Water Filtration Plant, the $330 million that’s being spent on storm sewers and water mains, and the ongoing construction of the $6 billion Tunnel No. 3, which will supplement the city’s two water tunnels, which were completed in 1917 and 1936 and are, to put it mildly, showing their age.

But those mandates, according to Holloway, have “substantially, and unnecessarily, increased the financial burden of the water system on New Yorkers, many of whom are struggling in these difficult economic times.” Holloway also notes that DEP has already enacted an eight percent budget cut and is going through its capital program line by line to find additional ways to trim costs. The “good” news is that, thanks to these belt-tightening measures, next fiscal year’s water rate hike is projected to be a bit less painful – a mere 11.5 percent.

As costs continue to rise and cost-cutting measures show diminishing returns, the time might be coming when a radical leap forward is necessary. Today, most residential buildings have a single water meter, and bills are divided with no regard for each apartment’s actual water usage. The guy watering his garden on the roof is not penalized for waste, and the water miser downstairs is not rewarded for saving. (A small percentage of buildings still receive flat-rate “frontage” water bills, based on the building’s street frontage and the number of stories, apartments, and water-using fixtures. This system is scheduled to be phased out by July 2012.)

But even before it arrives, some people think the one-meter-per-building future is obsolete. “There might be a time when residential buildings start submetering for water like many are doing now for electricity,” says Weber, the property manager. In a commercial building he manages in Chelsea, each of the nine businesses has its own meter, including a restaurant that uses about $1,300 worth of water a month and an office that uses $35. When the office’s bill spiked to $150, Weber investigated immediately and discovered that a toilet was running non-stop.

“Based on where people are going with green buildings, a lot of supers are saying that [submetering] is where the city will be going in a couple of years,” says Michael Williams, who owns Brooklyn-based Meter Reading Services. Williams services five residential buildings in Brooklyn and Queens that already have water submeters.

“Using water has become more expensive, but wasting it is a killer,” adds Alan Rothschild, president of Vantage Group of Monroe Township, New Jersey, the largest water-conservation consulting company in the metropolitan area. “We try to help buildings figure out their most efficient level of water use, then get there and stay there.”

The process begins with a Water Cost Analysis, which takes a couple of weeks and usually costs between $1,000 and $3,000. An Automatic Meter Reader (AMR) reads the water meter every hour and transmits the information to a central computer. Rothschild says an AMR quickly notices upticks in water usage from “insidious and sneaky” things like “invisible” leaks.

Vantage was hired by AKAM Associates to address high water bills at eight of the properties it manages. “What was found was that the bills were accurate [but] there was gross over-usage of water owing to antiquated toilets, showerheads, and sink and faucet fixtures,” says AKAM president Michael Berenson.

The properties underwent a “tune-up” that attacked the sources of waste. “Ultimately,” Berenson adds, “aerators, seals, flushometers and other elements were replaced, resulting in reductions in water consumption of as much as 30 percent.”

High-tech systems like AMR are no substitute for diligent preventive maintenance of your water system, argues Philip Kraus, president of Fred Smith Plumbing & Heating Company, which has been in business since 1914 and now has a clientele of mostly upscale Manhattan co-ops and condos

“We find that in most buildings, if everything seems to be working, people aren’t inclined to look into it,” Kraus says. “That’s not the way to go. Every six months you should check your water-heating system – for domestic use and heat. Make sure [the meters are] calibrated correctly,” Kraus advises. “Then start asking questions. Is the tenant with the rooftop garden using more water? Is there a hot spot on the basement floor? If so, untold gallons of hot water returning from radiators might be leaking beneath the basement floor.”

Thanks to conservation measures, improved maintenance, new technology, public awareness, and, of course, soaring costs, New Yorkers are using far less water today, per capita, than they did 25 years ago. Water usage peaked at 200 gallons per person per day in the 1980s. Today, each New Yorker uses an average of 150 gallons a day.

Good news? Sure. But don’t pat yourself on the back too hard. According to a United Nations survey, the average German uses about one-third as much.

 

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