Don't Keep Flushing Water and Money Down The Drain.

Learn How to Build a Successful Submetering or Water Allocation Program for Your Community

LILA BALTMAN

As the cost of water and sewer continues to increase faster than any other utility and as water conservation becomes increasingly vital, more and more multifamily professionals are discovering the advantages and benefits associated with submetering the water allocation.

For years, most apartment properties provided water and sewer services to their residents as they did with electricity expenses prior to the 1980s. The cost of these services was simply absorbed into the monthly rental payment.

Today, however, property owners are realizing the benefits of making residents accountable for their water use by passing water and sewer costs directly to them. Residents who are billed based on the amount of water they use have an incentive to use it more sparingly. This is a welcome alternative to raising rents in order to account for rising water and sewer costs.

Water submetering is the process of installing meters attached to each multifamily unit to measure the actual amount of water being used. The resident is then billed based on the meter reading which reflects actual consumption. This method is possible in multifamily buildings that have one of the following physical characteristics: A single water feed to each apartment; A single hot water feed in each apartment (water heater); or A single cold water feed to each apartment and a common water supply.

Unfortunately, some existing buildings cannot be retrofitted with meters using existing technology. Meters can also be used to measure common areas such as laundry facilities and swimming pools to get an accurate reading of the property's total water consumption.

Submeter installation costs can vary based on the overall volume of water consumption, the structure of the building itself, and the type of technology being used. The cost of installation typically ranges from $300 to $1,000 per unit. This is a substantial capital investment, but it is accompanied with several benefits. For example, the value of the property increases with the installation of submetering technology and leaks can be pinpointed within the water system.

By far, the most enticing advantage to submetering for apartment owners and managers is the property's increase in Net Operating Income (NOI). For example, a property with 200 units and an average water bill of $40 per unit each month has the ability to increase the property's NOI by $96,000 per year or more. (These figures will vary based on local water and sewer rates.) The cost of installation is also tax deductible when it is treated as a capital improvement. The average Return on Investment (ROI) for submetering equipment is 14 to 18 months.

BEFORE YOU BEGIN SUBMETERING, IMPLEMENT A WATER CONSERVATION PROGRAM

According to Ronald Kepes, director of American Water & Energy Savers, Inc., 'A water management program is not complete without water conservation.' For the past two years, American Water, a nationwide conservation and submetering firm based in Miami, Florida, has been studying the effects of submetering programs both with and without water conservation and repairs being completed first.

For properties that did not complete water conservation and repairs prior to submetering, the most interesting discovery was an immediate, across-the-board increase in the number of work orders related to faucets, showers, and toilets. Once residents started paying for their water consumption, they were quick to report leaks and potential problems they were not previously concerned about.

Residents may resent submetering on principle, says Kepes, because with it they have to pay a high water bill that the property has done nothing to control. The study also revealed that these residents were more reluctant to pay their water bills. The delinquency rate at these properties was 20 percent higher once the residents started to receive their bills.

In contrast, properties that implemented water conservation and repair programs before remetering had 75 percent fewer work orders for the three months after installation of the meters.

Typically these properties communicated to the residents that a water conservation program would lower the water bills they were about to receive. Seeing that the property was doing its part, residents' acceptance of the submetering program was much higher. In fact, the company found that their collection rate was 20 percent better than on other properties.

INVEST IN WATER SAVING DEVICES

There are several plumbing fixtures designed to use less water and to use it more effciently. Low-flow shower heads when installed can save up to 800 gallons of water per month. These shower heads use less hot water and fuel bills could conceivably be lowered as well. Other water saving devices include low-flow toilet dams and other apparatuses that lower the amount of water in the tank. Offering residents an incentive to report leaky faucets and toilets will also help conserve water. Repairing a leaky faucet can save 600 gallons of water per month. Placing a brick in the toilet tank can save 20 gallons of water per day, and fixing a leaky toilet can save 200 gallons of water per month.

ARE THERE ANY LAWS GOVERNING SUBMETERING?

Generally speaking, all state laws permit controlled submetering, however, there are some laws governing what can be charged. These regulations do not permit the submetering supplier to charge higher rates per gallon than those billed by the water supplier. Other state laws stipulate certain annual filings for compliance. Laws are, of course, changing. New laws governing submetering will be enacted to prevent overcharging and others will be passed to encourage water conservation. Submetering will fit within this regulatory structure. The 'From State to State' section of Capital Beat in this issue of Units, page 18, contains available regulatory information on submetering.

THE ADVANTAGES OF WATER ALLOCATION

Water allocation is the process by which a multifamily building owner will disperse water and sewer expenses among residents using an arbitrary formula. There are formulas that create a pro-rated billing system based on apartment square footage. A more complex formula might include weightings for square footage, number of occupants, and water consuming fixtures. Allocating water in this manner varies and is referred to as Ratio Utility Billing, or RUB.

Allocation based on a formula distributes the rising water and sewer costs among residents and relieves the property owner of a financial burden. Allocation also requires virtually no capital expenditure on the part of the property owner. There is a general lack of regulation in most cases regarding common areas of the property such as laundry rooms and water fountains.

With water allocation, residents essentially split one large water bill and are billed using a formula based on some variable such as the square footage of their unit or the number of occupants. Residents are not billed according to their units' actual water usage.

It has been estimated that RUB programs, when implemented, average a 15 percent reduction in consumption. Residents' bills will fluctuate moderately even if they drastically reduce their consumption due to the negative effects of averaging. A portion of the reduced consumption can usually be attributed to education programs for residents and the installation of low-flow plumbing devices.

REPORTING REQUIREMENTS

Some localities require owners to file periodic reports documenting allocation or submetering on their property to the government. The frequency of the reports can vary from monthly to yearly. Arizona, Missouri, Oklahoma, Pennsylvania, Virginia, and Dade County, Florida, do not require periodic reporting to the government. California and Tennessee do require periodic reports. Owners should consult the local authority to determine what they are required to report and what the penalties are for reporting late or not reporting. Tennessee has the most extensive regulatory oversight of any state on this subject. Property owners in Tennessee must conduct and log daily tests and file monthly operation reports.

EDUCATE YOUR RESIDENTS

There are also several changes residents can make in their daily routines that will lower water consumption. For example, simply reducing shower time by one minute can save 700 gallons of water a month per resident. Turning the water off while brushing one's teeth saves three gallons, while using a bucket rather than a hose to wash a car saves about 50 gallons of water per wash. Detecting leaks and drips can also aid conservation.

GO WITH THE FLOW

To summarize, both water allocation and water submetering a conserve water. Those communities that install meters can expect a 25 to 35 percent reduction. These figures are indicative of the fact that associating the usage of water with its cost results in less usage than the current system. Submetering is more effective than RUB programs in reducing water consumption, but as mentioned before, can only be implemented in buildings with certain physical characteristics.

'One of the most important things that apartment owners and managers can do to conserve water is aggressively implement a plumbing inspection program,' says Jim War field, executive officer of the Virginia Water Authority. 'Residents are often unaware of a leak in the apartment, especially a toilet leak, and a tremendous amount of water can be wasted this way.' Most water utility companies will be happy to come out and assess if there are any leaks, says Warfield. 'Just look on the internet or in the phone book for the water facility closest to you.' U