Attention Kmart Shoppers: Visit Aisle 42 for Water Bills at 30 Percent Off

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When Saturday Night Live makes fun of you, you have hit the big time.

Do you remember the old days when Kmart was the 900-pound gorilla of retail? Everyone was familiar with its Blue Light Special, in which a mobile blue light was quietly placed somewhere in the store where an item was about to be discounted. Then came the world famous announcement:

Attention Kmart shoppers! Fruit of the Loom athletic socks are on sale in aisle 28!

The Blue Light Special was not just any cultural icon. It was a Hollywood star. Saturday Night Live did skits every week portraying Kmart shoppers as rabid animals trained to salivate upon hearing the words – Attention Kmart Shoppers.

Then something happened. The blue light that once glowed so brightly is now but a mere dim bulb. What happened to Kmart? Many would say that Walmart happened to Kmart, but that is only part of the story.

Just like everyone in the multihousing industry has always been concerned with minimizing vacancy rates and utility expenses, everyone in retail has always been focused on inventory control. Kmart was as worried as Walmart about ordering too many chocolate Easter bunnies in February or not enough winter coats for the cold season. Though there were a number of differences between these two competitors, the stark contrast between Walmart’s success and Kmart’s failure was largely attributable to how each company used technology to further efficiency and execution.

Technology happened FOR Walmart.

Technology happened TO Kmart.

Walmart didn’t invent any new technology. It didn’t have to. The founder – Sam Walton – made use of already existing technology. With the help of technology, Walmart knew exactly how many Oster 6-cup blenders were on the shelves in a given moment and how many raincoat accessories for Barbie Dolls were stored in a given distribution center. Walmart’s efficiency enabled it to offer lower prices to customers. Kmart, figuratively speaking, was busy trying to recoup money lost on spoiled chocolate Easter bunnies. Such as it was, Kmart survived only after filing Chapter 11 in 2002.

Multihousing properties that recoup water costs from tenants are more efficient. Studies show that residents of submetered apartments consume 16 percent to 39 percent less water than in cases where unlimited water is offered free with rent. Properties that employ RUBS (Ration Utility Billing) use 6 percent to 27 percent less water.* How does efficiency benefit the property owner?

Take for example:

•         A property that averages $70 per unit per month water bill.
•         Management institutes a $20 per month rent increase instead of a $70 per month rent increase.
•         The average resident modifies behavior and conserves water.
•         The average resident now pays a $48 water bill instead of the owner paying $70.
•         Net results:

 1.     The property owner nets $90 more per unit per month than last year rather than only $70 more.

2.     The resident spends only $68 more per month than if there had been a $70 rent increase.

Efficiency makes more money for the owner while empowering residents to save money via conservation.

Speaking of efficiency, whether you decide to use submeters or RUBS, it needs to execute in an efficient manner. You don’t want to be like K-Mart – filling dumpsters with chocolate Easter bunnies on the Monday after Easter. Before you hire a third party billing Company to provide submetering or RUBS for your property, here’s some questions to ask:

• Does the Company have a website that allows residents as well as property managers & owners to access accounts and online billing information?
• Does the Company send special reports of irregular usage to the property manager, i.e. vacant units that are using water and occupied units that are using significantly more than usual should be flagged so that your maintenance crew can inspect for leaks.
• Does the Company provide training to property management personnel at no cost? Training needs to be available on an ongoing basis.
• What is the Company’s procedure when a resident is late or neglects payment?
• In the case of electronically transmitted submeter information, what is the Company’s procedure if data is not transmitting, i.e. bad battery or tampering?
• Ask the Company to provide client references.
• How many years has the Company been providing service?
• How many units does the Company serve?
• If it is relevant to your resident base, ask if customer service is bilingual.
• Are residents sent postcards or are the bills inside of envelopes?
• Can the bills include an additional line item for Trash or anything else?
• Is the Company familiar with city and county regulations? RUBS is legal in most Florida counties but not all.

In the case of submeters, here are some additional questions to ask the third party billing Company:

• Who will provide installation?
• Is the installer licensed and properly insured?
• Is labor warrantied for at least one year?
• Is the hardware warrantied? If so, for how long?
• Do the meters meet all regulatory requirements of the locale?
• What are the owner’s responsibilities during the installation phase?
• How long will it take to complete installation?
• Who is responsible in the case that a pipe fractures during a retrofit? (Galvanized piping is prone to fracture.)
• What are the payment options for hardware and installation?
• What is the charge for replacing faulty valves? Since the installer is already working at a unit’s water feed, this is usually a good time to replace faulty valves.
• In the case of electronically transmitted submeter information, what is the Company’s procedure if data is not transmitting, i.e. bad battery or tampering?
• Are the electronics tamper resistant?
• Are the electronics proprietary or universal? It is preferable to use universal equipment so that if the owner changes the third party billing company, the new Company can read the electronic transmissions.

Here are a few questions to ask yourself:

• Do your leases include a clause about submetering or RUBS? If not, you’ll need to have your attorney provide a clause. The billing of water will be phased in as leases are renewed and new residents move in.
• What information do we need to provide to the third-party billing company, i.e. move-ins & move-outs, tenant roster, etc.
• What do I need to do in order to get the most value of third-party billing and to recoup as much water cost as possible?
• How will I communicate with the third-party billing company – I will need to periodically ensure that everything possible is being done by all parties concerned in order to recoup as much water cost as possible.
• What type of reports will the third-party billing company make available to me. I will need to be able to see a reimbursement statement and a money trail that is transparent and easy to read.

Of course, you need to ask the relevant cost questions:

• In the case of submeters, how much for hardware and installation?
• What is the service fee per month per unit? Does your county or city allow you to pass this cost to the resident?
• What are the setup and close account fees when residents move in and out?
• Is there a setup fee for the whole property?
• How much is the late fee?
• How much is the NSF fee?

 Submetering has come a long way since the late 1980’s when only a few US multihousing owners began employing the technology. The technology works. The capabilities are robust. Because Florida’s water rates are expensive and continuing to increase, it is important to be efficient. 

Water costs can happen TO you. Or water billing can happen FOR you.

* For a comparison of results from five studies, see page 178 of http://www.nmhc.org/files/ContentFiles/General/full_final.pdf

For RUBS results, see page 3 from http://www.nmhc.org/files/ContentFiles/FinalLegReg/Water%20Comments.pdf

** NTEP – National Type Evaluation Program is administered by National Conference on Weights and Measures.

Article Contributed by PSC Member: Steve Hirsch , Commercial Water & Energy Co.