Auto Laundry News - February 2013

Water — Essential Part of Every Business Plan

By Robert Roman

If I owned a car wash today, I could not imagine not having a water management element in my business plan. For example, several years ago, one my clients reported a 200 percent hike in water and sewer rates, or a year-to-year increase of $29,000 in utility expense.

Aside from “ouch,” is the question of what to do about it: reclaim, raise prices, both, or just grin and bear it? Unfortunately, solving water-rate-setting problems is like solving the location problem for a new car wash, it requires local-specific solutions.

Generally, rate structures are set to cover the expense of treatment, transmission, and distribution of water and system maintenance (state of good repair). Other expenses may include debt service on bonds to finance capital programs and any rent or lease obligations.

The method of rate setting varies significantly. Where water is scarce, rate structures typically stress conservation; where water is abundant, not so much. Common structures include uniform flat rate and ascending, descending or single block rate.

The factors affecting water rates include source of water, number of customers, miles of pipeline, and the terrain. So, water rates can vary significantly. For example, rates for a new system carrying a high debt in a low-density area can be four times as much as an older system with little debt in a high-density area.

Although water and sewer rates have historically been inexpensive relative to other utilities, researchers find rates have gone up in most of the nation’s largest cities. In some cases, rates are increasing faster than inflation and income growth. Consequently, the first step in developing a water-management plan is to understand the local environment.

Groundwater is the source in my area. However, water wars of years past have permanently damaged the aquifer so our county must buy water from other producers. Complicating this has been a 14 percent decline in water sales, need to fund $80 million in infrastructure, and another anticipated future decline in water sales of 16 percent. To keep up with all of this, water rate consultants have proposed rate increases through 2020.

The next step is to calculate volume of water. For example, our subject has five employees, uses 65 gallons per wash, volume is 75,000, and related use is calculated as 153 gallons per employee per day. Thus, system use would be 5.154 million gallons of water annually = (65 x 75,000) + (153 x 5 x 365).

As shown in Table 1, if the rate increases come to pass, our operator would pay an additional $10,070 for water in 2014 as compared to 2010. In 2020, it would be $19,026 more. After calculating water use and costs, each specific type of water use should be identified.

Other uses of water in car wash facilities include bathrooms, cleaning maintenance, irrigation, water fountain, kitchen, and laundering towels. We can estimate these uses by subtracting total and system consumption. For example, if meter readings show total consumption is 5.5 million gallons, then other uses of water are roughly 350,000 gallons (5.5 – 5.154).

A water budget for the facility would identify where reductions in water use could occur and how much would
be saved. In this case, system use is identified because it accounts for 89 percent of consumption.

As shown in Table 2, if reclaim water is used in washing and high-pressure functions, fresh water use would be reduced by 58 percent to 27 gallons per car wash.

At this point, the car wash owner would need to make a decision — increase price to offset the greater expense, improve water-use efficiency, or do nothing and incur the opportunity cost of more than $100,000 during the period.
Proponents of water-use efficiency view it as a long-term investment that benefits the community. However, some car wash owners may insist on seeing water-use efficiency actually reduce facility operating costs and provide a payback.

In the final analysis, the benefits of water-use efficiency do not always outweigh the costs despite circumstances, regulations, or rising water costs. Consequently, water management should be an element in every car wash business plan.

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.

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