By Louis Martin, RCAC staff writer
Managing a water and/or wastewater system is an often overlooked and overwhelming aspect of mobile-home park ownership. If you just purchased a mobile-home park, there’s a strong chance you also just became the park’s de facto water and/or wastewater systems operations manager. Responsibilities typically handled by an entire local government department could now fall on you. Unprepared owners find themselves thrust into the role of environmental tester, contractor, billing and even police department.
There are many points to consider before running a utility. For example, the complicated processes for rate setting and determining the appropriate revenues needed to recover the system’s expenses and allow for emergency reserve funding and profits. Rates should also take future expansion plans into consideration.
It’s important to stress that a mobile-home park’s system governance is complex because the mechanisms for water and sewage can be wildly different from park to park. One park may have several septic tanks that individual mobile-home residents own. Others may have a community septic tank with shared costs. Here are some factors to keep in mind when planning to run a mobile-home water and/or wastewater system:
You can create a nonprofit to govern your system
A private, for-profit water/wastewater system may seem appealing, but regardless of park size, the high cost of operation and maintenance adds up and can quickly eliminate the potential for revenue. Pumps, repairs and testing are expensive; and as head of a utility, you are ultimately responsible for any payments that need to be made on delinquent accounts. Raising rates to cover expenses can create undue burden on park and/or mobile-home owners. And because the number of units in a given park typically doesn’t change, increasing revenue over time becomes difficult.
The high cost of operation and maintenance means that park owners may never generate the revenue they need to fund upgrades, repairs or make a profit. But there is an alternative: you can create a nonprofit organization to manage your water or wastewater system.
Nonprofit governance allows you to qualify for various grants and loans that for-profit organizations do not. This includes access to training and technical assistance to set up your nonprofit. Nonprofit status could also unlock significant relief in emergencies or for urgent maintenance. However, it’s important to understand that choosing this route limits your decision-making abilities. A for-profit water/wastewater system allows you full control, while a nonprofit system must have a board of directors who will make all the major decisions. Nonprofit systems must also be transparent about their financial strength and generate significantly more documentation on financial and operational activities. This transparency extends to your customers, and decisions that in the past were made in private must now take place in open meetings.
You need to set wastewater rates that cover costs
Many people underestimate wastewater costs. For a typical gravity-fed wastewater system, there are very few moving parts, and day-to-day costs are minimal. This can mislead owners into setting rates very low or even choosing not to charge at all. What they should factor in is that in case of urgent maintenance or an emergency, wastewater treatment costs can be extremely high. Problems like these are not uncommon, especially in small parks. For example, parks with several septic tanks in close proximity to the water source are likely to have high nitrate concentrations, which could affect their drinking water if left untreated.
You need to build a surplus for emergencies
Administering your own system includes setting rates for water and sewage and it’s critical that you structure rates to save for an emergency reserve fund. More often than not, you will need to use your emergency fund on maintenance. Replacing pumps, water lines, or even septic tanks can cost from tens of thousands of dollars to well into six figures. And because public health and safety requires access to safe drinking water and sewage treatment, an emergency might require a sudden large purchase. Saving in advance can avoid reactive measures, such as having to purchase a new septic tank with a high interest credit card.
You are responsible for collections
In a typical municipal water system, you could shut off water to tenants who don’t pay their bills, or in certain situations work with law enforcement to find a solution. Privately owned water systems must handle their own collections. In these cases, the recourse is different. If a customer owns their property, one option is to put a lien on the property to recover back payments but even a lien cannot bring in revenue until the property sells. If you own the land, you can take steps to evict the tenant, but that is an extreme action that can also take time.
Whether you are a nonprofit or not, and you must take action to shut off a customer’s water, they may be able to simply turn it back on, therefore you may need to install locking mechanisms on curb stops (the control valve for the water system). In other cases, individual connections won’t have service shut offs. That means you won’t be able to shut off a past due account! As a last resort, you can call local police and ask them to enforce on your behalf.
You will need to test your water regularly
No matter what governance your water system falls under, you’ll need to create a testing plan for regular drinking water sampling. The results need to be reported to oversight entities called Local Primacy Agencies (LPAs) that will vary from state to state. You will be required by law to share this data with your customers via an annual consumer confidence report.
Luckily, new mobile-home park owners don’t need to go it alone. RCAC has regular trainings for water and wastewater operators. In person and online trainings are available. RCAC also offers on-site support to rural water and wastewater staff and boards. You can find more information about these services here.
Rural Community Assistance Corporation’s Jeremy Peirsol contributed to this article.