What is the estimated life span of a treatment plant that is being maintained.
I’m trying to figure out how much Capitol needs to be set aside for a new plant or just budget for repairs as they come
Originally I thought I should stay away from Waste treatment plants at all cost but it seems that if you factor in the necessary repairs and capital expenditures into the equation before you buy, you might be OK.
I’m looking at a park built in the 60s set up with 100 pads and about 50% vacancy.
Five or six years ago they were allocating approximately 40,000 a year plus approximately 15,000 a year for utilities directly related to the WWTP now however, the utilities is still approximately 15k but the WWTP is up to 90k.
The packaging plant is traditionally located where the source of dumping the “treated” water occurs, such as near a stream. Effectively the sewage goes into the plant and comes out the other end 98% pure and safe to flow into a stream or other option.
If you look at the economics on these systems – which we have a hundred times – you can quickly see what the problem is. When the plant is built, it lasts around 50 years and costs around $500,000, so you need to save $10,000 per year to be ready to replace it (plus compounding) when it wears out, which is roughly equivalent to the costs of city sewage. But here’s what happens instead. Mom and pop sell the park after 40 years and the new owner has no savings to replace it. The next owner would have to save $50,000 per year for the next 10 years, which they never do. Instead, they plan to sell it just before it dies. Then the third owner buys a literal time bomb with a $500,000 obligation and no savings at all. After that, it’s strictly a hot potato with each successive owner praying it does not die on their watch. That’s not the way to run a railroad.
You are smart to realize that you have to save a set amount per year to replace the system when its useful live is over. Do the math and see if the park economics support that level of savings. If not, then don’t buy it
What type of treatment plant do you have? Is it complying with the current permit conditions? Do you have a copy of the DEQ or equivalent permit? It will tell you the operating conditions that must be met. How many gallons per day are you trying to process? Standard numbers are any where from 100 to 250 gallons per manufactered home.
What you doing with the treated effluent? Stream, lagoon for infiltration, or drain field infiltration.
The 500k is not a crazy number I know a 15000 gallon per day activated sludge plant that was just replaced. 350k plus installation, plus engineering. 450 to 500k. This cost did not include replacing the effluent infiltration / disposal component of the system or any of the collection piping.
Most waste water plants have 30 to 50 year life.
Dont count on 50 years unless your lucky. If treatment plant was built in the 60s I would say now is the end of its life cycle…
You need to have a look at the operating permit. Every State is different this will drive the cost of compliance.
Phillip Merrill
Merill Water Systems
Operation and Management of drinking water and waste water systems.
OK, I found out that this particular WW TP is a 30 K contact stabilization WW TP installed in the mid-80s so that puts it at about 30 years old. The operator says it could use a little refurbishing on the inside but is an overall better condition than a lot of the other ones he sees.
So I’m thinking that if this deal is going to hold any water it would have to support a very aggressive finance plan for a new system and a discount to help replace it faster
Louvie, have owned and personally operated WWTP. The negatives usually outweigh the positives and WHEN you decide to sell the present questions you have will possibility be a deal killer for the NEXT owner. Unless you have a cap north of 12–WALK
We have owned and operated several WWTPs over the last 10 years. Yes they require maintenance and they can be a headache but in some cases I would rather be in control of the process than be paying the city for a huge water/ sewer bill. For example if you have a major leak it will almost always be cheaper to process that water and sewer through your own plant than pay the extra water bill to the city.
Regarding lifetimes, these systems typically do not just fail all at once. Think of it moire like a house or building. The entire structure does not just disappear after 50 years. If you manage it carefully and keep up with replacing blowers, motors, pumps, etc it can be very viable for decades.
It all comes down to what you are comfortable supervising versus what you are comfortable contracting out versus what you expect to pay the government for to take care of without worry. Like many other aspects of managing a business (any business), there is aggravation, risk, and expected return. I capitalize the aggravation and risk into the park cap rate I will pay or “value” the park at, and compare the expected return to the aggravation and risk to determine whether an investment makes sense.
Blowers, pumps, motors are usually 10 to 15 year items. The big ticket item is if the whole plant has to be replaced. The contact stabilization process probably has two to four basins. If it was a package plant the basins/ tanks are probably steel. If your lucky they are cement. If they are cement rebuilding the piping and guts is much less painful. Rebuild as you go is way to go.
Another item that tends to sneak up on people is lagoon or basins that they let slowly fill up with solids over the decade. Costly to remove and dispose of.
So many variables. You definitely need an outside expert to check it out. Dont rely on current operator oppion. Go over the system top to bottom for condition and for compliance.
When we buy a park one the first items we consider is how easy will this park sell in the future. A park that is highly sought out by buyers for such things as good location, infrastructure good condition, easy of operation, good tenant history, high occupancy, lack of needing the police every week, few POH’s is part of deciding what kind of properties we buy and operate. Since it is difficult to put a fixed cost per year with a WWTP it is a gamble that you will have plus how much does that decrease the number of future potential buyers. When ever the pool of future buyers becomes less the potential sales price could also be much less. The WWTP gamble is one we refuse to take again since EPA keeps upgrading the requirements!!
I have to agree with Carl on this one. If it wasn’t for the EPA and their ever moving targets and changing regulations it wouldn’t be so bad. I did look seriously at one with a wwtp but it had the plant at the front of the park and a city hookup available near the plant.
I called PCS out of Ohio today and they gave me an estimate on a extended aeration plant rated for 30k made out of steel for a ballpark of 160k. Installation if able to setup next to an old one 35-50k.
Seems like the engineering and most of the design costs would be minimal since it’s a prefab model.
Other than the cost to get rid of the old contact stabilization plant, are there other large expenses I’m not seeing?
Yes, permitting for one. Also there may be more engineering than you think. Where is the daylight drain? If it’s a lagoon you’re looking at drilling, perk tests, etc. if a stream you’re probably looking at some engineering there too. I’m sure there are limits into how much effluent you can dump into a waterway. Removal of the old plant, there will be other costs.
Price seems low… with out seeing what your getting for that price hard to say for sure. Extended airation plants are very sensitive to flow. You will need an equilization basin in front of the the plant. Does the current permit have nitrate limits? Either way you better have a plan to deal with them with the new plant. Government likes to tighten things up. “You just installed a new plant so how about we cut your limits in half”.