We’re considering a purchase of a park that has a WWTP and being that I’ve never owned a park with on nor have I performed due diligence on one before, I thought it might be appropriate to post on the forum.
The plant just had a 150k upgrade and was issued a 10 year permit. Per the inspection company the facility is currently running at a 45% capacity which means we should never have an issue with the demands from the park, even if we add homes.
What are the proper due diligence steps to take as a buyer to ensure I’m not walking into a money pit? Should I have any concerns other than the ability for the system to perform as intended., i.e, environmental, liability, future capital expenses, etc?
Kevin -Gads, I’d stay away from that. WWTPs can be something like $750,000 to replace when they go bad. There are just too many decent parks out there on city water and city sewer to even consider taking on that type of risk… Unless you are getting the property at a 20%-cap with non-recourse financing … :)>- -jl-
Where is the park? You need to have a local environmental engineering firm, preferably one that knows the county and state EPA. If you tell me the state, I could maybe give you some guidance.I have to respectively disagree with Jefferson. We have been involved in plenty. If you know what you are getting into and budget accordingly you can find great values in parks with private utilities. Unless you are dealing with a massive system, worst case scenario for a ~100 site park should not cost you more than $250,000 if the whole system needs to be replaced.There are risks, but at the right price it could be worth it. In addition, water leaks become way less expensive!DR
Is the cpacity 150K or 15K gallons per day? I ask because my over 55 years old Florida park has 211 lots with a package plant of 15K per day which is plenty. It is run like this: I took courses through the Fl Rural Water Association and became a class D operator. Nevertheless, in order no to be tied down, I have an independent contractor operator who does most of the weekly and monthly tests–I just wanted to be qualified in case he became unavailable. In addition the park maintenance man does the daily operating procedures. This may sound complicated, but it’s really not. The main benefit is that the cost to me is much less than what the county services would be if I hooked up to them. And by the way, the impact fee for joining to co. svs., waste water and drinking water would be $2100 per lot. It is true that a moderate amount of skill is required, but our waste water plant has run for many years without any serious trouble or regulatory violations.I agree with DR: "There are risks, but at the right price it could be worth it."CN
One problem is EPA and their regulations are being more challenging every year with MORE testing and stricter standards. The $250,000 total cost from my experience is very low and remember their is an outflow that will be closely monitored and potential fines for any violation. We use septic systems but will never own AGAIN own an aeration plant… After 30 years in the business I am changing my attitude on sewage–if it does not have city sewage I probable will not buy it–keeping up with ALL the new regs is never ending and at times VERY COSTLY.
In my haste to express the satisfaction and enthusiasm I
have for my small wastewater treatment plant I did not read and edit my
previous post. I see now I need to make some clarifications.
The package plant has a capacity of 15,000 gallons per day
and this is sufficient for my population. What I need to clarify are facts
about this population: All residents of
this park are 55 years old or older and senior citizens tend to be frugal in
their use of water. In addition, many of the homes have only one occupant. (We
have a lot of widows and widowers.) Most of the remaining homes have only two
occupants, and only a handful of homes have three. The average daily input to
the sewer system is only about 50 gallons per home. That is why over 200 homes
can be served by a wastewater plant with a 15,000 gallons per day capacity.
Thanks for all the feedback. Just to clarify, the WWTP just underwent and complete rebuild at a cost of $150,000 less than a year ago and was issued a new 10 year permit from the county based on the upgrades. I’m not sure of the actual gallons per day capacity but will find out. All I do know at this point is what the seller stated which is that the plant is only running at 45% capacity based on the current usage, but I will surely verify this during due diligence. The park is in the Florida Panhandle and is in a highly desirable location. Based on our contract price and current performance we’d be buying at a 12.5% CAP. Unfortunately, there is no non-recourse financing available for the deal and there’s no opportunity for owner carry as he still has a decent amount of debt on the property.Wonder if a Master Lease Option would be a better solution for this deal. The underlying debt has attractive terms and has 6 years left before it balloons. Jefferson, not sure you’d ever find a 20% CAP park in this park of Florida, unless it’s a small little rundown park which was built in the 50’s or 60’s and has high density and very small lots. This park is not the case. CN (flaguy), whens the last time your WWTP had a major overhaul (if ever)? If it’s never been rebuilt or replaced, whats some of the common expenses you’ve incurred during your ownership (not including routine operations and inspections)? Any other suggestions would be greatly appreciated.Thanks,Kevin
If you want to read about WWTPs look at the Office of Water Programs page at the California State University Sacramento website. The address is www.owp.csus.edu . They have at least 6 well written manuals, all reasonably priced, covering pretty much everything that you need to know, including the mathematics of wastewater. Pictures are good, glossaries are real good, math is covered thoroughly. These manuals are aimed at WWTP operators and are widely used in the classroom. Jim Allen
If you have any type of septic tank or leach field in your existing park or are considering the purchase of a park with these then the manual you want is Small Wastewater Systems Operation and Maintenance Vol I and or Vol II. Manuals are $49 each and will give you a working knowledge of the system.
If you already have a septic tank system this will help keep the plumbers from taking advantage of an owner. For the record, I’m not saying plumbers are dishonest but I have seen some shady practices.
Jim Allen
Most of our parks are on private utilities (water and sewer) and we have been very successful. The next time you have a massive water leak in your master metered park you might wish you had a private well where you were not having to pay dearly for every gallon of water lost. Water and sewer rate are very high in some cities now and so it is not always so great to be on public systems.
Jefferson has shown from experience the smartest way to operate is to have investors fund your properties and after many years I am asking why am I operating water and sewer plants when our time is most valuable managing our parks for the greatest return and to have buyers waiting at our doors when we want to sell. EPA is loading us down with more and more testing and regulations that could bite us when we want to sell and have fewer interested buyers.
The costs for potable water and effluent treatment will be going up for the foreseeable future greater than or equal the rate of inflation. There are many reasons for this. One large reason is that many water districts have not replaced or upgraded their distribution and collection systems to keep pace with deterioration and obsolecsense. Another is that EPA is pushing regulations down to the user/consumer/purveyor level. Still another is that there is an idea out there that we are running out of water which is causing a degree of panic in many circles.
The only defensive tactics I see are to push costs onto the consumer, educate the consumer as part of the cost pushing, and get smart about the water utilities in your park as a part of your management philosophy. Later, I will post the link to Brown and Caldwell’s BC Water News, a free daily email newsletter. Also, the American Water Works Association, AWWA, has some great material as well.
Jim Allen
As for risk on these waste water treatment plants and private wells, almost all general liability insurance policies exclude any coverage associated with “pollution.” And most states consider human waste as “pollution.” Thus, you’ve got to be careful here. Stand alone pollution liability policies have proven to be so expensive for park owners with private utilities that they are rarely purchased ($5k premium minimum).A common solution is to hire a company that specializes in plants and water wells to do your testing and maintenance. They generally carry pollution insurance coverage and can name you as an additional insured on your policy.
I would contact Mike Renz at (614) 538-0451. He’s a genius on these type of items and, although he is the guy we use for all our Phase I reports, he knows a million contacts that might help you get a handle on the plant and its risk/condition.The biggest problem with these type of systems is the capital required when they go bad. They normally work fine if properly serviced – that’s not at issue. But we’ve seen them cost up to a million dollars to replace, and that’s a lot of money. New ones have long warranties, but if it was just upgraded, and not replaced, then don’t think that the 10 year permit means someone is promising it will work for 10 years. The permit is not a warranty.Also, your park is going to have a mortgage a whole lot longer than 10 years, so make sure you know how the permitting process works when that comes up again.