Mobile Home Park Mastery: Episode 335

Should You Bill Back Trash?

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When park owners talk about billing back utilities to residents it’s mostly about water and sewer. But rarely do most operators consider billing back trash. In this Mobile Home Park Mastery podcast we’re going to review the pros and cons of billing back the trash service and how to better make a decision on that option.

Episode 335: Should You Bill Back Trash? Transcript

Many years ago, Mobile Home Park lot rents followed a simple path, it included all utilities. You paid one monthly amount and everything else was included. And then park owners realized over time that this was not the best methods for the good of the residents. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're gonna talk about billing back utilities, but most specifically billing back trash. Now the first utility that owners realized need to be billed back to the residents based on use was water and sewer. Why? That is the single largest line item in any Mobile Home Park's P&L. So as a result, owners realized if they could move water, sewer into a new category where it was actually metered and residents paid for what they used, it would foster conservation, which it definitely does when you put in sub-meters at a Mobile Home Park. Typically consumption declines by about a third. It's a very impressive amount of water and sewer that is saved when residents have to pay their own way.

But additionally, it also allows you to capture those few individuals who are heavily abusing their use of water. It's not just a casual amount that they are using based on their regular everyday life. Some people will often convert that even to things they need for work. So a guy will fill up a giant tank of water on a trailer, if he's in the landscaping business, the construction business, or a mobile car wash business. And we've got to find those people because if you don't bill back the utility, it gets end up being spread amongst all residents, raising all of their individual rates and prices in the lot rent to live there. So we're all convinced that based on conservation and fairness and equity, that residents should pay their own way when it does come to utilities. But one utility that rarely gets mentioned when it comes to billing it back is trash. Now why is that? Why have many park owners over the years lost track of trash? Well, the key reason is that trash has historically been a very small number.

Now, for many Mobile Home Parks that are on poly cart, if you look at the trash bill from 20 years ago, it might be $5 a month or $7 a month, or even $10 a month for that poly cart with a regular weekly dumping of the trash. But the problem is you've now fast forward for many decades of inflation, not to mention all of the new costs and surcharges thanks to COVID. And now you look and you see the trash might be $20 a month, or $30 a month. So the first reason that trash never got on the radar screen for most owners was very simple, it wasn't really enough money to worry about, but today it's a much more significant amount. Now if you own a Mobile Home Park, which is served by a dumpster, one giant metal container that represents all the trash for the whole community, then you typically are not going to bill that back to the residents because it's kind of a group cost, very hard to allocate, and most community owners just continue to pay that out of their own pocket.

Additionally, one big metal dumpster typically is not gonna be anywhere near the cost of the poly carts. Now, why would we go to poly cart then if it's more expensive? Well, the reason that poly cart is the superior trash collection method is it gives you more of a residential feel. Have you ever been to a single family subdivision on a dumpster? No, obviously not. Doesn't exist. So on detached housing, typically the correct way to collect refuse is with the poly cart. And most park owners today want to provide their residence the best quality of living, and they find that most people want to live in the Mobile Home Park over the apartment complex, because they in fact want to have more of that residential subdivision feel. And the poly cart goes a long way to providing that. Additionally, poly carts are much more attractive to have around than the giant dumpster in your park. The big metal dumpster, even with the enclosure is not very sightly. I think we would all agree with that.

And also poly cart does not typically lead to offsite dumping, whereas when you have a dumpster, frequently someone who does not live on property will come and throw everything from shingles to tree limbs into your dumpster, causing you a lot of financial agony because you'll now have to have it dumped more frequently and or picked up off the ground wherever they throw it. So there's many reasons why poly cart is a very important feature. One that many people never think about is just your roads themselves. A giant dumpster truck weighs as much as a railroad car. It's a giant amount of weight to have on that asphalt. It will destroy it. If you go in many parks with the worst road you'll ever see, they all share one common feature, a giant dumpster at the back of the park. So that giant railroad car goes right down your roads, however many times a week that they dump the dumpster. Now, regular car weigh about 4,000 to 5,000 pounds. The dumpster trucks can weigh anywhere from 50,000 to as much as 100,000 pounds. Can you see the problem with this?

Now, the poly cart truck is right between, it comes in at about 20 to 25,000 pounds. Definitely weighs more than the car, but nowhere near as destructive of force as the giant dumpster truck. Now, if you're on curbside service, poly cart service, and you've got residents, and it will be one fee per lot for that service typically. The question then comes up, should I bill that back? Well, let's explore that for a minute. When you bill back utility, what are you really doing? What you're really doing is you're trying to keep your lot rent fair based on your competition, because if somebody else doesn't include a service and your rent does include a service, typically the customer doesn't look over that fact. They look just at the raw number. So if a Mobile Home Park had a $400 lot rent, which does not include water, sewer, and another park owner has a $420 lot rent, which does include water, sewer, they never hear the does or does not include water, sewer, they just assume the $400 one is superior, even though when you add on the water, sewer, the $400 lot rent is more.

So from a marketing perspective, from a fairness perspective, typically it makes sense to have the residents pay their own way when it comes to utilities. And that is in fact also true for trash because many operators, some of the largest now do include trash in the bill backs to residents. If you look at a lot of park owners today, you'll see it says lot rent, but the lot rent does not include WST, which stands for water, sewer, trash. So if you wanna remain competitive today in most markets, you need to follow what everyone else is doing and start billing back that trash additionally. Now, when it comes to billing back trash, in many cities, it's much more simple than billing back water and sewer. You need to check with your state MHA and see what the guidelines are. But in most cases, you'll find those guidelines are few and far between. Basically, you just bill back whatever that regular monthly recurring charge is for the trash.

Now, when you bill back the utility, whether it be water, sewer, or trash, you also get to insulate yourself from the hate, which occurs as those utilities go up in price. In some municipalities, we have seen, particularly in the form of trash, huge increases because the government is telling some of these cities that they have to do massive improvements to their waste water treatment facility. So they're going to have to go out and float a bond issue, and they're gonna have to get the money back. So they may tack on giant surcharges. People hate having extra price to pay every month, and if it's included in the rent and you have to raise your rent appropriately, all that hate comes to you. "Hey, why are you raising my rent so much? I hate you. You raised my rent so much". However, it needs to be accurately focused on what's causing the higher cost, and that's typically the utility provider.

So often when you push the utility back to the resident, what you're doing is you're fair and square, putting a spotlight, a focus on who the true culprit is in this world today in America, of all these escalating prices, it's not fair for you as the park owner to be blamed because in most ways you're the victim. You didn't do it, you didn't raise the cost. You wish that the cost was still what it was in the olden days, but yet it's not. The bottom line to it all is that billing back trash today is probably something that all community owners should look at. If you've not already adopted that process, you might check with your state mobile home association because it may be time for you to start billing back trash. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.