News

Japan earthquake and tsunami disrupts materials production

04/07/2011

According to Plastic News's Frank Esposito, we should expect production problems in Japan to drive PVC pricing very high for months.

For more see the article at Plastic News.

When Aging Pipes Means Big Business

05/05/2011

Joseph Vellano likes to say sewers are in his blood. They course through his business’s top line, too.

Vellano runs Vellano Bros. Inc., which supplies pipes and valves for water and sewer systems. With those systems aging, Vellano sees opportunity.

Meanwhile, a fourth national supplier moved into the Capital Region market this month—the latest evidence that the Northeast’s rampant water and sewer problems have turned into a big, and unheralded, business.

“By 2020, I’d say 80 percent of upstate systems will be done with their design life. So it’s either pay me now, or pay me later,” said Vellano, third-generation CEO of his family’s business.

He has 105 employees spread over 14 locations in six states, as far south as Alabama and Georgia.

Vellano said he serves 425 municipalities just from Buffalo to Boston. Part of his business is tied to the real estate market. Those sales, for new construction, nose-dived as developers halted new subdivisions, Vellano said. No matter. Crumbling infrastructure in the Northeast helped push revenue to $60 million last year.

Even bigger companies have put their stake in the region.

The latest is a subsidiary of HD Supply Inc., which itself is a spin-off of The Home Depot Inc.
HD Supply bought Rexford Albany Municipal Supply Co. Inc. of Watervliet in a deal that took effect May 2. RAMSCO, as it was called, has 60 employees and reported $40 million of sales in 2009.

“They wanted New York and New England. They see all this aging infrastructure,” said James Beaudoin, third-generation head of the former RAMSCO.

“I did see the market changing, and I was afraid they would come here and set up shop anyway,” Beaudoin added.

There appears to be plenty of work to go around.

Environment One Corp. sees greater demand for sewer consulting and products, including pumps that grind waste.

“It’s a trend we want to keep capitalizing on,” said George Vorsheim, spokesman for E/One. The Niskayuna business has 150 employees.

Beaudoin, now of HD Supply, has outlets in Utica, Binghamton and Rochester. He plans to add more.

“It’s almost a miracle the systems continue to do what they do,” he said.

“Quite frankly, a lot of these municipalities aren’t charging enough in water rates. They’re all in deficit-spending mode,” Beaudoin added.

Repairs happen on an emergency basis. Some lines are so fragile, they’re not strong enough to handle new water mains, Vellano said.

“We sell Band-Aids now,” Vellano said.

“No one’s ever heard of us,” he mused later. “But we deal with everyone’s lives all day, every day.”

What Lurks Beneath

05/06/2011

A crew for the city of Troy dug a six-foot-deep trench on a recent Saturday morning to reconnect gushing water pipes from 1885.

It’s a scene repeated more than 300 times every year with the city’s aging water and sewer pipes—emblematic of a costly crisis plaguing the Northeast.

Most of the water and sewer systems under our feet blew past retirement age many years ago, but they continue to shoulder more and more demand.

And here’s the kicker: Repairs will cost New Yorkers $63 billion over the next two decades, according to conservative government estimates. The bill for drinking-water work alone is four times the national average.

In a very literal way, this is the story of the trouble that lies beneath. A 21st-century economy is trying to subsist on a ticking time bomb of pipe systems that, in many cases, predate the Civil War.

Aging pipes create environmental issues, too. Six area municipalities spill 1.3 billion gallons of untreated sewage and stormwater into the Hudson River every year, thanks to the antiquated design of their sewer systems.

The cost of those repairs: At least $110 million.

Sewers, admittedly, aren’t sexy. Politicians prefer to cut ribbons at new parks or buildings, with little desire for major work that’s literally out of sight.

Roads and bridges dominate the debate about infrastructure. But for every bridge that needs to be replaced, hundreds of miles of water and sewer pipes are now well past their expiration date.

No wonder water and sewer rates will double or quadruple over the next 20 years, according to a U.S. Conference of Mayors study.

The problem is all too familiar for that crew in Troy, where 20 percent or more of the city’s water leaks out of pipes or is otherwise unaccounted for.

Workers stopped traffic both ways to fix the 126-year-old pipe, collecting eight hours of overtime on that recent Saturday. The broken pipe gushed almost a gallon every two seconds.

“It is perpetual triage,” said Neil Bonesteel, Troy’s water plant operator.

Troy needs to spend $33 million to replace seven miles of century-old pipes connected to its reservoir. It will cost at least $18 million to fix the 48 places where untreated sewage dumps into the Hudson.

Troy is far from alone. Albany also pollutes the Hudson, especially after heavy rains, and the city has had a record 50 breaks this year, just in primary water pipes. In Montgomery County, Amsterdam is eyeing a 17 percent hike in water rates. In New York City, tunnels feeding drinking water to the city are in dire need of repair, and the city has spent $6 billion (and four decades) building a new one.

Joseph Vellano deals with these issues every day. He is the third-generation CEO of Vellano Bros. Inc., a pipe and valve supplier based in Latham. Vellano said a worst-case scenario could be just as crippling to a city as a natural disaster.

“We see little Katrinas every day,” Vellano said. “It’s like fixing Model Ts. So many of these systems are one catastrophic event from there being no water or sewage disposal for days or weeks.”

“All these politicians and municipalities are gambling,” he added. “But I don’t see what they can do. They have no money.”

The state is little help, having just erased a $10 billion deficit last month.

New York’s fund for drinking-water projects has had so little money that 95 percent of work remained unfunded before the federal stimulus chipped in. The modest aid has started to dry up.

“The signals from Washington and Albany are clear: We’re not going to subsidize your systems. You’re on your own,” said Cohoes Mayor John McDonald.

It’s not like municipalities are better off than the state. They’re now paying the highest pension rates in 30 years, and health care costs continue to soar. Gov. Andrew Cuomo wants to limit how much they can raise taxes with his tax cap.

“It’s really the worst in an older city, where the infrastructure is extremely old and the tax base continues to erode. The numbers just become astronomical,” said Jeanine Rodgers Caruso, president of Fiscal Advisors & Marketing Inc. Her firm advises local governments from offices in Clifton Park and four other sites.

The water and sewer funds for Cohoes were flush when McDonald took office in 2000. The city cut rates by 25 percent over a few years.

Both funds ran $200,000 deficits as recently as 2009, especially after the cost of environmental regulations kicked in.

“I championed what I thought was the right thing to do for taxpayers. The reality is, it threw our fund out of balance,” McDonald said.

The funds now turn a small surplus, though at least $16 million of water and sewer work awaits. McDonald said he understands why most other politicians don’t focus on water and sewer issues.

“It admittedly took me awhile to get to this point,” he said. “I’ve never seen any state or local official with a ribbon-cutting for a pump station.”

Cohoes is one of six Capital Region municipalities spilling those 1.3 billion gallons of untreated sewage into the Hudson River every year. It represents a fraction of the water passing through this area, but it still means the localities violate federal pollution regulations.

Suburbs have newer, more sophisticated systems that don’t wash untreated sewage into rivers. Separate pipes carry sewage to treatment plants and stormwater to rivers.

But the region’s older cities have combined systems that take everything to the treatment plants. It’s not as if cities are dumping raw sewage into the Hudson at all times. Still, rainstorms often overwhelm the systems, which are set up to dump the sewage-rainwater soup into the Hudson—or else risk creating major backups into homes and businesses.

The river has become much healthier over the past couple of decades as more clean-up efforts took place. Solving the combined sewer overflow issue is one of the final waves of those efforts.

Environmental studies, the first step in trying to address the problem, started six years ago. The Capital District Regional Planning Commission organized the effort.

“We’ve come to realize that we have to turn these rivers around and make them assets,” said Rocco Ferraro, executive director of the commission.

Ferraro’s group has calculated that $110 million of work is needed to fix the problem. Even he isn’t certain yet how the six localities will pay for it.

“There are a lot of questions about affordability. You’re talking about many of the area’s poorest communities, and we are certainly already burdened with property taxes,” Ferraro said.

“Everyone’s trying to stop sprawl and trying to attract people into cities. But at what cost?” he asked. “Are you willing to relocate into a city and pay those sewer and water rates?”

It’s a prevalent question in Troy, where water and sewer rates are among the highest in the region, even though they haven’t changed in three years.

Well-built infrastructure could last up to 125 years, said William Bradley, superintendent of Troy’s water and sewer system. The city’s pipes are at least 30 years beyond that point, he said.

Bradley gave $500 million as a conservative price tag to replace Troy’s 310 miles of water and sewer lines. Spread over a century, that’s $5 million a year—or 10 times the city’s annual pipe repair budget today.

“In this current environment,” Bradley said, “we will never, ever catch up.”



The Business Review