The disposition of portable restroom contractors isn’t so sunny in Florida these days. After years of construction booms — which saw restroom operators expand their inventories and invest heavily in service fleets — an economic downturn brought on by the collapse of the sub-prime mortgage frenzy and rising property taxes has dialed back demand in a big way.
One contractor recently called Pumper to bemoan the falloff of construction customers, and said that a new cost-cutting tactic from a national homebuilder working in Florida has added insult to injury. As the contractor explained, Lennar Homes held an online auction for restroom operators to compete to serve its construction sites statewide.
The result of the auction was a per-unit service contract that the contractor said would have been unprofitable, had he accepted it. The contractor also contacted the Florida Onsite Wastewater Association to discuss the situation, and executive vice president and CEO Bill Carson said he’s set to convene a meeting on the issue this fall.
Florida could be the flashpoint for the industry that is taking the hit from questionable sub-prime mortgage lending and a rash of foreclosures nationwide, which are glutting the market with real estate and causing banks to pull back on free-and-easy lending terms. Carson says that liquid waste contractors will have to bite the bullet and somehow get through this challenging time.
“They’ve had 15 to 20 years of constant growth and all of a sudden they get slapped in the face,’’ Carson says. “What do you do when you get slapped in the face? You have to be prepared to survive. Florida is definitely not down and out and will continue to be one of the fastest-growth states for years to come.’’
Pumper: What’s the state of construction-related business in Florida right now?
Carson: On an average, building permits are down 50 percent, not including the panhandle that we call South Alabama and South Georgia. Onsite contractors are down by about 50 percent. Residential construction is the problem area. There are so many homes on the market that it will take an indefinite amount of time to recuperate. The commercial market is very strong. The contractors who serve that market are absolutely fine.
Pumper: In addition to the sub-prime loan defaults that are gaining national attention, what caused the sudden slowdown?
Carson: There was about a year there where you could sell your home in one day, with several buyers bidding on it, and you could get more than you asked for it. Florida became this great hub, and people saw the values just take off. The prices here just went bananas. I call Florida the California of the East. The problems California has faced in the past, Florida faces now, including overgrowth, poor road systems, and not enough schools to handle the growth.
Pumper: You’re still bullish on Florida’s future?
Carson: Yes. Florida doesn’t have a state tax. Companies come to Florida. Add into it the weather and everything else, and it’s still logically a big retirement area. Orlando has room for growth … I attend a lot of development meetings, and the projections are that within a 20-year period, the Orlando area will double in size to 7 million people. The market will come back because of the growth patterns.
Pumper: So what can portable restroom contractors do to weather this storm?
Carson: Diversification is the key. If you’re only a portable restroom contractor, that’s your only product. You’re better off like the onsite contractor who, if he does repairs and pumping, is probably keeping his head above water when he’s not doing any new installations. When you have all your eggs in one basket and something happens to that basket, you’re up a creek. If you’re sitting with 1,000 restrooms on your property and you can’t get rid of them, you have two options: either expand your territory or come up with an alternative market … in some places, the market is weddings and high-line events. That market is still there.
Pumper: What’s on your agenda that might help companies survive downtimes?
Carson: We’re going after a new state ordinance that says onsite septic systems should be maintained. We’re looking at new technology and making sure conventional systems are managed properly, because of the effect of polluted waterways. If that goes through, counties will require the homeowner to make sure their system is operating properly, which will require an onsite expert to maintain the systems. That will create business on the maintenance side and will give (contractors) business they’ve never touched.
Pumper: Do you think the recent Lennar Homes auction for statewide restroom services, which is upsetting portable restroom contractors, will start a cost-slashing trend?
Carson: Whenever you have a market with drastic changes like we’re in the middle of now, you’ll have companies trying to find ways to survive … They have the right to do it, and if they can find a way to do it, they’re going to. Homebuilders are trying to find ways to save costs, and they’re going out and cutting whatever kind of deal they can that helps reduce their costs … How far is it going to go? Nobody knows for sure. Do I think it will be a constant thing? No.
Pumper: How are the septic system pumpers doing?
Carson: People are still using their restrooms and washing their clothes. From that point of view, the business will always be there. The problem in Florida is what do you do with the septage? We’re running out of land-spreading areas and there are fewer and fewer areas to dispose of it. It’s extremely expensive to set up (private) plants, so the best way is to get multiple companies together to work on reducing the costs. It sounds easy, but we know it’s not.
Pumper: Have there been any surprises in the midst of the economic woes?
Carson: Our association recently had its annual convention and we had more exhibitors and stronger attendance than we’ve ever had. When people are down and don’t have work, they start going out and looking for alternative work that’s there for them.
Pumper: What’s the good news angle in Florida?
Carson: I don’t want to be doom and gloom. The future is bright for companies that have patience and look at alternative methods to help themselves survive until the industry comes back. Florida will be one of the top three states in the nation in growth and business development. The strong will survive and the weak, I’m sorry to say, won’t.
