St. Louis Park endorses company’s utility line warranty
By Seth Rowe on August 14, 2012 at 2:01 pm
Because utility line replacements can create high, unexpected costs for homeowners, the St. Louis Park City Council has taken the unusual step of endorsing a private company’s warranty program. The City Council voted Aug. 6 to endorse a National League of Cities Service Line Warranty Program operated by Utility Service Partners Private Label, a Pennsylvania company that hopes to offer its services to all cities in the lower 48 states.
For a monthly fee, the company promises to provide utility line repairs using licensed local plumbers at no extra deductible or service fee cost. Utility Service Partners maintains a repair hotline that is open at all times.
The program “helps city residents save thousands of dollars on the high cost of repairing broken or leaking water or sewer lines,” a Utility Service Partners brochure states. The brochure adds, “USP administers the program and is responsible for marketing, billing, customer service, and performing all repairs to local code.”
The company states the average cost of repairing a broken water line or sewer line ranges between $1,200 and more than $3,500. A St. Louis Park staff analysis states service line repair or replacement costs in St. Louis Park may range from several hundred dollars to as much as $7,000.
The water line warranty covers repair costs from the city’s main line to the water meter of up to $4,000 plus $500 for public sidewalk cutting, if required. The sewer line warranty covers the sewer line from the city’s main line to the pipe’s entry to the home. Up to $4,000 is covered for sewer line repairs with another $4,000 available for cutting into the public street, if necessary. The coverage is available on a per-incident basis with no lifetime cap. The coverage does not cover the cost of bringing utility lines up to code that are not in need of repair, according to the company’s brochure.
Because the St. Louis Park City Council agreed to enter into a marketing agreement with Utility Service Partners, solicitation letters sent to homeowners will contain the city’s logo.
Before the council agreed to endorse the company, City Attorney Tom Scott negotiated several points with Utility Service Partners in the marketing agreement. The company will be required to carry at least $1 million in liability insurance. The city will be insured through the liability insurance as well. The revised agreement clarifies that St. Louis Park residents will receive a 10 percent rate discount through the agreement with the city. The city could have received royalty payments from the company but opted to provide the rate discount to residents instead.
St. Louis Park may also terminate the annual marketing agreement with a 60-day notice.
“Typically, service line repairs range in the several thousands of dollars and can create significant financial hardships for an unprepared homeowner,” St. Louis Park Public Works Director Mike Rardin states in an analysis of the program. “This warranty program is designed to transfer the risk of these costly repairs.”
Rates will likely cost each homeowner $6-9 per month per line, according to Rardin’s report. Buffalo and Columbia Heights have previously agreed to participate in the program while Chanhassen and South St. Paul have cited concerns regarding the program’s lack of a track record in Minnesota and potential complaints from residents about using a city logo on the company’s letterhead. Eagan is also investigating participation.
Rardin noted the National League of Cities provided favorable documentation about Utility Service Partners’ management of the program elsewhere.
“City contacts have confirmed this is a good program and USP appears to be a reputable viable vendor,” Rardin states in a staff report. “Based on the earlier staff evaluation and the due diligence results obtained by the City Attorney, staff feels this is a reliable credible program that could be of benefit to some residents in St. Louis Park.”
Rardin said he anticipates between 2,000 and 3,000 St. Louis Park homeowners would sign up for the warranty program.
Councilmember Susan Sanger said the marketing materials should specify the city would not provide the service and any complaints should be addressed to Utility Service Partners. Other council members said they have heard from many residents with concerns about utility line replacement bills.
“I know many people in Ward 3 have had issues with lines breaking, needing replacement, being dug up, and finding out that they have a huge bill, which for many people has been very frightening for people in these economic times,” Councilmember Sue Santa said.
“I’m kind of glad to see there’s something available that staff has done due diligence on and checked out and vetted.”
While Councilmember Anne Mavity said she had some reservations about partnering with a private company on a venture new to doing business in Minnesota, she said, “It seems to have panned out. I’ve had residents in Ward 2 hit with very large bills and that can be somewhat devastating for the people involved, so I would support this.”
Currently in St. Louis Park, utility line replacement costs may be paid outright by property owners or paid through a special assessment process over a 10-year period. Interest currently set at 5.85 percent is charged. Rardin’s report said major service line replacement takes place in a typical line every 50-75 years.
“Over the long term this program appears to be cost neutral to a homeowner,” he notes. St. Louis Park and Utility Service Partners will publicize the new warranty program through direct mail marketing. To learn more about the company, visit homeserveusa.com.
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