Columbia Getting Big Bucks for Promoting Private Firm’s Service Plans

August 12, 2015

Investigative Reports

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Leaky PipeThe city of Columbia will collect tens of thousands of dollars over the next five years from a Connecticut-based company in exchange for officially endorsing the firm’s offer of repair-service plans to home water and sewer customers, The Nerve has learned.

A city official told The Nerve this week that fees received from HomeServe USA Corp. will go toward a city program aimed at helping water and sewer customers who experience hardships in paying their bills.

The Charleston Water System has a similar marketing agreement with HomeServe, which has paid a total of more than $230,000 in fees to the system over approximately the past two years, a system spokeswoman said Tuesday.

The city of Columbia’s promotion of the national company’s coverage plans, which is being done through mailings and the city’s Customer Care Center, comes as City Council recently approved water and sewer rate hikes for in- and outside-city customers, averaging about 9.7 percent monthly for 800 cubic feet of use, according to city documents.

The city also has a long history of transferring millions annually from its water and sewer funds for other uses, as The Nerve has previously reported.

Asked this week why Columbia officials singled out one company’s plans for endorsement, Shannon Lizewski, the contracts administrator in the city’s Utilities and Engineering Department, told The Nervethat customers in the past often didn’t know who to contact when dealing with unexpected repairs to exterior water or sewer lines on their property.

“We used to try to let them do their own research, but we had a lot of customers becoming frustrated not knowing where to start,” she said.

Under a marketing agreement between the city and HomeServe USA, a copy of which was obtained recently by The Nerve under the S.C. Freedom of Information Act, HomeServe will pay the city:

  • A “nonrefundable setup” fee of $55,000;
  • $10,000 for each 12-month period under the five-year contract for the city’s “Residential Assistance Program,” or “RAP,” to provide “assistance to Utility customers with isolated financial burdens (that) individuals face at a particular time”; and
  • 7 percent of net payments “actually received” from HomeServe customers during the contract period.

Lizewski couldn’t immediately provide specifics on how much HomeServe has paid the city to date. The parties can extend the marketing agreement for another five years after the initial term is complete.

She said HomeServe was one of three companies that submitted proposals for the marketing agreement with the city, though she requested that The Nerve submit an FOIA request for those documents. That request was made Monday; the records weren’t released by publication of this story.

Lizewski said there were “many factors considered” in selecting HomeServe, including, for example, the company’s experience and past performance, and its “program management concept.” Asked if the amount of annual fees offered to the city was a factor, she replied, “Not necessarily.”

Lizewski said the city was aware of a similar agreement between HomeServe and the Charleston Water System, though she added the company “didn’t receive points toward the RFP (Request for Proposal)” because of that.

In a written response Tuesday afternoon to The Nerve, Jenny Craft, spokeswoman for the Charleston Water System, said that since contracting with HomeServe in September 2013, the water system has received a total of $233,475 from the company  through June 30, including a one-time, $120,000 setup fee. She noted HomeServe “gives us 12% of the monthly revenue from protection plan purchases in our service area.”

Craft said since last October, the water system has donated a total of $25,621 in fees received from HomeServe to the “Good Neighbor Fund,” which “assists customers in need with paying their water/sewer bill,” and is administered by the Palmetto Community Action Partnership.

As of May of this year, 8,127 water-line service plans and 2,190 sewer-line service plans had been purchased through HomeServe, with the company arranging a total of 652 service-line repairs for customers who “signed up through our partnership,” Craft said.

“We find that many customers don’t realize the water and sewer pipes in their yard are part of their private plumbing system and that they are responsible for any repairs, which can be expensive,” she said.

Besides HomeServe, two other companies submitted proposals for the marketing agreement with the water system, she said. The Nerve’s request for those documents was being processed Tuesday as an FOIA request.

The Nerve also submitted written questions this week to HomeServe representatives but received no response by publication of this story. The firm’s website says it has more than 2 million customers covered under its plans, and that HomeServe USA is the North America arm of HomeServe plc, a London Stock Exchange listed company.

The marketing agreement with the city of Columbia was signed on Jan. 27 by City Manager Teresa Wilson and Thomas Rusin, chief executive officer of HomeServe USA.

On its website, HomeServe says Columbia has “endorsed HomeServe to offer coverage plans to its customers that provide protection from the expense and inconvenience of home plumbing repairs.”

In a written message to city water and sewer customers, Wilson said that “(y)ou may not be aware that as a homeowner, you are responsible for the repair of the exterior water service and sewer/septic service lines on your property.”

Replacing a water service line can cost $2,223, while locating, excavating and repairing a leak can cost $416, according to literature included with Wilson’s message.

“The City of Columbia values its customers, which is why we are passing along information about protecting yourself from unexpected expensive and water and sewer/septic line repair costs with coverage from HomeServe,” Wilson wrote. “The enclosed information outlines the protection and peace of mind these coverages can provide City of Columbia customers.”

Wilson’s message doesn’t say that customers can choose other repair-service plan companies, or deal directly with plumbing businesses when problems arise, though Lizewski said HomeServe’s program is “an optional process.”

Lizewski also said HomeServe is required to use licensed contractors in Richland or Lexington counties on repair calls, and that the homeowner’s “preference should be considered.”

“We wanted to make sure that local contractors were used,” she said. “We wanted to keep the business still here.”

According to HomeServe’s website and literature, homeowners can choose from the among the following service-repair plans:

  • Exterior water-line service coverage: $4.99 per month; covers repairs to the water line leading from the exterior of the house to the water meter;
  • Exterior sewer/septic-line service coverage: $8.99 per month; covers repairs to the exterior sewer line on the property; and
  • Interior plumbing and drainage system coverage: $9.99 per month; covers plumbing repairs inside the house.

The marketing agreement limits HomeServe’s “maximum aggregate liability” for “negligence, breach of contract or otherwise” to $2 million; and neither the company nor the city “shall be liable for any special, indirect, consequential, punitive, exemplary or incidental damages, including lost revenues or lost profits.”

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.