September 2015 Vol. 70 No. 9
Rehabilitation
Innovative Plan, Creates Community Funding For Lateral Repair
As with most underground utilities, water service lines and sewer laterals are out of sight and out of mind – until they fail.
When that happens, property owners in most parts of the country discover that the sewer lateral and water lines from the house to the mainline are their responsibility and that they must pay for replacement or repair to restore essential service.
Not a pleasant surprise, but cities and water and sewer service providers – already hard pressed for funds – have consistently resisted assuming responsibility for water and sewer service lines.
The Sandy Suburban Improvement District (Sandy Suburban), a sewer district in Salt Lake County, UT, believes it has found the answer to this sewer lateral dilemma: an insurance program that covers every residential customer with no exclusions for pre-existing conditions and no deductible. Repair costs covered up to $15,000, are typically more than enough to pay for most lateral rehabilitation or replacement.
As planned and implemented, the program appears to be the only one of its kind in the country.
Sandy Suburban, located at the base of the Wasatch Mountains just south of Salt Lake City, has a population of about 47,000 with 9,600 residential sewer customers.
The Sewer and Water Insurance Program (SWIP) went into effect in October 2014 and is very successful, said Jerry Knight, Sandy Suburban general manager. The program covers sewer laterals of residential customers. Commercial accounts are not included.
The district is funding the cost of the program for the first two years, so there is no new cost to customers. A small monthly charge will be added to sewer bills after the two-year term expires. Total annual cost of the program is $576,000.
“The process is simple,” said Knight. “When a problems occurs, the property owner calls in a claim. Within an hour or two the line is inspected and problems assessed. Repairs generally are completed within two or three days. This program is providing a solution to a challenging problem.”
“The general public’s response has been extremely positive,” Knight said. “Our customers are very satisfied with the program, especially in lower income areas in our community. Reported claims have been rapidly and professionally remedied, resulting in more certainty and better customer relations for the municipality. We have successfully launched the program, and its success will smooth the transition to a small premium charge of a few dollars a month for each residential connection. Our elected officials are very happy and have received positive feedback. They are thrilled with the program.”
Working model
In the first 10 months, property owners have submitted 115 claims and 65 repairs have been completed at an average cost of $4,200.
Knight said 99 percent of claims have resulted in lateral rehabilitation by the CIPP (cured-in-place-pipe) process which minimizes surface damage and disruption of routine activities while the lining is being installed. One of several pre-approved vendors performs the work.
Knight said the district’s lateral sewer lines had been neglected for many years and he had been searching for a creative solution to the problem.
“As general manager, I have been reluctant to get involved in the private lateral business, but I recognized a growing problem. We decided a lateral insurance private/public partnership was an excellent solution.”
The program is administered by SWIP and is a partnership between the Sandy Suburban and Prime Insurance Co. From Knight’s perspective, the SWIP program is a unique approach for the costly issues of rehabilitating or replacing failing sewer laterals with multiple benefits.
“The lateral insurance solution does not add unnecessary legal liability to our district,” he elaborated. “The district pays a flat rate to SWIP and SWIP hires professionals who inspect, service or rehabilitate private sewer laterals. These professionals typically provide services for discounted rates because of the volume of work. It is important that the workload of our staff has not increased since implementing the program.” Careful planning went into the program.
“At the outset, we mapped out the level of insurance coverage we wanted,” Knight said. “We identified specific needs and wanted a custom solution. We knew we wanted a flexible program when we began searching for a qualified vendor. Prime Insurance conducted an assessment at no cost to Sandy Suburban, so we knew the types of pipe and problem areas of laterals in the system. Development of the program was a team effort between us and the insurance company.”
With details of the lateral insurance program established, a public awareness campaign was launch. The district hired a marketing firm to develop initial communications regarding the program. The information was placed on the district’s website and has been included on each billing statement since the program started.
Community embrace
“There has been no ‘push back’ about the program from the community or stake holders,” Knight said. “The only issue that we encountered was some members of the public did not know about the program despite our best communication efforts. After a few months, the word was out and we have a continuing public awareness campaign. The program is successful and smooth-running and has exceeded our expectations. “
Will Sandy Suburban’s lateral insurance program work for other municipalities?
“Based on what I have seen,” Knight said, “the SWIP plan is responsive, flexible and dependable and could be tailored to fit the needs of virtually any municipality of any size. I am of the belief [that]this is the solution to the private lateral problem.”
However, Knight said, the key to a successful sewer lateral or water service line insurance program is that it’s inclusive – everyone has to be covered.
“There have been other efforts to ‘insure’ water services and laterals,” he said, “but they solicit customers primarily by mail. Monthly fees are from $30 and up, and coverage for a sewer lateral is not something most property owners perceive that they need. Unless a program covers everyone, the numbers simply aren’t there to provide affordable coverage.”
Rick Lindsey, chairman and chief executive officer of Prime Insurance agrees, and emphasized that a program must include all customers to succeed.
“Everybody must be in for it to work,” said Lindsey.
Two things gave the Sandy Suburban program an advantage at the outset. Lindsey understood the lateral issue, and the Sandy Suburban Improvement District operations are limited to sanitary sewer services. The flat rate fee charged to customers is retained by the district to operate the system, so cash was available to implement the program.
However, effective lateral insurance programs still can be implemented. “It makes no sense,” said Lindsey, “for a sewer provider to spend millions of dollars to keep its mains in good operating condition and ignore the link from the main to the house. Sooner or later providers here are going to have to accept responsibility for laterals as they do in Europe.”
Lateral insurance programs such as this can address the issue now. However, Lindsey said conventional insurance plans won’t work.
“It’s going to have to be a partnership between the city, sewer district and insurer with all parties being ‘good’ partners,” he said. “All partners and their customers benefit.”
Lindsey said his company currently is talking to more than 20 municipal sewer service providers all across the country.
“We meet with the board, do an assessment at our cost, and determine what fees would be needed to finance a program.”
FOR MORE INFORMATION:
Sandy Suburban Improvement District,
(801) 561-7662, sandysid.com
Prime Insurance Co.,
(877) 257-5590, primeis.com
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