Breakup Backup

When a 42-unit apartment building’s water main blew underground, it was a nasty surprise: water gushed like a river from the sidewalks and the flower beds in front of the Bronx property. Bigger still was the sticker shock. The owner paid a $23,000 repair bill.

You heard it right. Where water lines are concerned, if one breaks, you – as owner of your cooperative or condominium – pay for it.

On average, it’s $3,000 to $5,000 to repair a water line break and between $10,000 and $15,000 to repair a sewer line in New York City. Many homeowners don’t realize that hefty bill is their responsibility; as property owners, they are responsible for maintaining their water service lines, which run from inside the property to the city-owned water main in the street (see illustration, above). The damage isn’t usually covered by insurance.

Take heart: there’s now a safety net for some homeowners. The New York City Department of Environmental Protection (DEP) and American Water Resources (AWR) recently announced the launch of the Water and Sewer Service Line Protection Program for smaller residential properties throughout the city.

What It Is

The service line protection program provides unlimited protection for covered repairs from normal wear and tear and basic restoration of the affected property. It also offers, for an unlimited number of claims, round-the-clock customer service and New York City-licensed master plumbers qualified to perform needed repairs. There are no claim forms to submit and no deductibles, and the protection fee will be itemized and included on each participating customer’s DEP water and sewer bill, according to a prepared statement from the DEP.

Water line protection is $3.99 per month; sewer line protection is $7.99. You can sign up for one or both. In the future, the New York City Water Board will approve annual rates for the service line protection programs at the same time it adopts DEP water and service charges.

Leaks are not a minor issue. In 2010, DEP field crews responded to 4,403 total leak complaints citywide, nearly 80 percent of which were deemed to be private service lines.

Sewer and water are big business in New York City. According to the DEP, between January 2007 and September 11, 2010, the city collected $25 million in sewer and water permits. Some see the program as an opportunity “for the city to increase their revenue stream,” says Paul Brensilber, president of management company Jordan Cooper & Associates, who suspects that city officials “have a financial model that shows them this is a good risk and service at a minimal cost to owners.”

If homeowners are in the program, they will be more likely to fix their leaks promptly, which is an advantage for the city, explains Alan Rothschild, president of the Vantage Group, a water cost management and analysis firm. The program will also reduce the expense to the DEP of shutting down water to service line leaks that have not been repaired.

How It Works

There are roughly 670,000 properties in New York City that can take advantage of this program. Eligible properties include residential, mixed-use, and single- or multi-family dwellings that are metered with wireless meter-reading devices. They must be billed on flat-rate or metered charges. They must be current on DEP charges or have a payment agreement. And they must be equipped with a meter pipe that is two inches or less in diameter.

The new program is being met with enthusiasm in some quarters. “It’s a great idea,” says Peter von Simson, the chief executive officer of New Bedford Management. “It could potentially work for larger properties as well, but they would probably have to increase prices. It’s interesting to see government and private business partnering and coming up with something reasonably priced.”

“Leaks do happen, especially if you are in a building 40 years old and older,” says Vantage’s Rothschild, who adds that it could be “a good investment compared to what you would pay out of pocket for repairs.”

Although it is technically a service contract, the program operates like an insurance policy, explains Barbara Boyarsky, vice president and general manager at American Water Resources. Notes Rothschild: “You are paying for something you hope never happens.”

When a customer calls to report a claim, AWR dispatches a licensed master plumber from its local network. “There is a one-year warranty on all repairs, so customers know they are fully protected,” says Boyarsky. Based on the average repair costs, a customer could be enrolled for close to 100 years and the program will pay for itself with just one repair, says Boyarsky.

Will It Work?

Still, there’s not much of a track record yet. On its face, the program is “a nice minimal cost for some of the smaller properties, so if proper items are covered, then it’s likely a good thing,” says Brensilber, the manager.

But some are skeptical. “Anything that the city monitors or partners in, I don’t have much confidence in,” says Ellen Kornfeld, vice president of the Lovett Group, a real estate management and sales firm. “I want to know if it covers the cost of breaking the sidewalk and repairing it after the pipe is put in. That’s a big part of the costs.”

According to Boyarsky, public roadways and sidewalks are covered under the program. AWR provides basic site restoration, including reseeding lawns and backfilling walkways and driveways.

The plumbing industry has plenty to say about the new program. “It only covers water services up to two-inch meters,” complains Angela Cappiello, executive director of the Master Plumbers Council. “It is also mostly a repair-only program, with an emphasis on patching rather than replacing piping that may have exceeded its useful service life.

Another limit is choice; participants in the program will be required to use only AWR-approved contractors to make the repairs. “The company may only accept a limited number of contractors to do the repair work, causing the companies not selected to downsize or even cease operations,” Cappiello says. “Although it covers unlimited repairs, one must question if it is in the best interests of the city to potentially have to open streets up numerous times to repair leaks on one line.”

Finally, while the New York City comptroller has determined that participating contractors must pay wages at the prevailing wage rate, the costs for the program and the fees were not at prevailing wage rates, says Cappiello. “This may lead to increased program costs for service.” While she agrees a water main and sewer insurance program could benefit New York City residents, she wonders “why a government agency would be involved. In some cases, such involvement over time may limit competition and actually drive up costs.”