A program that was established in 2007 to protect Hamilton homes from sewer backups could be $1.5 million in the red by the end of this year. The reason according to a city staff report is an aggressive campaign by a private company that is acting as a middleman between homeowners and local plumbing firms. City staff say the company approaches homeowners using door to door and telemarketing techniques to talk them into signing up for the City’s sewer backflow protection program and thus qualify for an up to $2,000 rebate from the city. The Residential Protective Plumbing Subsidy Program, as it is called, was established after disastrous flooding resulted in extensive basement flooding in the city’s east end a few years ago. Under the plan homeowners could have the backflow valves installed and qualify for a subsidy from the city of up to $2,000.
Concerned that there was a lack of real competition among local plumbing firms installing the valves, the city instituted a policy requiring homeowners to obtain 3 quotes before work would proceed. Instead of lowering costs, the staff report says, “What has been observed is that instead of prices coming down, some contractors are partnering up to provide the quotes and dividing the work up amongst themselves utilizing the full grant amount. Instead of 3 independent contractors visiting the home and providing solutions, a single contractor or representative may visit the home and provide the additional two quotes from contractors who have not visited the property.
Shane McCauley of Hamilton Public Works told the Bay Observer that there is essentially one firm that is acting as a broker, supplying homeowners with the quotes and parcelling out the work—charging a commission to the local plumbers. “In some cases it results in backflow valves being installed where they are not the correct solution,” he said. Because it is necessary to break the basement floor to install the valve and the fact that the valve has to be exposed for maintenance, some homeowners are experiencing groundwater leakage in their basements where there had been no problem before.
The other problem is that the aggressive marketing tactics are creating unusual demand resulting in installations that may not be needed. Presumably homes that had been the most susceptible to flooding in past had already taken advantage of the program before the aggressive brokering had begun. Since the middleman got into the act last spring, the number of subsidy applications has soared, after the program had operated within budget for years. Essentially the city has exhausted the $2.5 Million it had allocated to the program for this year, and projects a $1.5 Million shortfall by the end of the year. Since its inception the program has assisted 7,400 property owners and spent over $17 Million.
The staff report says the company may be misrepresenting itself at the door, “While the information that they are providing is technically accurate, a number of residents have got the impression that this organization is representing the City. Staff from Hamilton Water met with the president of the company in May 2015 to discuss our concerns about the way the company represented themselves and their messaging.”
Councillor Lloyd Ferguson suspects it’s a case of good old fashioned price fixing and he wants legal staff to see what can be done about it.