by Kate Knable
Posted 10/22/2012 12:00 am
Updated 2 years ago
North Little Rock residents last month received letters, printed on city letterhead and bearing Mayor Pat Hays’ signature, promoting an insurance-like product that would cover the cost of water line repairs.
But the letters weren’t actually from the city. A private company, Service Line Warranties of America of Canonsburg, Pa., mailed out the letters to advertise one of its products.
The letters were the fruit of SLWA’s first marketing agreement in Arkansas, which was approved by the North Little Rock City Council in March.
(Click here to read a related story about the program Little Rock opted for instead of partnering with SLWA.)
(Click here to read a related story about the National League of Cities' relationship with SLWA.)
Maurice Taylor, alderman of Ward 2, initiated North Little Rock’s relationship with Service Line Warranties of America.
When he heard about the service line warranties from the National League of Cities, a nonprofit advocacy organization, he thought his constituents could benefit, Taylor said.
(THVideo: More on Service Line Warranties of America.)
SLWA pays the National League of Cities for use of its mailing list and logo to promote its products to city officials around the country.
Taylor represents an older part of North Little Rock prone to outside utility line problems and home to a lot of residents on fixed incomes who can’t afford a $4,000 sewer line repair, he said.
SLWA’s sewer line warranty — which was similarly promoted to residents earlier this year — costs about $8 a month. The water line warranty costs $6 a month for North Little Rock residents. Each provides coverage of up $4,000 per incident.
“It’s a good deal,” Taylor said. “I think it’s a great program, especially for the citizens I represent.”
North Little Rock did not seek proposals from any other utility warranty companies, so it’s impossible to say whether the price being offered to residents is competitive.
Insurance policies very rarely cover damage to outdoor water and sewer lines between a house and its connections to the city systems, according to Roger Ward, an owner of Arkansas Best Insurance Corp. in Hot Springs. Most policies cover damage to a home but not repairs of the line break that caused the damage, Ward said.
The marketing arrangement is a hallmark of how SLWA operates its residential water and sewer line warranty programs. The company offers the warranties only in cities that allow the company to promote its services using the city’s name.
In exchange, SLWA either pays the cities 10 or 12 percentage of annual warranty premiums or, as in North Little Rock’s case, applies a discount to enrollees’ annual rates.
The company’s first round of promotional letters, sent out in the spring, attracted 1,588 North Little Rock enrollees in the sewer line warranty program.
The water line warranty program, begun in September, doesn’t have anyone enrolled in Arkansas yet.
How It Works
North Little Rock doesn’t oversee the utility warranty programs.
“It’s not the city’s program,” Taylor said. “The city basically endorsed it. The citizens have the choice to purchase it or not purchase it. It’s completely hands-off for the city.”
SLWA buys a mailing list from a list vendor, sends promotional mailings and monthly or yearly bills and hires local contractors to make needed repairs.
Brad Carmichael, vice president of business development for Utility Service Partners, explained the business model. Utility Service Partners, doing business as Service Line Warranties of America, belongs to Macquarie Capital, which is part of the publicly traded Macquarie Group.
“We don’t actually enroll customers unless we have a relationship with the city,” Carmichael said. “We want to partner with the city in order to be able to use their logo on the marketing materials that we send to the residents. Our experience has found that will increase participation.”
That participation tends to involve about 25 percent of a city’s residents within three years of a program’s launch, he said.
Service Line Warranties has negotiated agreements similar to North Little Rock’s with 146 cities in 28 states, including Atlanta and the Dallas suburb of Plano.
Matthew Marchant, mayor of another Dallas suburb, Carrollton, observed SLWA’s work for about one year, but his city ended its agreement with the company last summer. Carrollton has 125,000 residents.
No one in Carrollton complained about SLWA as a company or its products, Marchant said.
Some did express concern, however, saying they didn’t think a city should be involved in marketing a company.
“I actually was not in favor of the agreement from the get-go,” Marchant said. “It’s not a reflection on the company. Philosophically, I do not believe the city should be using its logo to benefit one company. When a municipality communicates with its citizens, I think there’s a special relationship there.”