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Flood subsidy costs escalating

Feb 05, 2013

After paying out over $5 million in grants last year for installation of backwater valves in private homes, the city is tightening up its subsidy program to curb reported abuse by contractors. Other growing climate change costs include over 200 compassionate grants provided to flood victims in the wake of last summer’s 1000-year storm that clobbered the Binbrook and upper Stoney Creek area.

Grants issued in response to that storm were the second highest since 2006 and rank fifth among 19 eligible extreme rain storms since 2004, pushing that program’s total costs to nearly $5.2 million. Many of the same homes got flooded again last month from a combination of heavy rain and rapid melting, but so far that event has not been declared eligible for the grants of up to $1000 per home.

Staff report that 145 liability claims have been filed in relation to the July storm – also the second highest since 2006. Such claims used to frequently be successful, but staff say not many of them make it anymore because of legislation pushed through by the Mike Harris Conservative government in 1996.

“The Good Government Act essentially eliminated the theory of ‘nuisance’ as it relates to basement flooding and established that claimants were required to prove negligence to be successful in recovering flood damages from a municipality,” explains the staff report. “Consequently the City of Hamilton has rarely compensated a flood claimant since the Good Government Act has been in place.”

The July 26 2009 storm that flooded the Red Hill Parkway remains the largest in terms of claims filed and compassionate grants provided. It was in the wake of that deluge that council established the “protective plumbing program” to encourage homeowners to install backwater valves to keep sewage out of their basements – a program described by staff as “possibly the largest and furthest reaching that addresses adaptation to climate change in Hamilton.”

Initially only flooding victims were eligible to apply for the grant of up to $2000 to install the valves, but in the summer of 2011, in the face of requests from residents hoping to avoid future victimization, the program was extended to all homes except those occupied by renters. That has resulted in a huge increase in applications that forced council to top up the funding twice in the last year.

The popularity alarmed staff when they became aware that some contractors were offering gift cards to homeowners to convince them to apply for the grant and then apparently billing for the full grant despite minimal work at some locations.

“It’s not unusual for a contractor to call first thing in the morning, and then ask for an inspection two or three hours later,” water/wastewater director Dan Chauvin told councillors in October. “By virtue of the fact that there’s probably more profit for the contractors, their marketing has just stepped up incredibly, and we’re seeing all kinds of different marketing schemes where they’re offering free gas cards and this and that and the other thing.”

That has pushed total grants to $11.2 million – close to half of it in the last year. With startup and ongoing administrative costs, the program has cost the city over $12 million to get backwater valves into less than five percent of the more than 100,000 eligible homes, so alarmed councillors directed staff to find a way to stop potential abuse.

The recommendation going to Wednesday’s general issues committee meeting seeks to do that by requiring all applicants to obtain “three independent quotes” on the eligible work, with the lowest to be approved for funding. It will also add a provision to the application form that “any grants or loans from the city are provided on the condition that the property owners not receive remuneration, in any form, from the contractor”, and requiring both the property owner and the contractor to certify this will not happen.

“If then there is evidence that shows that the contractor does provide an incentive program to a property owner, such as a gift card, then enforcement against the contractor can proceed under the ‘honesty and integrity’ requirement with a licensing hearing,” explains the report.

The idea of the city taking over the valve installations or hiring a single contractor to do so is not recommended by staff because of “significant” risk of liability.

“Undertaking this model would likely expose the city to a number of potential claims,” staff believe,  “such as recurring basement flooding and associated property damage, collateral structural or cosmetic damage, customer service claims and health and safety claims.”

The report also renews a promise made in 2009 and 2011 of future recommendations on how to extend the grant program to rental properties. While some renters in high-rise buildings would have little need of the backwater valves, Hamilton’s tenants pay a much higher property tax rate – equal to about 20 percent of their rent – despite being frequently ineligible for city programs and services.

While the backwater valves do nothing to prevent overland flooding – an increasingly common occurrence as storms intensify – staff argue that they reduce liability claims, response costs, and compassionate grant payments. And they note the subsidy serves to “provide access for property owners for cheaper [insurance] premiums, higher limits, and/or lower deductibles for sewer back-up coverage.”

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