The County's recent update to its Subdivision Regulations allows a developer to give a letter of credit or a performance bond for the roads.
Can anyone help with the proper language for the letter of credit?
Not directly on point but close:
Financial Guarantee of Performance
(a) Contractor shall furnish County (in care of the Williamson County Attorney�s Office) with a corporate surety bond (the �Performance Bond�) in an amount equal to the sum of fifty percent (50%) of the Gross Receipts received by the Contractor in the last preceding year. The surety for the Performance Bond shall be approved in writing by County, at County�s sole discretion, prior to issuance. Contractor shall pay the costs associated with procuring the Performance Bond. The Contractor and the County agree to review, evaluate and modify (if necessary) the amount of the financial guarantee of performance every five (5) years from the Effective Date of this Agreement.
(b) Qualifications of Surety. The surety must be licensed to conduct business in the state of Texas. A surety that provides a letter of credit must be a financial institution whose long-term debt is rated in one of the three highest categories by a nationally recognized rating agency (e.g. Standard & Poor's rating of AAA, AA or A). A surety that provides a bond or other alternate form of performance guarantee in lieu of an irrevocable standby letter of credit must conform with all applicable Texas statutory requirements for sureties. The surety shall not be issued by an entity which is owned, affiliated with or controlled by Contractor.
(c) In lieu of a Performance Bond, Contractor may provide and maintain in force for the term of this Agreement an irrevocable standby letter or letters of credit. The letter of credit shall provide that County may draw upon it upon a County determination of a Default under `
Article XII. Failure to replace the letter of credit with another letter of credit or acceptable performance guarantee (or provide evidence satisfactory to County of renewability of the existing letter of credit) at least 90 days prior to the expiration of an existing letter of credit shall, among other Defaults, constitute a Default for which County may draw upon that existing letter of credit. Upon such a draw for non-replacement or upon receipt of amounts from a surety resulting from Contractor's failure to procure, maintain and/or replace the letter of credit or other performance guarantee, County shall place the proceeds of that draw or payment in a separate fund. That fund shall constitute a guarantee fund, the amounts in which may be used by County to compensate itself for any damages (including liquidated damages) and other losses, costs or expenses resulting from any other Default under this Agreement.
(d) For purposes of this subsection, the term "performance guarantee" shall mean any bond, letter of credit or other financial guarantee referred to in this Article and provided to guarantee or provide the funds to guarantee the performance of Contractor's obligations under this Agreement.
(e) Duration of Performance Guarantees. The performance guarantee and any subsequent performance guarantee shall be issued for a term of not less than one year. Contractor shall provide a new performance guarantee or evidence satisfactory to County of the renewability of the current performance guarantee, at least 90 days before the expiration date of the performance guarantee then in effect. Any letter of credit shall provide that notwithstanding the termination or expiration of this Agreement, at any time within two years of the date the performance guarantee terminates or expires, County may make a claim against the performance guarantee for Contractor's failure to perform its obligations under this Agreement. However, Contractor shall be liable for its obligations under this Agreement notwithstanding the termination of the surety's obligations under the performance guarantee.
(f) Authority of Agent. All performance guarantees given under this Article that are signed by the surety's agent must be accompanied by a certified copy of such agent's authority to act for the surety at the time the bond is signed. County must approve in writing the designated surety and the form and substance of, all performance guarantees. Contractor may satisfy the obligations under this Article by providing performance guarantees from one or more sureties meeting the qualifications set forth in this Article.
Thank you. That was helpful. I believe our County Engineer convinced the inexperienced land developer to put up a bond!
A subdivision bond is a much better option if you qualify. You may want to read how subdivision bond compares to an ILOC
Let me know if you have any questions about it all. You can always call JD Weisbrot at 888-JWBOND-1 as well. He is our resident expert when it comes to subdivision bonding.
Surety Bond Applications
www.suretyforums.org - Free Surety Bond Q&A.
Subdivision and Site Plan Regulation
Planning board approvals of subdivision and site plan applications are usually made conditional on installation of on-site and off-site improvements, including streets, utilities and other facilities. The developer may elect to install the improvements prior to signing and recording of final approval. But, if the developer elects to post security to achieve final approval, the statutes require the planning board to “accept a performance bond, irrevocable letter of credit, or other type or types of security as shall be specified in the … regulations….” RSA 674:36, III (subdivisions) and RSA 674:44, IV (site plans). Often, developers opt to install enough improvements to make the site functional and then post security for the finishing touches, such as final pavement, road shoulders, planting, etc., which are installed after heavy construction vehicles and equipment are off the site.
A performance bond is usually a surety bond, an instrument expressing three-party contractual obligations by which the developer, as “principal,” and an insurance company, as “obligor,” agree to pay the municipality, the “obligee,” a certain sum. The condition of the obligation is that the bond is null and void if the principal performs its obligation to the obligee, that is, if the specified improvements are properly installed.
Performance bonds tend to be form documents that broadly define the parties’ undertakings. Sometimes the obligation will be broadly defined as a “contract,” since most performance bonds are issued in connection with contracts. It is worthwhile to make sure the bond identifies the regulatory permit that creates the principal’s obligation. The municipal attorney should review a proposed performance bond before the board accepts it.
you can see more in this site :
and read more information about performance bond
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