Surety Guidelines
Purpose: A guideline for developers and\engineers posting surety for public improvements associated with land development and/or subdivisions in Ferguson Township, Centre County, PA
Reference: Pennsylvania Municipalities Planning Code, Act 247 of 1968 as amended and the Ferguson Township Code of Ordinances
From: David Modricker, PE, Public Works Director
Date: March 2009
Surety is required prior to final plan approval for improvements within or adjacent to the public right-of-way and for the construction of stormwater improvements contained within an easement on-site. These improvements typically include curb, pavement, sidewalk, street trees, storm pipe, inlets, detention basins and sometimes include complete roadway construction and traffic signal improvements. The Township holds surety on behalf of the State College Borough Water Authority for waterline improvements and on behalf of the University Area Joint Authority for sewer line improvements.
Surety can be posted by means of a letter of credit, improvement bond, restrictive escrow account, or a personal bond. An agreement prepared by the Township must accompany the surety.
Forms of surety
Letter of Credit
The most common form of surety provided to Ferguson Township is a letter of credit. The letter of credit must be from a Federal or Commonwealth chartered lending institution and must contain certain language to be acceptable. It must state that the letter of credit is redeemable upon presentation of the original and an official demand for payment at a local State College office, or by facsimile to an office outside of State College. It should indicate that any official demand for payment, or draft, needs the signature of any officer of the Township (Chairman, Vice-Chairman, Secretary, or Treasurer) and a statement that the developer is in default of the terms of his agreement. The letter of credit must state that it is unconditional and irrevocable. The letter of credit must be accompanied by an agreement.
Improvement Bond
An improvement bond from a company listed in the US Department of Treasury’s Listing of Certified Companies, Circular 570, is an acceptable form of surety. The bond must reference the name of the land development/subdivision and plan date, record book and page number if available, and the Subdivision/Land Development Improvement Bond Agreement and date. Example Improvement Bond Agreement language can be found on the Township web site. The improvement bond form of surety must be accompanied by an agreement.
Restrictive Escrow Account
A restrictive escrow account may be established at a Federal or Commonwealth chartered lending institution. A Bank Restrictive Escrow Account Agreement must be executed by the Developer, the Lending Institution, and the Township. A letter from an officer of the lending institution is required confirming the amount of funds deposited with the institution in accordance with the terms of the agreement. The restrictive escrow account form of surety must be accompanied by an agreement.
Personal Bond
A developer may deposit funds with the Township in the form of cash, bank certified check, or certified money order as surety. A Personal Bond Agreement must be executed. The personal bond form of surety must be accompanied by an agreement.
Engineer’s Estimate of Amount of Surety
The amount of financial surety to be posted for improvements shall be equal to 110% of the cost to complete the improvements including inspection fees and a 10 percent contingency. Prevailing wage rates apply if the work is in excess of $25,000. The developer must present a cost estimate prepared and certified by a professional engineer licensed in the state of Pennsylvania. The estimate must be reviewed and approved by the Township Engineer.
Surety Renewal
Surety agreements expire in 50 weeks, and surety often expires in 52 weeks. It is the responsibility of the developer to know when his agreement expires. If the agreement expires, the surety will be cashed by the Township. If work to complete public improvements is anticipated to exceed 50 weeks, the developer must execute a new surety agreement and post an acceptable amount of surety. The amount of surety posted shall be increased by 10 percent per year until work is complete. In lieu of posting an additional 10 percent, the developer may submit a cost estimate prepared and certified by a professional engineer licensed in the state of Pennsylvania indicating the percent of work complete and the amount of work yet to be completed. The estimate must be reviewed and approved by the Township Engineer. Allow at least one week for the Township to inspect and review the estimate of outstanding work.
Surety Reductions
Any request for a surety reduction must be a) accompanied by a cost estimate prepared and certified by a professional engineer licensed in the state of Pennsylvania, b) reviewed and approved by the Township Engineer, c) approved by the Board of Supervisors at a regular public meeting. The initial request must be submitted to the Township Engineer at least two weeks prior to a scheduled meeting of the Board of Supervisors to allow the Township Engineer to inspect the work, review and approve the estimate, and allow enough time for request to be placed on the agenda. The Township Engineer will by memorandum request the reduction request to be placed on the agenda of the Board of Supervisors. After approval of the Board of Supervisors, the Township Engineer will provide a letter to the Developer and his financial institution indicating the amount of the reduction and the remaining required surety.
For a current listing of surety and expiration dates, contact the Public Works Department Administrative Assistant at (814) 238-4651.