With the Province consulting…

With the Province consulting on a proposed regulation on Pay-on-Demand surety bonds to be used to secure certain obligations that are conditions of land use planning approvals, staff at the City of Waterloo have prepared the following comments.

The City of Waterloo wishes to see developments move expeditiously, and is supportive of innovative solutions that allows communities to be built faster, while protecting residents and businesses by ensuring that developments are built safely according to Provincial standards such as the Ontario Building Code. To that end, Letters of Credit (LoC) are a common tool used by municipalities to ensure that funding is available to complete necessary works, should developments not meet Provincial standards. The City of Waterloo has, for years, only required partial LoC coverage (50% of erosion control, underground servicing including stormwater management, surface works and landscape items), and have based the LoC requirements off construction value.

City of Waterloo staff prefer that existing LoC abilities continue. From staff’s perspective, LoC incentivizes the development industry to complete work expeditiously, to a reasonable standard such that they can quickly release the requirements to hold a LoC. Letters of Credit also help to ensure development risk remains with the development industry.

Should the Province mandate that municipalities accept pay-on-demand surety bonds, City of Waterloo staff request appropriate consideration of the following:

1. The Regulation should enable municipalities to have sole discretion to require the bond to be produced, recognizing that such securities are only called on when there are serious issues with developments that could impact the community. The Province should be careful to avoid creating red tape surrounding how to access the surety bonds when the development industry does not construct to appropriate standards.
2. The Regulation should enable surety bonds to cover at least 100% of the value of works to be completed. Such a structure will help to ensure risk remains with the development industry, while also helping to address any construction inflation that may occur between start of construction and completion.
3. The Regulation should seek to standardize surety bond requirements, while also enabling some flexibility based on unique circumstances. City staff is aware that the Municipal Finance Officers’ Association (MFOA) has recommended that the Province create a Surety Bond Guideline. City of Waterloo staff are in support of this idea. Particular items important under any security bond scheme include:
a. If an insurer intends to cancel a security bond, the municipality should have the right to draw on the bond, or be replaced by a LoC.
b. Surety bonds should have autorenewal clauses, similar to LoC. This ensures to minimize municipal risk.
c. Surety bonds should be as accessible as LoC. Today, a LoC is accessible within 2-3 business days, whereas 15 business days is being proposed by the Province.
4. Monitoring the credit rating of surety bond issuers should not be a municipal requirement. City staff believes the Province has an important role to play that would provide visibility to the development industry on appropriate insurers, while providing confidence to the municipal sector in this mandated tool.
5. The Regulation should create a transitional period to provide municipal staff time to create policies, application forms as well as consider delegating appropriate authority to staff. Municipal staff currently have very high workloads, and enabling a transitional time period (e.g. June 1, 2026) would ensure that municipal staff have adequate time to respond to new Provincial requirements.

Thank you in advance for your consideration.

City of Waterloo staff