To begin, municipalities…

To begin, municipalities have long only accepted guaranteed funds as securities for development agreements and other projects. This allows the municipality to not have to bear the risk of a private corporation not fulfilling their obligations and abandoning projects that may include vital municipal right-of-way works or park infrastructure. This is also a way for municipalities to guarantee that the municipal works surrounding the developer's projects gets done and is funded whether or not the developer wants to do the work or not. Many times, the developers request for the Letter of Credit to be drawn down from so that the City can complete the works on their behalf. This will not be possible if we move to allowing pay-on-demand bonds.

The overall proposal is on the right track, however, there needs to be documented certainty and assurance that the municipalities accepting these pay-on-demand bonds have the ultimate say in what they accept as bond wording.

Municipalities are pushing for a standard template Municipal Pay-on-Demand Surety Bond that is accepted by the surety industry and the majority of municipalities, with the ability to add a municipality specific addendum to the bond form to cater to any additional requests of the municipality accepting the bond.

If this solution is going to work to free up capital for developers to build better and faster, the municipalities cannot be the ones that lose in this initiative. The risk needs to remain with the developers and the financial loss cannot be born by the municipality.