Lacombe City Council has approved the use of surety bonds as a development security which is believed to provide more financial assurance for the City and flexibility for developers.
With surety bonds the general contractor pays a fee to a company for coverage up to a set amount. Instead of protecting the contractor against high costs due to unforeseeable circumstance such as fire theft and weather, the surety bonds protect the owners who hire the general contractor against incurring several significant costs.
The owner can "draw on the bond" to pay suppliers, fund outstanding repairs, and finish incomplete work outlined in the construction contract as required. A general contractor buys insurance to protect their business, and buys a bond to protect the City's interests.
"Council's strives to be business and development-friendly," Mayor Grant Creasey said. "Council's endorsement of surety bonds as a development security is a straightforward way to further that goal. This alternative allows for flexibility while removing red tape for our development partners."
The endorsement of surety bonds allows for several benefits, including:
- Improved liquidity for Developers
- Providing the City with the same financial assurance as irrevocable letters of credit
- The Developer can put their cash and credit towards new developments and further investment in the community
- Surety prequalification of Developers provides the City with additional assurance of the Developer's ability to complete their project
This is a recent innovation, which has allowed qualifying developers to now purchase a surety bond to cover the security requirements of municipalities that traditionally accept cash or irrevocable letters of credit from a financial institution.
“The City of Lacombe’s endorsement of the use of Surety Bonds as a form of security available to their Development Community is a creative solution that reduces red tape and increases flexibility,” Steve Bontje, Managing Partner at Laebon Group, said. This allows Developers more opportunity to direct resources towards creating new and innovative communities to meet the needs of the growing City of Lacombe. We appreciate the City of Lacombe’s commitment to recognizing new strategies and continuing to position Lacombe as a leader in Central Alberta”