Real estate agent complains that city bond is too high
By Tony E. Windsor
A Seaford real estate agent was unable to convince city council members that the residential development bond should be waived on a project he is representing because it presents an unfair burden for developers.
During the April 22 meeting of Seaford City Council, Frank Parks of Home Team Realty, Seaford, requested that council forgive the 125-percent bond requirement of contractors associated with the Governor’s Grant residential complex. The city requires the bond on all construction projects to protect the city and potential homeowners from costs if a developer fails to complete a project.
Contractors are required to pay 120 percent of construction costs as a performance bond and an additional 5 percent of construction costs as a maintenance bond.
Given the large scale of development being undertaken at Governor’s Grant, Parks said the 125-percent bond computes to “thousands of dollars” and is more than the actual risk potential.
He said Sussex County building officials ask for the 125-percent bond requirement at the time the contractor requests building permits, whereas the city seeks the 125-percent bond prior to groundbreaking. Parks said workers are just beginning work on infrastructure of the project.
Seaford city manager Dolores Slatcher told Parks that the city seeks the up-front bonding in case the developer vacates the project and leaves the city with the cost of returning the property to its original condition. She said there have been such cases within the city which led to the
Parks said a 10-percent bond would equate to about $80,000 and would be sufficient to cover any costs incurred by the city to repair “piles of dirt and holes” should the project be vacated.
“We are willing to put up the 10-percent bond, but asking us to have a 125-percent bond on day one just to turn dirt is something we see as excessive,” Parks said. “A 125-percent bond is excessive when a 10-percent bond would be adequate. This is $80,000 versus $1 million bond.”
Slatcher said the developer could phase in the project and not have to bond the entire Governor’s Grant project at once. “We have seen no cost estimates for this project, so we can’t say what is reasonable or unreasonable,” Slatcher said. “It is not the city’s intention to impose a hardship on the developer. We cannot be sure at what point a developer may run into problems and be forced to abandon a project, so it is important that the city be financially secure in making any necessary repairs. We certainly have confidence that you and your developers will complete this project, but this is a requirement that all developers must meet.”
Parks maintained his opposition to the bond requirement and continued to urge the city to reconsider.
“All I am asking the city to do is consider what the county does,” he said. “The purpose of this bond is to protect homeowners who buy a house then the developer fails to complete a roadway. We are not seeking a building permit at this time. When we do ask for building permits we will secure the 125-percent bond. Now we are only interested in starting the work for project infrastructure. The only potential damage faced by the city would be a big hole or a pile of dirt. $80,000 to $100,000 bond should cover this. It is not as if the city has to go in and complete the project.”
Councilman Larry Miller said he has complete faith in Parks and the completion of the project. However, he has been with the city during times when developers have vacated projects and left the city holding the bag.
“You make good, debatable points,” he told Parks. “But be that as it may, there have been projects that have failed and thank goodness they had bonds in place. I cannot put this council in a position where it has to negotiate each bond situation. I believe in the policy as it is. I know the money is different sometimes, but we have a policy that works for the city. I have all the faith and confidence in your project, and you personally, but I simply cannot put the city in a position of having to debate every bond that comes up.”
Councilwoman Grace Peterson echoed Miller’s comments, saying she believes the city has to follow its policy concerning bond requirements.
Parks continued to protest. “The county does more development than the city and the county’s policy works for them,” he said. “Why does the city have to be so much more overbearing?”
Miller responded that the county has a more “broad-based source of revenues.”
Slatcher said that there was one point that she felt Parks may have been missing. “There are adjacent neighbors who live near the development areas. When projects are abandoned and property left in a state of disrepair, these citizens are not interested in extended conditions. They have faith that the city is going to take care of this problem,” she said.
The council voted unanimously to deny Parks’ request for relief from the bond requirement for the Governor’s Grant.
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