CHAPTER.7Chapter 7
SURETY
Art. I. In General
ARTICLE I. IN GENERAL
Sec. 1. Purpose.
This policy delineates specific criteria and
prerequisites for accepting surety by the city in
conjunction with developer agreements, contracts,
development related improvements and any other
contractual obligations.
Sec. 2. Applicability.
A. When Required.
Wherever surety is required within the
Boynton Beach Code of Ordinances and/or Land
Development Regulations it shall be provided in the
form and manner prescribed in Section 3 hereinafter.
The type of surety shall be determined by the
administrator of the code section involved, and shall
be acceptable to the Boynton Beach city attorney and
City Commission.
B. Amount.
The amount of surety shall be equal to or
greater than 110% of the total obligation whether it be
for restoration, abatement, maintenance, guarantee,
fees in lieu of land dedication, required improvements
or any other purpose.
C. Periodic reduction of surety.
From time to time during progress of the
work the developer may request that the city engineer
reduce the dollar amount of the surety on the basis of
work completed, but in every case the remaining funds
shall be sufficient to complete the obligation. In the
case of surety for required improvements associated
with subdivision development, five (5) per cent of the
engineer's certified cost of required improvements
shall be retained for one (1) year after acceptance of
such improvements by the City Commission as a
guarantee against defects in workmanship and
material. The final release in surety of the remaining
balance of the surety, by letter of credit or other
instrument, shall be approved by motion or resolution
of the City Commission, with the recommendation by
the appropriate department and/or the city engineer.
D. Default.
In the event of default by the developer or
failure of the developer to complete the obligations
within prescribed time limits, the city, after thirty (30)
days written notice to the developer, shall cash the
surety to insure satisfactory completion of the
obligations.
(Ord. No. 02-033, §§ 3, 4, 8-20-02)
Sec. 3. Types of surety.
A. LETTERS OF CREDIT.
1. The face of the letter of credit must
indicate the following:
a. The letter of credit is "clean".
b. The letter of credit is
irrevocable and shall remain enforceable until
released by a resolution adopted by the City
Commission, or until the letter of credit expires. If
the letter of credit provides for an expiration date,
said letter of credit shall be automatically renewed for
successive periods of one (1) year each unless the
issuer of the letter of credit provides the City written
notice of its intent to cancel the letter of credit. Said
notice must be provided at least ninety (90) days prior
to the expiration of the date of the original term or
any renewed one (1) year term. Notice to the City
that the letter of credit will expire prior to the
performance of the obligations guaranteed by the
letter of credit shall be deemed a default and shall
entitle City to collect on the letter of credit.
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c. The purpose or project for
which the letter of credit is issued.
d. The specific amount of the
letter of credit, in U.S. Dollars.
e. The method of disbursement of
draws against the letter of credit.
f. The street address where draws
against the letter of credit shall be made.
g. The letter of credit is
enforceable in a court of competent jurisdiction in
Palm Beach County, Florida, and is to be interpreted
by Florida Law.
h. The name and street address of
a designated agent within the State of Florida for
acceptance of process.
2. At the time of issuance of the letter of
credit, and at all times subsequent thereto and so long
as the letter of credit is enforceable, the issuing
financial institution must have a minimum "peer
group" rating of fifty (50) in the latest Sheshunoff
Quarterly Listing or a minimum rating of one hundred
twenty-five (125) in the latest IDC Bank Financial
Quarterly Listing. The city finance department shall
periodically verify this information.
3. At any time during the life of the letter
of credit, should the rating of the issuing financial
institution fall below both of the minimum ratings
indicated in Section 2 above, or should the financial
institution merge with another financial institution or
have a conservator or receiver appointed to supervise
or control the operation of its business or become
insolvent, the contractor/developer must, within sixty
(60) calendar days after notification by the city:
a. Replace the existing letter of
credit with a replacement letter of credit from a
financial institution with either of the minimum
ratings as specified in Item 2 above; or
b. At the city's option, the letter
of credit may be replaced by other surety acceptable
to the city in accordance with the city's existing surety
policies.
4. Failure to comply with this provision
may result in any or all of the following actions by
the city: suspension of the contractor/developer's right
to pull building permits and schedule inspections;
issuance of a stop work order; and/or revocation of
the land development permit. These actions shall be
in effect until a satisfactory replacement surety is
accepted by the city.
5. No letter of credit shall be deemed
accepted by the city until accepted by motion or
resolution of the City Commission, following review
and approval by the city attorney's office for legal
sufficiency, and by the finance department for the
bank's rating.
6. Original letters of credit shall be
maintained by the finance department and each shall
be clearly identified as to the project or contract for
which it is issued.
7. Letters of credit accepted prior to
approval of this article shall continue through the
current expiration date of the letter of credit provided
however, renewal of these existing letters of credit
shall be in accordance with this policy for accepting
letters of credit.
8. The financial institution issuing any
letter of credit must be authorized to do business in
the State of Florida and shall show proof of same
upon request of city staff.
B. CASH, CERTIFIED CHECK, CASHIER'S
CHECK.
C. PERFORMANCE OR SURETY BOND.
Performance or surety bond obtained from a company
acceptable to the city in accordance with the city
policy on performance bonds.
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D. ESCROW (AGREEMENT) DEPOSIT. An
executed escrow agreement between the developer, a
bank approved by the city and the city as the third
party beneficiary may be established for this surety.
The escrow agreement shall require that release of the
funds, or any part thereof, shall be subject to city
approval. The agreement shall be in accordance with
the city policy on such escrow agreements.
(Am. Ord. 98-08, § 1, 2-2-98; Ord. No. 02-033, § 4, 8-
20-02; Ord. No. 03-018, §§ 1-3, 6-3-03)
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