Sussex officials want to tighten bonding process

In the near future, developers may have to post two bonds to ensure work is completed. Sussex County officials are making strides to upgrade the bonding process for residential development.

Under current regulations, the county requires developers to post a single bond of no less than 125 percent of the cost of required improvements. In addition to infrastructure, the bond covers sediment control and stormwater management projects under the jurisdiction of Sussex Conservation District.

A bond or letter of credit is required to ensure projects are finished when a developer fails to complete infrastructure projects such as roads. The county uses the funds to hire contractors to complete the work.

Sussex County officials now want to switch some bonding authority to the conservation district. Under the current system, the county administers one bond for all infrastructure – including sediment control and stormwater management systems. But reviewing plans, inspecting and approvals of those systems is the responsibility of the conservation district, not the county.

“Sussex County has no control,” said county attorney David Rutt during county council's Oct. 8 meeting. “This places the county in the middle and sets the county up for potential exposure without any control.”

Under a new plan – possibly starting in early January 2014 – the conservation district would take over administration of bonds for sediment and stormwater management improvements. Instead of one bond, developers would be required to purchase two bonds – one for the county and one for the conservation district.

David Baird, conservation district coordinator, said the district would require a 150-percent bond to cover the cost of improvements because the projects typically cost less than other infrastructure. Baird said the district would follow the county's new policy and allow a one-time reduction of up to 50 percent of the total bond as work progresses.

Baird said some projects would be exempt: farm structures, commercial projects where the property owner maintains the stormwater features, projects on sites of less than one acre and projects with a value of less than $10,000.

Baird said the district's board has not taken formal action on the switch but has agreed to it. “We will have to address the additional administration costs,” he said, adding the new procedure does not help streamline the construction process. “It breaks it apart, but if that's the way the county wants to go, we will support it.”

A new ordinance will be required to make the change. County council and the planning and zoning commission will have public hearings before voting on the bonding change.

County adopts new bonding protocols

Also at the Oct. 8 meeting, council adopted a new set of protocols to improve the bonding process.

Under current regulations, developers are allowed to request reductions in bond amounts as phases of projects are completed. Under the new protocol, developers can request a one-time reduction of not less than 50 percent of the original bond amount. At least one layer of hot-mix must be placed on all roads within a development before a bond reduction can be requested.

Also, the county has developed a more specific costing process that will be posted on its website. “We need to know how much it will cost the county to complete work,” said county engineer Mike Izzo. He said in the past there have been projects for which bond money was insufficient to complete work. He said administration, inspection and engineering fees have to be added to obtain a more realistic cost of doing business.

Doing projects with no bonds

In January 2012, because of a slowdown in the housing market, county council enacted a two-year no-bond process allowing developers to begin projects and construct infrastructure without a bond. However, no property transfers or lot sales can take place without a 125-percent bond in place.

“This takes a lot of coordination with county staff to keep records updated. It's been somewhat of a challenge to close out the loopholes in the computer systems,” Izzo said.

Izzo said the four phases of the ongoing Senators housing project off Gills Neck Road in Lewes has two phases that are bonded while two phases are also being constructed under the no-bond process. Izzo said by mistake 10 to 15 building permits have been issued by county staff to no-bond projects.

Since the no-bond ordinance expires in January 2014, council will have to vote to approve its continuation. An ordinance extending the deadline for one year was introduced at council's Oct. 15 meeting.

Sussex council questions leverage

As ordinances were introduced at the Oct. 15 meeting, Sussex County council members raised questions concerning a possible loss of leverage in the stormwater/sediment control process.

Councilman Vance Phillips, R-Laurel, said council might be losing leverage by de-coupling the bonds, while Council President Mike Vincent, R-Seaford, asked exactly what leverage council had when the Sussex Conservation District not only reviews plans but also approves and inspects projects.

Phillips suggested council would lose control by giving up bonding authority to the conservation district. He said the bond is the only leverage the county has over the conservation district.

Councilman Sam Wilson, R-Georgetown, agreed saying the change could take away some of council's authority over the land-use process.

County Administrator Todd Lawson said county officials try to coordinate projects under review by the conservation district assuring projects are built to specifications and on time. He said, in his opinion, the change does not take much leverage away from council.

Assistant county attorney David Rutt reminded council that the conservation district's authority comes from the state. He also said the discussion would be better as part of a public hearing. The ordinance was introduced and will be placed on future planning and zoning commission and county council agendas.