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094 of 1998 - Bond and Security Requirements for Public Improvements0 98-1 0 98-27 SALT LAKE CITY ORDINANCE No. 94 of 1998 (Bond and Security Requirements for Public Improvements) AN ORDINANCE ENACTING SECTIONS 20.08.135, 20.08.265 and 20.24.052 AND AMENDING SECTIONS 20.08.300, 20.24.040, 20.24.050, 20.24.055, and 20.24.110 OF THE SALT LAKE CITY CODE, RELATING TO BOND AND SECURITY REQUIREMENTS FOR SUBDIVISIONS. WHEREAS, under the terms and provisions of the Salt Lake City Code, a subdivider of a subdivision must file with the city a performance bond and a payment bond, in an amount equal to the estimated cost of the public improvements to be made in the subdivision, and such requirement can be satisfied by the subdivider filing a letter of credit or cash; and WHEREAS, the City Council has now determined after a public hearing to enact Section 20.08.135, 20.08.265 and 20.24.052 and to amend Sections 20.08.300, 20.24.040, 20.24.050, 20.24.055, and 20.24.110 of the Salt Lake City Code (1) to provide that if a single letter of credit or cash bond or escrow agreement is provided by the subdivider to satisfy both the performance bond and the payment bond requirements, the amount of such letter of credit or cash bond or escrow agreement is sufficient if it is not less than one hundred percent of the estimated cost of the public improvements, (2) to apply the bond and security requirements to condominium projects and planned development projects, and (3) to harmonize the release provisions of security devices for physical improvements and utility improvements, and to make related changes. NOW, THEREFORE. be it ordained by the City Council of Salt Lake City, Utah: SECTION 1. That Section 20.08.135, Salt Lake City Code, be, and the same hereby is, enacted to read as follows: 20.08.135 Improvement agreement. "Improvement agreement" means an agreement described in Section 20.24.040. SECTION 2. That Section 20.08.265, Salt Lake City Code, be, and the same hereby is, enacted to read as follows: 20.08.265 Security device. "Security device" means any of the following, in a form acceptable to the city attorney, which secures the performance of the subdivider's obligations under the improvement agreement: (a) a separate payment bond and a separate performance bond provided by a corporate surety company; (b) a cash bond or escrow agreement; or (c) a letter of credit. SECTION 3. That Section 20.08.300, Salt Lake City Code, be, and the same hereby is, amended to read as follows: 20.08.300 Subdivision. "Subdivision" means any land that is divided, resubdivided or proposed to be divided into two or more lots, parcels, sites, units, plots or other division of land for the purpose, whether immediate or future, for offer, sale, lease, or development either on the installment plan or upon any and all other plans, terms, and conditions. For purposes of this chapter, "subdivision" includes: 2 A. The division or development of land whether by deed, metes and bounds description, devise and testacy, lease, map, plat, or other recorded instrument; B. Divisions of land for all residential and nonresidential uses, including land used or to be used for commercial, agricultural, and industrial purposes; C. Any condominium project; and D. Any planned development project pursuant to Chapter 21A.54 of this code. SECTION 4. That Section 20.24.040, Salt Lake City Code, be, and the same hereby is, amended to read as follows: 20.24.040 Public improvement agreement. A. Prior to the approval by the mayor of the final plat, the subdivider shall execute and file an agreement between the subdivider and the city, specifying the period within which the subdivider shall complete all public improvement work to the satisfaction of the city engineer, and providing that if the subdivider shall fail to complete the public improvement work within such period, the city may complete the same and recover the full cost and expense thereof from the subdivider's security device or, if not recovered therefrom, from the subdivider personally. The agreement shall also provide for inspection and testing of all public improvements and that the cost of such inspections and testing shall be paid for by the subdivider. B. Such agreement may also provide the following: (1) Construction of the improvements in units or phases; or (2), An extension of time under conditions specified in such agreement. 3 SECTION 5. That Section 20.24.050, Salt Lake City Code, be, and the same hereby is, amended to read as follows: 20.24.050 Bond and security requirements. A. The subdivider shall file with the city engineer, together with the improvement agreement, a security device. With the consent of the city attorney, the subdivider may, during the term of the improvement agreement, replace a security device with any other type of security device. If a corporate surety performance bond and a corporate surety payment bond are used, each shall be in an amount equal to not less than one hundred percent of the estimated cost of the public improvements. If a cash bond, escrow agreement, or letter of credit is used to secure the performance and payment obligations, the aggregate amount thereof shall be not less than one hundred percent of the estimated cost of the public improvements. The estimates of the cost of the public improvements pursuant to this subsection (A) shall be subject to the approval of the city engineer. Except as otherwise provided hereafter, each security device shall extend for at least a one-year period beyond the date the public improvements are completed and accepted by the city, as certified by the city engineer, to secure the subdivider's obligations under the improvement agreement, including without limitation the replacement of defective public improvements. B. In the event the subdivider fails to complete all public improvement work in accordance with the provisions of this chapter and the improvement agreement, (1) in the case of a corporate surety performance bond, the city shall have the following options, which shall be set forth in the bond: (a) the city may require the subdivider's surety to 4 complete the work, or (b) the city may complete the work and call upon the surety for reimbursement; (2) in the case of a cash bond or escrow agreement, the subdivider shall forfeit to the city such portion of the money as is necessary to pay for the costs of completion; and (3) in the case of a letter of credit, the city may draw on the letter of credit to pay for the costs of completion. The subdivider shall be liable for, and the city may draw on the security device for, the city's costs and expenses incurred in realizing on the security device and otherwise pursuing its remedies hereunder and under the improvement agreement. If the amount of the security device exceeds all costs and expenses incurred by the city, the city shall release the remainder of the security device to the subdivider after the expiration of the one year period described in Section (A) above, and if the amount of the security device shall be less than the costs and expenses incurred by the city, the subdivider shall be personally liable to the city for such deficiency. C. The office of the city engineer shall monitor the progress of the work. Ninety days following the completion and acceptance by the city (as certified by the city engineer) of all of the public improvements work and upon the receipt by the city of any lien waivers required by the city engineer and provided that the city has not received any claims or notices of claim upon the security device pursuant to Section 20.24.052, the city engineer shall release or consent to the release of seventy-five percent of the security device to the subdivider. The remaining twenty-five percent shall be held for one year from the date of completion and acceptance by the city (as certified by the city engineer) of the public improvements work to make certain that the public improvements remain in good condition during that year and to secure the subdivider's other obligations under the improvement agreement. At the end of that year and upon the receipt by the city of any 5 lien waivers required by the city engineer, and provided that the city has not received any claims or notices of claim upon the security device pursuant to Section 20.24.052 and that the public improvements remain in good condition and the subdivider has performed the subdivider's obligations under the improvement agreement, the city engineer shall release or consent to the release of the final twenty-five percent of the security device to the subdivider. All sums, if any, held by the city in the form of cash shall be returned to the subdivider without interest, the interest on such money being reimbursement to the city for the costs of supervision of the account. If the security device is a corporate surety bond, copies of the partial releases from the engineer's office shall be sent to the recorder's office for inclusion with and attachment to the bond. The foregoing provisions of this subsection (C) shall not apply to amounts required for erosion control and slope stabilization requirements, and any release with respect to such amounts shall be made as provided in subsection (E) and in the improvement agreement. D. A letter of credit shall be irrevocable unless otherwise expressly consented to in writing by the city engineer. All other terms of and conditions for a letter of credit shall be the same as those required for a cash bond or escrow agreement. E. Where a subdivider is required to provide erosion control and slope stabilization facilities in a subdivision, the estimated cost of such facilities, as approved by the city engineer, shall be set forth as a separate figure in the security device. Upon the completion and acceptance by the city engineer of such facilities, and upon the receipt by the city of any lien waivers required by the city engineer, and provided that the city has not received any claims or notices of claim upon the security device pursuant to Section 20.24.052, 50 percent of the money held as security for such facilities shall be returned to 6 the subdivider and 50 percent shall be retained for two growing seasons to ensure that growth has taken hold and to secure the subdivider's other obligations under the improvement agreement. All dead vegetation shall be replaced through replanting at the end of the second growing season. At the end of that two-year period and upon receipt by the city of any lien waivers required by the city engineer, and provided that the city has not received any claims or notices of claim upon the security device pursuant to Section 20.24.052 and that the erosion control and/or slope stabilization remains acceptable to the city, the city engineer shall release or consent to the release of the final 50 percent of the security device to the subdivider. All sums, if any, held by the city in the form of cash shall be returned to the subdivider without interest, the interest on such money being reimbursement to the city for the costs of supervision of the account. If the security device is a corporate surety bond, copies of the partial release from the engineer's office shall be sent to the recorder's office for inclusion with and attachment to the bond. F. Within 20 days after entering into a contract for the construction of the public improvements, the subdivider shall file with the city engineer a copy of the payment bond required by Section 14-2-1, Utah Code Annotated 1953, as amended, which section requires the obtaining of such a bond to secure payment for material furnished and labor performed under the subdivider's contract with the contractor for the public improvements. SECTION 6. That Section 2.24.052, Salt Lake City Code, be, and the same hereby is, enacted to read as follows: 20.24.052. Security devices securing payment risk. 7 The terms of a corporate surety payment bond held by the city as a security device shall govern claims to the corporate surety by a claimant. Subsections (A), (B), (C), (D) and (E) of this section shall govern claims by claimants on any security device which is a cash bond held by the city, a letter of credit, or an escrow agreement. For purposes of this section, "claim" means a request or demand by a claimant that (1) a corporate surety pay the claimant from a corporate surety payment bond or (2) that the city either (a) pay the claimant from a cash bond, or (b) make a draw request under a letter of credit or make a request for payment under an escrow agreement. For purposes of this section, "claimant" means a person who, pursuant to contract, furnished labor, materials, supplies, or equipment with respect to the public improvements. For purposes of this section, "contractor" means the person with whom the claimant has contracted to furnish labor, materials, supplies, or equipment with respect to the public improvements. For purpose of this section, "original contractor" means the person with whom the subdivider contracted to construct the public improvements. A. The city shall be obligated to make a payment or request a payment to be made only to the extent of monies available under the security device, and shall have no duty to defend any person in any legal action relating to a claim. B. The city shall have no obligation to a claimant under a security device until: (1) The claimant has furnished written notice to the contractor, with a copy to the original contractor, the subdivider and the city, within 90 days after having last performed labor or last furnished materials, supplies or equipment included in the claim, stating, with substantial accuracy, the amount of the claim and the name of the 8 party to whom the materials, supplies or equipment were furnished or for whom the labor was done or performed; and (2) Not having been paid within 30 days after having furnished the above notice, the claimant has sent written claim to the city, with a copy to the original contractor and the subdivider, stating that a claim is being made under the security device and enclosing a copy of the previous written notice furnished to the contractor and to the city. C. When the claimant has satisfied the conditions in paragraph (B), the city shall, within 30 days after receipt of the claim, take the following actions: (1) Send an answer to the claimant, with a copy to the original contractor and to the subdivider, stating the amounts that are undisputed and the basis for challenging any amounts that are disputed; (2) Pay or arrange for the payment of any undisputed amounts. D. No suit or action shall be commenced by a claimant under a security device after the expiration of one year after the date of completion of the public improvements and acceptance thereof by the city (as certified by the city engineer). Any such suit or action shall be commenced only in a court of competent jurisdiction in Salt Lake City, Utah. E. If the subdivider provides a security device comprising a cash bond, a letter of credit or escrow agreement, the subdivider and the contractor shall be deemed to have waived any right to sue the city because of any payment or draw made by the city under or pursuant to such security device. 9 SECTION 7. That Section 2.24.055, Salt Lake City Code, be, and the same hereby is, amended to read as follows: 20.24.055. No public right of action. The provisions of Sections 20.24.040 and 20.24.050 of this chapter, or successor sections, shall not be construed to provide any private right of action on either tort, contract, third -party contract or any other basis on behalf of any property holder in the subdivision as against the city or on the security device required under Section 20.24.050 or its successor in the event that the public improvements are not constructed as required. Notwithstanding the foregoing sentence, any security device obtained pursuant to Section 20.24.050 to secure payment obligations with respect to the public improvements shall provide a private right of action to any person, at any tier, who supplies labor, material or equipment with respect to the public improvements. SECTION 8. That Section 20.24.110, Salt Lake City Code, be, and the same hereby is, amended to read as follows: 20.24.110. Recordation with county. When the mayor shall have approved the final plat, as aforesaid, and when the subdivider shall have filed with the city recorder the agreement and security device described in Sections 20.24.040 and 20.24.050 of this chapter, or successor sections, and when such agreement and security device shall have been approved by the city attorney as to form, the plat shall be presented by the subdivider to the Salt Lake County recorder for recordation. SECTION 9. Effect and Invalidity. By enacting this ordinance, Salt Lake City has determined that the provisions of this ordinance are adequate to protect the interests 10 ordinance is for any reason determined to be or rendered illegal, invalid, or superseded by other lawful authority including any state or federal legislative, regulatory or administrative authority having jurisdiction thereof, or determined to be unconstitutional, illegal or invalid by any court of competent jurisdiction, this entire ordinance shall be voided and terminated. SECTION 10. Effective Date. This Ordinance shall become effective on the date of its first publication. Passed by the City Council of Salt Lake City, Utah, this 17th day of November ,1998 CHAIRP ' SON ATTEST AND COUNTERSIGN: IEF DEPUTY C T REORDER Transmitted to the Mayor on November 17, 1998 Mayor's Action: xxx Approved Vetoed MAY R APPROVED AS TO FORM Salt Lake City Attorneys Office Date /I By 11 C„ ATTEST AND COUNTERSIGN: 1. IEF DEPUTY I '. CORDER AL) ill No. 94 of 1998 Published: November 26, 199.8 \Ordina98\Bond and security requirements 8-7-98.doc 12