The town is now in Stage 3 of the province’s reopening framework. More town amenities, programs and services are becoming available. Provincial orders remain in effect and we must all follow public health guidelines.
This procedure establishes a framework for the acceptance, handling and custody of securities to ensure the obligations of developers, builders, or land-owners under various development related approval processes are met by setting out:
This procedure applies to the criteria for accepting, handling and custody of development and damage related securities. The determination of the value of securities is through town by-law, rate or calculation of an amount sufficient to cover costs of completing/rectifying works. Securities required in connection with contracts, including bid solicitations provided for through the Purchasing By-law and damage deposits associated with facility rentals, are excluded from this procedure.
Where development related security is required to ensure performance, the amount will be determined by the applicable department responsible for the required works in accordance with the relevant by-law, policies, practices and standards i.e. Parks and Open Spaces reviews the valuation of required Park related structures. In general securities are required to be 100% of the estimated costs or sufficient to cover costs of completing/rectifying works. The required security and other financial obligations are then incorporated by notation or schedule into the relevant agreement or permit process. Receipt of the required security is ensured through the clearing conditions process in the case of an agreement or as a requirement prior to issuance in the case of a permit.
Security may be provided in cash, certified cheque, bank draft, money order, or unconditional irrevocable letter of credit. If a letter of credit is provided as security it must be approved to be in compliance with the town’s letter of credit template and acceptable financial institutions listing by the Development Finance Clerk, Financial Planning department (security administrator). For the purposes of this procedure, performance bonds and letters of guarantee are not considered acceptable forms of security.
The criterion for acceptance is:
The town’s standard letter of credit template and listing of currently acceptable financial institutions is attached as Appendix A. Acceptance of letters of credit from financial institutions which do not meet the above noted requirements shall be at the discretion of the treasurer or designate on a case by case basis.
Staff shall conduct periodic reviews of its letter of credit templates and update the listing of acceptable financial institutions annually to ensure they reflect current practices and institutions that meet the criteria.
Interest is not paid on securities held.
The director or designate of the department responsible for the secured works may authorize reduction or release of the security (based on fulfilment of the secured obligations to the satisfaction of the Town as evidenced by inspection and certification documentation) by forwarding a written request to the security administrator. The director or designate of the department responsible for the secured obligations may also authorize a draw on securities where obligations under the applicable agreement or by-law have not been fulfilled to the satisfaction of the town. The security administrator will then process the draw, reduction or release documents in the case of a letter of credit, or the cheque requisition in the case of a cash security release/reduction or journal entry to the appropriate fund in the case of a draw. Proceeds from a letter of credit draw are credited by the security administrator to the cash security account kept for this purpose and will be held until authorization to release is received from the authorizing department.
Should the owner of the securities fail to fulfill the obligations for which security is held, the town may draw on the securities to fulfill the obligations or to acquire the services of a qualified contractor to fulfill the obligations. Draws will be in accordance with the applicable agreement or by-law under which the security was posted.
The requirement for automatic renewal dates provides assurance that letters of credit do not expire without the obligations being fulfilled to the satisfaction of the town. However, it is the responsibility of the security administrator to monitor expiry dates to ensure compliance. If a notice of non-renewal of the letter of credit is received by the security administrator and the secured obligations are not deemed to be fulfilled by the department responsible for approving the fulfilment of the obligations a draw may be initiated. Once the draw documents are prepared, they are endorsed by the treasurer or deputy treasurer in accordance with the terms of the letter of credit template criteria.
The security administrator will prepare annually a schedule identifying all outstanding securities that are five or more years old. The list will be forwarded to each department, requesting confirmation whether all or a portion of the securities should (1) continue to be held to secure the relevant obligations under the applicable agreement or by-law; (2) be drawn against to fund deficiencies and the money treated as liquidated damages for the obligations secured under the applicable agreement or by-law; or 3) released to the owner of the securities in accordance with the applicable agreement or by-law.
Where securities are to be released to the owner, the town will endeavour to contact the owner. Methods utilized shall include, but are not limited to regular or registered mail, corporate searches etc. If the owner is found, the securities will be released to the owner. In the case where the owner cannot be located, a notice will be sent to the person who posted security at their last known address or financial institution. Should the funds continue to be unclaimed, they shall be added to a listing which the security administrator will prepare annually. This listing shall be published on the town’s web site and in local newspapers advising that all persons having any claim to any of the money listed are required to complete a deposit refund claim form and prove their claims within 90 days of the publication of the notice. Evidence of claim shall include satisfactory proof that they are the person who posted the original security or that they have some other legal right to the securities. Where the town is uncertain of the claim to the securities, the town may pay the money into court. The costs of advertising shall be borne by the securities. Upon expiration of the 90 days, all money for which there is no claim will be transferred to the Town’s general funds.
Bid Security - is a bond or deposit which guarantees that the bidder or offer or, if awarded the contract, will accept the contract as bid.
Irrevocable Letter of Credit – a Letter of Credit which is not subject to change or cancellation by the financial institution.
Letter of Credit - a legal undertaking by a financial institution to honour, without inquiry, and make payment on specific demand of the holder
Performance Bonds/Letters of Guarantee – issued by trust companies, credit unions and financial institutions. Payment is dependent on proof of damage.
Unclaimed Security deposits - cash securities which are no longer required by the Town, but which have not been released because the owner cannot be located, or the owner has not come forward.
The security administrator is responsible for the safekeeping of all letters of credit (or acceptable alternatives) received by the Town, and for processing all draws, reductions or releases of security. The department designate responsible for administration of the applicable development related approval process shall determine the amount of securities required or available for release and be the authority for providing direction on security actions. Authorizing actions on securities shall be the responsibility of the director or designate of the department responsible for ensuring the secured works meet town requirements through inspection, certification or other designated means. The security administrator shall be responsible for the custody and processing authorized actions on securities.
Procedure Number: F-FPC-002-001
Parent Policy: F-FPC-002
Sub-Section: Financial Planning Controls
Author: Development Financing & Investments
Effective Date: 2013 Dec 16
Review by Date: 2018
Appendix A - Deposit Refund Claim Form
Appendix B - Letter of Credit Template and Acceptable Financial Institution Listing
Development Charges By-law
Road Cut By-law
Site Alteration By-law
Site Plan Agreement
Building Policies, Procedures and By-laws
Planning Policies, Procedures and By-laws