Longmont City Council unanimously approved changes to the requirements for financial security in development projects on Tuesday.
City Planning Manager Don Burchett explained to council that the land development code requires that financial securities are held by the city to ensure the obligations required of a developer are completed according to city regulations and approved plans.
When a developer builds a project, they are typically required by the city to build things like roads, sidewalks, water and sewer lines, greenways and certain landscaping. After the infrastructure is built the city accepts it for a warranty period — ensuring that nothing goes wrong — before taking over the infrastructure.
Securities, which can be in the form of straight cash or through a letter of credit, mean that if the developer fails to build this infrastructure properly, the city can use that money to finish the work rather than taxpayer dollars.
As previously written, the securities process was time intensive for staff and required constant monitoring for several years. The changes could cut the time the city tracks the information by half.
With the changes, securities will be based on median construction cost by project type as determined by the city, which would be adjusted based on construction price indexes.
It also delays the collection of securities until there is an actual need for the city to hold them, along with updating the enforcement and penalties section of the municipal code to allow for tax liens on parcels for any work completed by the city as a result of the developer’s inaction.
The securities would not be collected until the city releases building permits to the developer. The monetary amount of securities will be higher with this change than it currently is and released back to the developer after the warranty period. Burchett felt that these changes would not increase risk for the city.
“Any of the risks that we have, I don’t see that we’re taking on more, and in many cases we’re going to have more money than we would have originally to fix something if it went wrong,” he said.
In the examples presented to council, the reduced securities period would also save the developer between $100,000 and $200,000 on administrative fees depending on the project.
“By changing this, we feel this could, one, benefit the development community which hopefully can translate towards some savings for our future residents and home prices or for rent rates,” Burchett said. “It also has ways to save staff time and money (spent on) keeping the securities safe and secure and accounted for.”
While the amount may not seem like much, City Manager Harold Dominguez said that it matters in building attainable housing.
“One hundred thousand dollars makes a difference in the pro forma when we’re looking at (attainable housing) and trying to manage gaps in there, so we’re definitely seeing that in the attainable world it’s probably a decent tool to bring to the table,” Dominguez said.
Council also unanimously approved some changes related to city-involved projects and securities. City projects will be exempt from the requirement of providing securities, council will be able to waive securities for city-funded economic development projects or public-private partnerships that include a development agreement, and reduced securities will be permitted for affordable housing projects equal to any fee reductions that the project qualifies for.
