3-16-18

Home Builders Prepare to Defend the Public Construction Bond Act

Oppose HB4531 – Moylan

State law allows cities & counties to require developers to post a bond to ensure that the public improvements on new developments are completed. Developers choose to post a cash bond, letter of credit, or surety bond to guarantee that there are funds available to complete the project improvements. Local officials set the rating of the bonds to financially protect their unit of government. They can set the rates as high as they wish.

• Prior to 1996, local government units in Illinois repeatedly misused their authority by intentionally refusing to deem a project complete for the sole purpose of using the cash bonds for purposes other than for the assurance of completing the public improvement projects. Their intentional actions and misuse of power tied the hands of developers and builders who needed those funds for home construction and commercial construction projects.

• Even though legislation passed in 1996 allowing developers to choose between a cash bond and a letter of credit for the assurance of project completion, local governments continued to require cash bonds; ignoring state statute and the intent of the Illinois General Assembly, P.A. 89-0518.

• The General Assembly expanded the options in 1997 to allow developers the option of using a surety bond deemed good or sufficient by the county or municipality and the law was also placed in the Municipal Code, Counties Code, and the Public Construction Bond Act, P.A. 90-0558. Still, developers were told to use cash bonds only, and the bonds were still being held far beyond completion dates.

• In 2001, the G.A. addressed the issue for the third time in six years. P.A. 92-0479 strongly clarifies and further reinforces the three forms of assurance that the developers may use. “A builder or developer HAS THE OPTION to utilize a cash bond, irrevocable letter of credit, surety bond or letter of commitment.” The bill also stated that cities and counties “DO NOT HAVE THE OPTION.”

• Not until the passage of some of the most restrictive language ever considered by the Illinois General Assembly to supersede local government authority (including home rule), did the practice of requiring private funds, misusing those funds, and ignoring state statute; curtail in Illinois.

• The passage of HB4531 would reverse the actions of these three Public Acts; would usher back in this misuse of local government power; and, break the backs of the few developers who dare operate in the state of Illinois.

Even with the deletion of Cash Bonds as an option, HBAI vehemently opposes any reversal of authority in the Public Construction Bond Act, such as that contained in HB4531. For these reasons, we are requesting the House Committee on Construction Industry & Code Enforcement to Vote No on its consideration, when the Illinois General Assembly returns to Springfield and resumes work in April.

If you have questions or concerns regarding our position to HB4531, please call or write Bill Ward at 217-753-3963 or billward@hbai.org.