City provides developers with greater flexibility to secure obligations for future projects
CALGARY — The City of Calgary will now accept developer surety bonds as an alternative to letters of credit, as part of the Master Development Agreement (MDA) for all residential, industrial and commercial development within the city.
Changes to the MDA came into effect on March 14, making Calgary the first large municipality in Canada to provide developer surety bonds for financial obligation. Previously, The City only accepted irrevocable letters of credit issued by a bank as part of the MDA. Surety bonds allow greater flexibility for developers in terms of being able to reinvest their working capital that would have been tied up in a letter of credit.
“By removing financial barriers for business owners, our aim is to strengthen Calgary’s reputation as a great place to invest in land development and redevelopment,” said Darren Lockhart, managing director of Calgary Approvals.
The City’s decision to accept bonds issued by a surety company comes after consulting with stakeholders in the industry. Letters of credit may restrict working capital or capacity in lending agreements, while bonds allow companies to reinvest funds in other projects to help grow Calgary. Surety bonds may also offer cost savings to some companies, as rates may be lower than those of letters of credit.
“The City is working to make improvements for businesses in Calgary that make it easier to invest,” said Lockhart. “Our hope is that this business-friendly change will allow our developer partners to invest those funds into projects that make Calgary one of the most livable cities in the world.”
In the event of a company transferring their ownership, bonds can be transferred in a manner similar to letters of credit. For companies that choose to use surety bonds to secure their development obligations, The City’s security reduction process will continue to be the same as with letters of credit. Once the Final Acceptance Certificate has been issued, bonds will simply expire after one year; no further action is required by a developer.
Developers who have questions about surety bonds, or want to learn about eligibility requirements can contact The City’s Planning Service Centre at calgary.ca/contactpd.