Senate Approves DiSanto Bill Ensuring Consistent Contractor Bonding Requirements

HARRISBURG—Today the Senate unanimously approved legislation authored by Senator John DiSanto (Dauphin/Perry) to clarify the dollar amount municipalities retain as financial security from builders and contractors for property improvements, ensuring capital resources are deployed productively for the Commonwealth’s development needs.

Senate Bill 208 clarifies the Municipalities Planning Code regarding final development plan approval and the retention of posted financial securities for improvements. The law’s intent is to ensure developers have enough funds to complete all required property improvements. However, the current language can be misinterpreted to withhold excess funds and greatly restrict the ability for contractors to get bonded for other projects.

Instead of a municipality only retaining a bond of 110% of the value of remaining property improvements, some local jurisdictions have interpreted the law to retain 10% of the entire original project amount in addition to the cost of remaining improvements.

For example, if the original bond amount was $1 million and there was only $75,000 in remaining work, the current planning code has been interpreted to allow a municipality to retain $75,000 in outstanding improvement costs plus a $100,000 contingency—or 10% of the original posted security. Under this scenario a municipality requires bonding of $175,000, or about 2.5 times the cost of the outstanding work.

DiSanto’s legislation would clarify that a municipality may retain the $75,000 in outstanding improvement costs plus a $7,500 (10%) contingency, for a total of $82,500. “My proposal balances the financial interests of municipalities with the Commonwealth’s construction and development needs.” DiSanto said. “At a time when our economy is still recovering, it’s important to fully leverage private sector financial resources into shovel-ready and family-sustaining jobs for our residents.”

The bill now goes to the House of Representatives for further consideration. 

CONTACT: Chuck Erdman 717-787-6801 cerdman@pasen.gov