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HomeMy WebLinkAboutFIN 17-24Report to Executive Committee Report Number: FIN 17-24 Date: September 3, 2024 From: Stan Karwowski Director, Finance & Treasurer Subject: Letters of Credit & Surety Bonds Acceptance Policies -File: F-1100-001 Recommendation: 1.That Report FIN 17-24 regarding the Letters of Credit (LC) and Surety Bonds Acceptance Policies be received; 2.That Council approve financial policies for the acceptance of Letters of Credit and Surety Bonds (FIN 100 and FIN 110), as set out in Attachment 1 and 2 to this report; and 3.That the appropriate City of Pickering officials be authorized to take the necessary actions as indicated in this report. Executive Summary: The purpose of this report is to obtain Council’s approval of the Letters of Credit and Surety Bonds Acceptance Policies (FIN 100 and FIN 110). The City currently accepts Letters of Credit (LC) and Surety Bonds to secure the financial obligations for subdivision and site plan agreements. These policies provide the minimum standards for the acceptance, custody, and administration of LCs and Surety Bonds and other acceptable forms of security to protect the financial interests of the City. Relationship to the Pickering Strategic Plan: The recommendation in this report responds to the Pickering Strategic Plan Corporate Key to Deliver on Good Governance – Fiscal Prudence Financial Implications: There are no direct financial implications regarding the acceptance of LC and Surety Bonds as financial securities for the City. However, the adoption of these policies will enhance the City’s financial practices. The attached policies are based on the City’s established business practices, in conjunction with a review of other similar municipal policies. In other words, the attached policies represent the best practices of other municipalities and now formalize the City’s established business practice. Discussion: The purpose of this report is to obtain Council’s approval of the LC and Surety Bonds Acceptance Policies (FIN 100 and FIN 110). These policies provide the minimum standards for the acceptance, custody, and administration of LC and Surety Bonds and other acceptable forms of security to protect the financial interests of the City. FIN 17-24 September 3, 2024 Subject: Letters of Credit & Surety Bonds Acceptance Policies Page 2 Letters of Credit Historically, the City only accepted LC issued by banks to secure the financial obligation for subdivision and site plan agreements. LC are extremely liquid financial instruments and guarantees payment or performance by allowing the City the right to draw upon the financial security in the case of developer default. Acceptable alternatives to a LC were cash, certified cheque, bank draft or a money order. The dollar value of a LC can range from a few thousand dollars to millions of dollars depending on the size and scope of the municipal services that are outlined in the subdivision and site plan agreements. Banks usually require collateral in the form of cash from the developer to guarantee the LC. For example, a developer that provides the City with a $1.0 million LC would have to deposit $1.0 million at the bank to be held as collateral security for the LC. This may create financial challenges for the developer, since the $1.0 million of cash held by the bank cannot be used by the developer to pay its normal business operating costs. Surety Bonds In 2015, Council approved (Resolution #33/15) the use of Surety Bonds as an acceptable form of financial security for subdivision agreements, site plan agreements and other development agreements of a similar nature. The acceptance of surety bonds provided a secure financial product as an alternative to a LC that would enable the developer to access some or all of the cash that would otherwise be held by the bank as security for a LC and provide the developer with cost savings. Both LCs and Surety Bonds are demand based and do not require the City to prove any default by the developer in Court, which can take a significant amount of time, effort and cost the City a significant amount of money. The main difference between a LC and Surety Bonds is that Surety Bonds provide financial security through insurance companies rather than banks (LCs). Since 2015, the City has accepted 57 Surety Bonds as financial security for Plans of Subdivision, Site Plans and other development agreements. The dollar value of a Surety Bonds accepted have ranged from $100,000 to millions of dollars depending on the size and scope of the municipal services that are outlined in the subdivision and site plan agreements. The highest dollar amount accepted for a Surety Bond was $15 million. The City has had no negative situations or experiences with respect to accepting Surety Bonds. However, there have been no instances to date where the City was required to make a claim against any of these bonds. Commonly cited concerns related to Surety Bonds are that they are not as secure as LCs as they are issued by insurance companies. To mitigate the risk of default, Surety Bond providers must meet and maintain minimum credit rating requirements before their Surety Bonds will be accepted. In addition, the use of Surety Bonds as security for development agreements is limited to an upset amount of $15 million per agreement. If the required amount of financial security is above the upset limit, then the balance remaining must be secured by a LC. FIN 17-24 September 3, 2024 Subject: Letters of Credit & Surety Bonds Acceptance Policies Page 3 Bill 109, Homes for Everyone Act, 2022 permitted the Province to enact regulations prescribing and defining surety bonds. This regulation would require and/or allow developers to require municipalities to accept surety bonds as a financial security instrument. As noted above, the City of Pickering has accepted Surety Bonds since 2015. At this time, staff are requesting Council’s approval of both financial policies set out in Attachments 1 and 2 (FIN 100 and FIN 110). Attachments: 1. Letters of Credit Acceptance Policy 2. Surety Bonds Acceptance Policy Prepared By: Approved/Endorsed By: Signed By: Signed By: James Halsall Stan Karwowski Division Head, Finance Director, Finance & Treasurer Recommended for the consideration of Pickering City Council Signed By: Marisa Carpino, M.A. Chief Administrative Officer Policy Procedure Title: Letter of Credit Acceptance Policy Policy Number FIN 100 Reference Date Originated (m/d/y) September 23, 2024 Date Revised (m/d/y) Pages 5 Approval: Chief Administrative Officer Point of Contact Director, Finance & Treasurer Policy Objective To establish a policy for the acceptance and administration of Letters of Credit as a security from financial institutions. Index 01 Definitions 02 Scope 03 Requirements for a Letter of Credit 04 Acceptable Institutions 05 Acceptable Alternatives to a Letter of Credit 06 Administration of Letters of Credit 07 Draw, Reduction or Release of a Letter of Credit 01 Definitions 01.01 Automatic Renewal – A condition that states the Letter of Credit shall be automatically extended without formal amendment for a specified period of time beyond the stated expiry date. Written notification must be received by the City prior to the expiration, if automatic renewal is to be terminated. 01.02 City – The Corporation of the City of Pickering. 01.03 Development Agreement – refers to any agreement entered into between the City of Pickering and a landowner to regulate the provision of on-site and municipal works required to service land under development applications, and includes, but is not limited to Site Plan, Plan of Subdivision/Condominium, Master Development Agreement, Construction Agreement and Servicing Agreement. Attachment 1 to Report FIN 17-24 Policy Title: Letter of Credit Policy Page 2 of 5 Policy Number: FIN 100 01.04 Irrevocable Letter of Credit – a Letter of Credit cannot be revoked or amended without the agreement of both the City and the issuing financial institution. 01.05 Letter of Credit – a document issued by a financial institution on behalf of their client to guarantee payment to the City. This security can be drawn against, should the client fail to meet their obligations under an agreement. 01.06 Schedule I Banks – domestic banks authorized under Schedule I of the Bank Act to accept deposits. 01.07 Schedule II Banks – foreign bank subsidiaries authorized under Schedule II of the Bank Act to accept deposits. Foreign bank subsidiaries are controlled by eligible foreign institutions. 01.08 Schedule III Banks – foreign bank branches of foreign institutions that have been authorized under Schedule III of the Bank Act to do banking business in Canada. Schedule III banks are not incorporated with the Bank Act and operate under restrictions not required by Schedule I or II banks. 01.09 Surety Bond – a bond which guarantees the assumption of responsibility for payment of security in the event of default of a Development Agreement. 02 Scope 02.01 The City accepts Letters of Credit to be submitted as security for Performance and Maintenance obligations under Development Agreements. The issuing banks of Letters of Credit accepted by the City must meet specific credit-rating requirements, and the Letters of Credit must be written in a specific form. 02.02 Acceptance of a Letter of Credit as a security is advantageous to the City since full or partial draws can be made upon the Letter of Credit on demand, regardless of disputes which may occur; no service charges are assessed to the City; and the Letter of Credit can be written so that it automatically extends from year to year. 02.03 Letters of Credit may be required for other types of agreements at the discretion of the Director, Finance & Treasurer. 03 Requirements for a Letter of Credit 03.01 Letters of Credit from any institution, including trust companies and credit unions, are not accepted unless approval is first received from the Director, Finance & Treasurer. In all circumstances, the acceptance or rejection of any Letter of Credit is at the sole discretion of the Director, Finance & Treasurer. 03.02 Institutions issuing Letters of Credit accepted by the City for any reason must meet specific credit-rating requirements, and the Letter of Credit must be written Policy Title: Letter of Credit Policy Page 3 of 5 Policy Number: FIN 100 in the City’s standard format (see Appendix 1). Acceptance of only certain types of Letters of Credit ensures that the interests of the City are protected. 03.03 Letters of Credit accepted by the City must: a)be printed on letterhead from the issuing financial institution; b)be the original copy (electronic copies will not be accepted); c)be issued in Canadian dollars in the amount requested by the City; d)specify that the Letter of Credit is irrevocable; e)be registered in the name of The Corporation of the City of Pickering; f)for the financial institution issuing office for the Letter of Credit be located in Ontario; g)disclose the project file number and municipal address or legal description; h)include an automatic renewal clause, requiring the bank to provide thirty days advance notice to the Treasurer, by registered mail, if it does not intend to renew; and, i)conform to the intent of the City’s standard format (see Appendix 1). Any deviation from the standard format will be subject to review by the City and may be refused for non-compliance. 03.04 Any deviations from the City’s Letter of Credit “template” shall be reviewed by the Finance Department and Legal Services Section and are subject to the final approval of the Director, Finance & Treasurer. 04 Acceptable Institutions 04.01 Letters of Credit may be accepted from any of the following six largest banks set out in Schedule 1 of the Bank Act (R.S.C.1985, C.B-1.01, and any amendments thereto): •Bank of Montreal •Bank of Nova Scotia •Canadian Imperial Bank of Commerce •National Bank of Canada •Royal Bank of Canada •Toronto Dominion Bank 04.02 Letters of Credit may be accepted from other Schedule I banks and Schedule II banks listed in the Bank Act (R.S.C. 1985, C.B-1.01 and any amendments thereto), having a Morningstar DBRS rating of R-1(Mid) or better, or an Policy Title: Letter of Credit Policy Page 4 of 5 Policy Number: FIN 100 equivalent rating by the rating agencies Moodys or S&P Global, subject to the approval of the Director, Finance & Treasurer. 04.03 If the City accepts a Letter of Credit from other Schedule I or Schedule II banks, the bank must maintain the minimum credit rating throughout the period of time the Letter of Credit is held by the City. The Finance Department will monitor the credit ratings of banks for those Letters of Credit held by the City. 04.04 If the bank’s credit rating fall below the minimum level, the City will require a substitute Letter of Credit from an eligible bank. Upon the direction of the Finance Department, the City department will contact the developer or landowner to advise them that a substitute Letter of Credit from an eligible bank is required. 04.05 The substitute Letter of Credit must be presented to the City within 30 calendar days of the City’s request. Should the Letter of Credit not be replaced within the time frame specified by the City, the City may at their discretion draw down the existing Letter of Credit. 04.06 Letters of Credit from any other institutions, including trust companies, credit unions and Scheule III banks, will not be accepted. 05 Acceptable Alternatives to a Letter of Credit 05.01 Acceptable alternatives to a Letter of Credit are cash, certified cheque, bank draft, and money order. 05.02 If any of the above is provided in lieu of a Letter of Credit, the funds must be forwarded to the Finance Department for deposit to the City’s bank account. 05.03 Releases or draws on these funds will be processed in the same manner as a Letter of Credit. No interest will be paid when funds are released. 05.04 Surety Bonds issued by insurance companies are acceptable security alternatives subject to the requirements in the Surety Bond Acceptance Policy. 05.05 The City will not accept Letters of Guarantee, Term Deposits, GIC’s or any form of non-cash security (with exception of Surety Bonds) as an alternative to a Letter of Credit. 06 Administration of Letters of Credit 06.01 Originating Departments are responsible for the following: a)providing the City’s Letter of Credit “template” (see Appendix 1) to developers, landowners, etc. for them to comply with; Policy Title: Letter of Credit Policy Page 5 of 5 Policy Number: FIN 100 b)ensuring that the form, content and wording of Letters of Credit received from developers, landowners, etc. match the City’s Letters of Credit “template”; and, c)forwarding the Letters of Credit to the Finance Department for evaluation and safekeeping. 06.02 The Finance Department is responsible for the following: a)confirming the acceptance of Letters of Credit by email to the originating department; b)that Letters of Credit (or acceptable alternatives) submitted, meet the requirements of this Policy; c)the safekeeping of the Letters of Credit; and, d)all draws, reductions, or releases of Letters of Credit. 07 Draw, Reduction, or Release of a Letter of Credit 07.01 A request in writing to draw, reduce, or release the Letter of Credit, duly signed by an authorized employee (from the originating Department) is forwarded to the Finance Department for the Division Head, Finance’s authorization. 07.02 A letter of request to draw, reduce or release a Letter of Credit is prepared and signed by the Division Head, Finance or designate and distributed as follows: •financial institution (original) •requester in originating department •individual/developer who submitted Letter of Credit. Appendices Appendix 1 Letter of Credit Template Appendix 1 Required Form for Letter of Credit [Insert name of]) Agreement To: The Corporation of the City of Pickering, Civic Complex One The Esplanade, Pickering, ON L1V 6K7 Re: Description of Lands Affected (Use exact description from ‘Lands Affected’ clause in Agreement) City File: (SP#, S# or D#) We hereby authorize you to draw on [insert name of bank], [insert address of bank], for account of [insert name of company or companies obtaining security] up to an aggregate amount of [insert amount of security in figures and in full] available by drafts at sight for 100% on demand as follows: Pursuant to the request of our customers(s), the said [insert name of company or companies obtaining security], we [insert name of bank], [insert address of bank], hereby establish and give to you an irrevocable Letter of Credit in your favour in the total amount of [insert amount of security in numbers and in words] which may be drawn on by you at any time and from time to time upon written demand for payment made upon us by you which demand we shall honour without inquiring whether you have a right as between yourself and our said customer(s) to make such demand, and without recognizing any claim of our said customer(s) . Provided, however, that you are to deliver to [insert name of bank], [insert address of bank], at such time as a written demand for payment is made upon us a certificate signed by you agreeing or confirming that monies drawn pursuant to this Letter of Credit are payable to you or are to be or have been expended pursuant to obligations incurred or to be incurred by you with reference to your file regarding a [insert either Site Plan Control, Subdivision or Development Agreement] dated [insert date of Agreement], between [insert name of owner referenced on Agreement, other than City and Encumbrancer(s)] and The Corporation of the City of Pickering; this Letter of Credit is required pursuant to section ____ of that Agreement. Partial drawings are permitted. The amount of this Letter of Credit shall be reduced from time to time as advised by notice in writing given to us from time to time by you. This Letter of Credit will continue up to and including [insert date of expiry of Letter of Credit] and will expire on that date and you may call for payment of the full amount outstanding under this Letter of Credit at any time up to the close of business on that date. It is a condition of this Letter of Credit that it shall be deemed to be automatically extended for one year from the present or any future expiration date hereof, unless thirty days prior to any such date, we shall notify you in writing by registered mail that we elect not to consider this Letter of Credit renewed for any such additional period. We hereby covenant with drawers, endorsers, and bona fide holders of drafts drawn under and in accordance with the terms of this credit that such drafts will be duly honoured if drawn and negotiated on or before [insert date of expiry of Letter of Credit] or any automatically extended expiry date. The drafts drawn under this credit are to be endorsed hereon and shall state on their face that they are drawn under [insert name of bank], [insert address of bank]. Dated this day of , 20 . Instructions for completing Letter of Credit: 1.Letter of Credit must be typed on bank letterhead. 2.Information required in square brackets must be provided where indicated, without brackets. 3.Phrases shown in round brackets must be included without brackets where there are two or more companies comprising the customer. 4.The date in the sixth paragraph must be at least one year from the date of the Letter of Credit. 5.The date in the seventh paragraph must be the same as the date in the sixth paragraph. 6.Bank signatories must show name, printed or typed, and title, in addition to signature. Acceptable Banking Institutions: 1.Letters of Credit may be accepted from any of the following six largest banks set out in Schedule I of the Bank Act (R.S.C.1985, C.B-1.01, and any amendments thereto): •Bank of Montreal •Bank of Nova Scotia •Canadian Imperial Bank of Commerce •National Bank of Canada •Royal Bank of Canada •Toronto Dominion Bank 2.Letters of Credit may be accepted from other Schedule I banks and Schedule II banks listed in the Bank Act (R.S.C. 1985, C.B-1.01 and any amendments thereto), that meet and maintain minimum credit ratings as described in the City’s Letters of Credit Acceptance policy 3.Letters of Credit from any other institutions, including trust companies, credit unions and Schedule III banks, will not be accepted. Policy Procedure Title: Surety Bond Acceptance Policy Policy Number FIN 110 Reference Date Originated (m/d/y) September 23, 2024 Date Revised (m/d/y) Pages 4 Approval: Chief Administrative Officer Point of Contact Division Head, Finance Policy Objective To establish a policy for the acceptance and administration of Surety Bonds as a form of security under development agreements from surety providers. Index 01 Definitions 02 Scope 03 Requirements for the Surety Bond 04 Acceptable Institutions 05 Administration of Surety Bonds 06 Draw, Reduction or Release of a Surety Bond 01 Definitions 01.01 City – The Corporation of the City of Pickering. 01.02 Development Agreement – refers to any agreement entered into between the City of Pickering and a landowner to regulate the provision of on-site and municipal works required to service land under development applications, and includes, but is not limited to, Site Plan, Plan of Subdivision/Condominium, Master Development Agreement, Construction Agreement and Servicing Agreement. 01.03 Irrevocable – a Surety Bond cannot be revoked or amended without agreement of both the City and the issuing insurance company. 01.04 Rider – a Surety Bond provision that amends the terms of the Surety Bond (i.e., a reduction in the bond value). Attachment 2 to Report FIN 17-24 Policy Title: Surety Bond Acceptance Policy Page 2 of 4 Policy Number: FIN 110 01.05 Security – an amount required to be provided under a Development Agreement, which will ultimately be returned to the developer after the terms of the Development Agreement have been executed to the City’s satisfaction, but may be drawn upon in the event of a contravention to the Agreement obligations. 01.06 Surety Bond – a bond which guarantees the assumption of responsibility for payment of security in the event of default of a Development Agreement. 01.07 Surety Provider – a company licensed, either federally or by a provincial insurance regulatory body, to issue Surety Bonds in the Province of Ontario. 02 Scope 02.01 The City allows Surety Bonds to be submitted as security for Performance and Maintenance obligations under Development Agreements. The issuing insurance companies of Surety Bonds accepted by the City must meet specific credit-rating requirements and the Surety Bond must be written in a specific form. 02.02 The use of Surety Bonds as security for Development Agreements shall be limited to an upset amount of $15 million per agreement. If the required amount of security is above the upset limit, then the balance remaining must be secured by a Letter of Credit. 02.03 Surety Bonds may be accepted for other types of agreements at the discretion of the Director, Finance & Treasurer. 03 Requirements for the Surety Bond 03.01 The Surety Bond to be provided to the City, issued by a Surety Provider, shall be irrevocable and shall be in the form and on the terms of the Surety Bond “template” attached hereto as Appendix 1. 03.02 The City will only accept original copies of Surety Bonds (electronic copies will not be accepted). 03.03 Notwithstanding anything in this Policy: a) The City may, at its discretion, decline a Surety Bond for any reason; and, b) When a Surety Bond has been received and is being held by the City, and the City is no longer satisfied that the Surety Bond provides adequate protection, the City may require a new security to its satisfaction, to be provided to the City within ten calendar days of demand for same and the original Surety Bond will be returned and/or exchanged for the replacement security. In the event the new scurity is not received as required, the City may draw upon the original Surety Bond. Policy Title: Surety Bond Acceptance Policy Page 3 of 4 Policy Number: FIN 110 04 Acceptable Institutions 04.01 The City will accept Surety Bonds from a Canadian Surety Provider having a minimum credit rating of: a) “A+” or higher as assessed by AM Best’s Financial Strength Rating (FSR); or, b) “A” or higher as assessed by DBRS Morningstar FSR; or, c) “A2” or higher as assessed by Moody’s Investor Services FSR; or, d) “A” or higher as assessed by S&P’s Financial Strength Rating. AM Best’s FSR is the preferred credit rating to be used for assessing a Surety Provider’s solvency, financial strength and ability to pay their policyholders’ claims. 04.02 The issuing company shall be incorporated in Canada for no less than ten years and issue Surety Bonds in Canadian dollars. 04.04 The issuing Surety Provider must be an active institution monitored by the Office of the Superintendent of Financial Institutions. 04.05 When a Surety Provider, that has issued or confirmed a Surety Bond received and held by the City, subsequently ceases, (in the opinion of the City), to meet all or any of the requirements of this Policy, the City may, at its discretion and subject to section 04.01 of this Policy, require a new security to its satisfaction to be provided to the City within ten days of demand for same and the original Surety Bond will be returned or exchanged for the replacement security. In the event the new security is not received as required, the City may draw upon the original Surety Bond. 04.06 Where there is doubt as to the credit rating or other qualification of a Surety Provider, the Director, Finance & Treasurer or the Division Head, Finance shall be satisfied that the institution meets the requirements of this Policy. 05 Administration of Surety Bonds 05.01 Originating Department is responsible for the following: a) providing the City’s Surety Bond “template” (see Appendix 1) to developers, landowners, etc. for them to comply with; b) ensuring that the form, content and wording of Surety Bonds received from developers, landowners, etc. match the City’s Surety Bond “template”; and, Policy Title: Surety Bond Acceptance Policy Page 4 of 4 Policy Number: FIN 110 c)forwarding the Surety Bonds to the Finance Department for evaluation and safekeeping. 05.02 The Finance Department is responsible for the following: a)confirming the acceptance of Surety Bonds by email to the originating department; b)that all Surety Bonds submitted meet the requirements of this Policy; c)the safekeeping of the Surety Bonds; and, d)all draws, reductions, or releases of Surety Bonds. 06 Draw, Reduction or Release of a Surety Bond 06.01 A request in writing to draw, reduce or release the Surety Bond, duly signed by an authorized employee (from the originating Department) shall be forwarded to the Finance Department for the Division Head, Finance’s authorization. 06.02 A letter of request to draw, reduce, or release a Surety Bond is prepared and signed by the Division Head, Finance or designate and distributed as follows: •financial institution (original) •requester in originating department •individual/developer who submitted Letter of Credit 06.03 For Surety Bond reductions, Surety Bond providers are required to provide “original” copies of Riders to the Finance Department to acknowledge the reduction in the value of the Surety Bond. Finance staff will confirm acceptance of Riders by email to the originating Department. If a Surety Provider fails to provide a Rider to the Finance Department, the originating Department is responsible for following up with the developer, landowner, etc. to ensure that the City receives the “original” rider. Appendices Appendix 1 Surety Bond Template Appendix 1 [Insert Name of Agreement]Bond Bond Number: [insert number] Amount: $[insert amount] Know all persons by these presents, that [insert company name] as Principal, hereinafter called the “Principal”, and [insert company name], as Surety, hereinafter called the “Surety”, are held and firmly bound unto The Corporation of the City of Pickering, as Obligee, hereinafter called “Obligee”, in the amount of [insert amount in words] ($[insert amount in numbers]), lawful money of Canada, for the payment of which sum, well and truly to be made, the Principal and the Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. Whereas the Principal and Obligee have entered into an agreement made the [insert date] day of [insert month], [insert year] with respect to lands legally described as [insert legal description], City of Pickering (said agreement is by reference made a part hereof and is hereinafter referred to as the ‘[insert name of agreement]”. And Whereas the [insert name of agreement], among other things, requires the Principal to construct and maintain site improvement works as described in the [insert name of agreement]. Now Therefore, the condition of this obligation is such that if the Principal, in the opinion of the Obligee’s Director, City Development & CBO, or designate, constructs, installs and maintains the site improvement works in accordance with the [insert name of agreement] and at all times indemnifies the Obligee from all loss, expense and damage which the Obligee may sustain by reason of the failure or default on the part of the Principal to keep, do and perform any of the stipulations, conditions, covenants and terms of the [insert name of agreement], then this obligation shall be void and of no effect; otherwise, it shall remain in full force and effect. Provided, however, the foregoing obligation is subject to the following conditions and provisions: 1. Whenever the Principal shall be declared in writing by the Obligee to be in default under the [insert name of agreement], and the Obligee intends to make a demand under this bond, the Obligee shall promptly notify the Principal and the Surety in writing of such default. 2. Any written demand for payment under this bond (hereinafter referred to as the “Demand”) shall: a. Specify the amount of monies drawn pursuant to this bond; and b. Provide a certificate to the effect that the amount of monies drawn pursuant to this bond have been paid, are payable, or will be payable by the Obligee pursuant to obligations incurred by the Obligee to remedy the Principal’s default under the [insert name of agreement]. 3. Upon receiving the Demand from the Obligee, the Surety shall make payment to the Obligee in the amount of the Demand to enable the Obligee to remedy the Principal’s default under the [insert name of agreement], including any and all administration fees due from the Principal to the Obligee under the [insert name of agreement]. 4. The Obligee may make multiple Demands under this bond. 5. The Obliged shall provide to the Surety a summary of the amounts expended by the Obligee (including invoices, if applicable), to remedy the Principal’s default under the [insert name of agreement]. In the event the total amount of all payments made by the Surety under this bond exceeds the amount required to indemnify the Obligee with respect to remedying the default of the Principal under the [insert name of agreement], the Obligee shall return all excess payments to the Surety. 6. Each payment made by the Surety under this bond shall reduce the amount of this bond. 7. In no event shall the Surety be liable for a greater sum than the amount of this bond. 8. No right of action shall accrue upon or by reason hereof to or for the use or benefit of any person other than the Obligee. 9. When the Principal has completed all works required by the [insert name of agreement] to the Obligee’s satisfaction, all maintenance and rectification periods contained within the [insert name of agreement] have expired, and the Obligee has issued a Final Acceptance Certificate, the Obligee shall return this bond to the Surety for termination or advise the Surety in writing that this bond is terminated, in accordance with the terms of the [insert name of agreement]. 10. If the Surety at any time delivers at least 60 days prior written notice to the Obligee and to the Principal of its intention to terminate this obligation, the Principal shall deliver to the Obligee, not less than 30 days prior to the termination of this bond, financial security in the amount of this bond in a form acceptable to the Obligee. If the replacement financial security is not provided by the Principal or is not accepted by the Obligee, this bond shall remain in effect. 11. Nothing in this bond shall limit the Principal’s liability to the Obligee under the [insert name of agreement]. 12. Notices to the Surety, including Demands, are to be delivered to the Surety at [insert full mailing address]. In Testimony Whereof, the Principal has hereto set its hand and affixed its seal and the Surety has caused these presents to be sealed with its corporate seal duly attested by the signature of its authorized signing authority. Signed and Sealed this [insert date] day of [insert month], [insert year] in the presence of: [insert company name] ___________________________________________ (Signature of Authorized Signing Officer) ___________________________________________ (Print name and title of Signature of Authorized Signing Officer) I have the authority to bind the corporation. [insert company name] ___________________________________________ [insert name, title] Instructions for completing Surety Bond template: 1. Surety Bond must be on surety provider’s letterhead. 2. Information required in square brackets must be provided where indicated, without brackets. 3. Obligee’s signature must show name and title, printed or typed, in addition to signature. Acceptable Surety Providers: 1. The City will accept surety bonds from Canadian surety providers that meet and maintain minimum credit ratings as described in the City’s Surety Bond Acceptance policy. 2. The issuing company shall be incorporated in Canada for no less than ten (10) years and issue Surety Bonds in Canadian dollars. 3. The issuing surety provider must be an active institution monitored by the Office of the Superintendent of Financial Institutions (OSFI). Surety Bond Upset limit: 1. The acceptance of Surety Bonds is limited to an upset amount of $15 million per agreement. If the amount of financial security is above the upset limit, then the balance remaining must be secured by a Letter of Credit