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Amendment to Pennsylvania Municipalities Planning Code Clarifies Bond Retention Requirements for Developers and Municipalities

On December 22, 2021, Governor Wolf signed into law Act 97 of 2021, which amended Section 509 of the Pennsylvania Municipalities Planning Code (MPC).  The amendment will take effect in February 2022.

By making just a few tweaks to the language of Section 509, the General Assembly clarified the amount of financial security which municipalities should retain to cover the cost of remaining improvements on a subdivision or land development.

MPC Section 509 has long required that a developer post a bond or financial security for the completion of a subdivision or land development in an amount equal to 110% of the cost of completion of the  development.  The purpose of this requirement is to ensure that the developer has sufficient funds to complete the improvements.  But according to the Act 97’s sponsor, “[i]nstead of only retaining a bond of 110% of the value of remaining improvements, some municipalities 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, prior to Act 97, some municipalities interpreted the MPC to enable it to retain the $75,000 in outstanding improvement costs plus a $100,000 contingency—or 10% of the original posted security. Under this scenario a municipality is requiring bonding of $175,000, or about 2.5 times the cost of the outstanding work.

Act 97 clarifies that a municipality should retain the $75,000 in outstanding improvement cost, plus a $7,500 (10%) contingency, for a total of $82,500.

In other words, the municipality should only retain 110% of the “estimated cost of the remaining improvements.” 

This amendment to the MPC’s language not only clarifies the bonding amount for municipalities and developers, but also puts money back into developers’ pockets to pursue additional projects.

January 10, 2022

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