Sunday, June 9, 2013

Publishers Opinion: Developers Should Not Be Penalized on Township's Proposed Cash Money Down Plan

Galloway Township is set to discuss at the next Council Meeting of June 11, 2013, an ordinance previously introduced and then tabled, that would require a cash deposit of Ten Percent (10%) for a developer's bond.

A developer when constructing a project is required to post a Performance Bond when they begin construction or a Maintenance Bond when they complete construction. According to the Township's introduced ordinance, the Developer would be required to post cash for a portion of those bonds.

With the recently downed economy, some developers have found themselves in a position not being able to afford the completion of a project. Depending on the stage of the project, the Township may be forced to call the developers creditor in order to obtain money to complete the improvements left vacated by the developer.

The Township recently called upon several developer's bonds in order to complete improvements on roadways as well as other improvements. The developer would post a Bond which is insured by a creditor or a Letter of Credit which is insured by a bank.

The Township now is looking to require part of that amount to be posted up front in cash. A normal estimate for a project could range in the $100,000 range, leaving the already strapped developer to be required to post at least $10,000 in cash with the Township. Although the Township would be required to put that cash in a interest bearing account, the interest is minimal.

Some bonds on bigger commercial projects, including those that require roadway and sewer improvements, could be in the $500,000 range. The math is pretty basic to see the Township could strap a developer for cash which in our opinion, could inhibit the developers ability to construct.

The developer is also required to post an inspection escrow, which is purely cash. That money pays for the professionals, mostly the Engineer, to perform site inspections on the project. Sometimes developers have a hard time posting the full cash amount on that and post the cash in quarter payments. 

Although Council in our opinion wants to bank money in case of a rainy day on a developer that may go south on a project, they need to take into consideration all of the other developers that complete their projects from start to finish, with no issues.

This is a sensitive political issue for many. Some developers contribute to political campaigns. 

Publishers Opinion:
The Township should remain open for business and welcoming developers into the Town. The White Horse Pike is just waiting to be developed. The amount of improvements in the White Horse Pike area, including the Township's new proposed ordinance of cash posting, will surely drive commercial developers into other towns, including Egg Harbor Township and Hamilton Township. 

Sometimes its not where to develop, its how they can afford to develop. Galloway Township needs to remain affordable for those developers.

The Township a couple years ago thought about a (10%) cash down policy, however, because of the political repercussions, they abandoned the idea. Now the Township is back on the same idea in an election year. 

Galloway Township can not afford to lose developers to other's towns just because of politics. The Township needs to figure a way to keep the developers here while protecting the integrity of the Township. 

By doing so, if the Township has to require cash down, then we suggest, based on our own own background that the Township either reduce the amount of the cash  down required to a more realistic number or embrace a previous idea originally presented to them a couple years ago and create a credit rating for developers. 

The Township normally deals with the same developers. Most developers never have issues, while others fluctuate with the economy. The Municipal Land Use Law sets the rules for the total percentage that has to be posted, but the municipality can control how that is posted. This just may be the one way Galloway Township can operate like a business to protect the taxpayers and not like a political government.

Galloway Township's needs the ratable in order to offset the already diminishing incoming taxes in order for the Township to operate. New Commercial ratables, including homes, reduces everyone else's taxes, if the Township doesn't significantly increase their spending. 

Proposed Ordinance:

Section 233-65.A.
(3) Ten percent (10%) of the total performance guaranty shall be in cash deposited with the Township Clerk and the remaining 110% of the total performance or maintenance guaranty shall be either in the form of cash deposited with the Township Clerk of Galloway Township, interest pursuant to N.J.S.A. 40:55D-53.1, or shall be in the form of a performance or maintenance bond, letter of credit or escrow agreement in a form acceptable to the Municipal Attorney and finally approved by the Municipal Council or its designee.  


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