Road Rage Over Untapped Surety Bonds

Unfinished roads in the city of Murfreesboro, TN seem to be giving many residents some rage. Surety bonds were obtained to help get these roads finished in multiple subdivisions, but the city council is considering using taxpayer money to complete a job that is the housing developer’s responsibility.

Developed by Parks, Jerry Benefield and Mel Adams, the three subdivisions were left with the hard to navigate roads after the housing industry was hit by the Recession in 2008, according to a letter from City Engineer Chris Griffith and Assistant City Attorney David Ives to the city council. Murfreesboro residents in the subdivisions have been dealing with unfinished roads for years now. Parks and his partners have paid only 10 percent of the costs to finish the roads, $59,639.

“This leaves $536,751, which may change based on actual quantities,” the letter states.

“If approved by council, the remaining amount will be funded by the General Fund and reimbursed by the developers as per the agreement with a 20 percent payment due on March 30, 2012, and the final payment due on June 29, 2012.”

This job is backed by contract bonds in place with Lexon Surety for a situation just like this; the bonds guarantee that the work will be completed by the contractors/developers and help dodge spending taxpayer dollars. A claim can be filed on the bonds for not fulfilling the contract, which the surety who wrote the bonds will pay. The surety will then go back to the contractor/developer who caused the claim in the first place for reimbursement. City engineer Griffith claims surety companies have been slow to respond when it comes to claims on this project. Although it may take some time to get claims paid by the surety given the investigation process, spending hundreds of thousands of tax payer money isn’t the way to go.

“We have personal guarantees from Bob Parks and his partners to pay for the work,” said Griffith.

Personal guarantees are not nearly as reliable as surety bonds. Surety companies are federally licensed insurance companies who will investigate claims thoroughly, and if legitimate, will pay out. Since bonds were required for this project, what’s the point of not utilizing them for the exact purpose they were obtained in the first place?

“We still have the option to make a call on the bonds and work with our agreement on the bonding company (Lexon Surety),” Griffith said.

“Making a call” or putting a claim on the bond seems to be the obvious solution. Surety bonds guarantee something and in this case, it guaranteed that the work on the subdivision roads would be complete. The city council should seriously reconsider taking advantage of the bonds.

Eric is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog. He has held a range of different roles within the surety industry, from agent assistant to bond issuer, which gives him a unique insider perspective on surety related topics.

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