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Council OKs eliminating building bonds for residents, contractors

July 24, 2013

FERNDALE — Mayor Dave Coulter’s goal for Ferndale is to make it the “friendliest place to do business in southeast Michigan.” Bringing new businesses in and keeping current businesses happy is all part of that, Coulter said.

Coulter challenged different departments in the city’s government to come up with ideas that could make this goal a reality. Derek Delacourt, Ferndale’s community and economic development director, and his department have come up with a change that has pleased the mayor.

City Council approved, at the suggestion of Delacourt, to eliminate building bonds for residents and contractors who are looking to do construction in Ferndale. The elimination of the bonds will not only decrease up-front costs of doing business in the city, but it will also save city officials time by eliminating the processing times.

“This takes what is arguably a redundant step out of the process and the fees associated with it,” Coulter said. “By itself, it is a relatively small thing, but the message I want to send to people who are interested in building a home or building in Ferndale is that this makes it as easy as possible to do that.

“We wanted to create an entire development that would streamline the process and make this a friendly place to do work.”

The building bonds were an up-front letter of credit paid to the city that would ensure projects were completed and the inspections done per the permits that were issued. If all steps were taken, the party would get back the letter of credit, but the city could execute it if final inspections were not made.

Delacourt said the city has rarely had to execute one of the bonds to get the work and inspections completed, and officials have other ways than building bonds to make sure the projects are finished in the future.

“If an inspection hasn’t been done, most of the time, we call the contractor to let them know, and 99 out of 100 times, it was no negligence — just they forgot and they schedule an inspection on the spot,” Delacourt said. “Basically, we were threatening the fear of loss of money as a catalyst to do the inspection, but they had every intent to do it. We have other means of code enforcement to make sure the work is done.”

According to fee schedules, the building bonds could range from $250 to more than $10,000 depending on the cost of construction.

For bigger contractors with anywhere from five to 20 jobs going on, the costs could add up. But the up-front costs could really hurt individual residents or smaller contractors, Coulter said, and this was a step that helped them feel more secure.

“We think the final inspection step will cover what the city needs, and wherever we can make it easier and cheaper to do business with the city, I’m interested in doing that,” Coulter said. “We got a lot of feedback from folks who felt like (the building bonds) were an extra burdensome step, and that is exactly the type of feedback we wanted. It was a great example of the public being right and we took their advice.”

Internally, the elimination of building bonds will also help city officials. Delacourt said when letters of credit are brought in, they have to be processed, and when projects are completed, they have to be processed again.

“It takes the city a significant amount of staff time to collect and process these bonds, and at the end of the month, we have to do it again,” Delacourt said. “We feel our internal time could be better spent, and it can save homeowners because, if we have this up-front cost for contractors, they could pass that on to the homeowner as part of the project.”

When city officials get in a habit of doing a task, it can be hard to break, Coulter said. The building bonds were a prime example of a task that was being done, but didn’t need to be.

“I really challenged the staff to look at things, and just because it has always been done doesn’t mean we should do it,” Coulter said. “The building bonds were an example of a work function that was being done because it had been done for so long. We have a smaller staff than we’ve ever had, so wherever we can streamline the process for our staff helps give us more time to do more meaningful work.”

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