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Have a question? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Army Veteran Owned | Expert Surety Bonds Since 2004
Check the exemption before anything else. San Diego does not require a bond where the approved Construction Cost Estimate is $100,000.00 or less, where the work is a standard Public Improvement Right-of-Way Permit on a Construction Plan template, or where the permit is issued to a government agency. If you are past those, there is no published amount to quote you. The figure comes off a Construction Cost Estimate prepared by a California-licensed Civil Engineer against the City's latest Unit Price List and approved by the DSD Drainage and Grades reviewer, so get the estimate approved first. And this bond has its own City form, DS-402, not the DS-401 used for grading permits.
The City of San Diego requires security for subdivision improvement agreements, deferred improvement agreements, grading permits, public right-of-way permits, parcel maps and final maps. For a Subdivision Improvement Agreement or a Deferred Improvement Agreement the instrument is the Improvement Agreement Bond on City form DS-402, and the City does not accept insurance company letters or other insurance company documents in lieu of that form. The amount is not published as a flat figure. It is derived from a Construction Cost Estimate submitted and approved by the DSD Drainage and Grades reviewer as part of plan review, based on the latest Unit Price List and prepared by a California-licensed Civil Engineer. The surety must be authorized to do business in California and hold a credit rating in the A category or higher from at least one Nationally Recognized Statistical Rating Organization.
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San Diego's own bulletin on this, Information Bulletin 126, does not print a dollar figure or a percentage for the improvement agreement bond. It prints a process instead.
A Construction Cost Estimate must be submitted and approved by the DSD Drainage and Grades reviewer as part of plan review. The estimate is built off the City's latest Unit Price List, and it must be prepared by a California-licensed Civil Engineer, or by a Landscape Architect for landscape plans.
So the order of operations runs estimate, approval, then bond. Asking a surety for a number before the estimate is approved is asking them to guess at the City's arithmetic.
Where the percentages live is the Subdivision Map Act, and those are ranges rather than a single rule. Government Code 66499.3(a) requires faithful performance security in an amount determined by the legislative body, not less than 50 percent nor more than 100 percent of the total estimated cost. Subsection (b) requires an additional amount of 50 to 100 percent securing payment to contractors, subcontractors and persons furnishing labor, materials or equipment. Subsection (d) allows an additional amount to guarantee the work for one year after completion against defective workmanship or materials.
Which end of those ranges applies to your project is the City's call. Ask DSD.
Worth checking before you spend anything.
No bond is required for a standard Public Improvement Right-of-Way Permit on a Construction Plan template. None is required for projects with a Construction Cost Estimate of $100,000.00 or less. And none is required for permits issued to a government agency.
That $100,000 threshold does real work on smaller jobs. If your estimate is close to it, the approved estimate rather than your own draft is what decides, which is another reason to get the estimate settled early.
There is also a narrow state level exception at Government Code 66499.3(c) for California nonprofit corporations funded by the United States government or a state agency, which can substitute letters of credit for 100 percent of contract costs or a performance bond at 100 percent with a labor and materials bond at a minimum of 50 percent.
This one costs people a resubmittal.
San Diego runs two different bond forms. Form DS-401 is the Performance Bond, used for grading permits, right of way permits and deferred improvements. Form DS-402 is the Improvement Agreement Bond, used for Subdivision Improvement and Deferred Improvement Agreements.
The bulletin is blunt about substitutions. You must use the City's form DS-402, as the City does not accept insurance company letters or other insurance company documents in lieu of the form. A surety's own paper, a certificate, a broker letter, none of it clears.
The company must be authorized to do business in California and must hold a credit rating in the A category or higher from at least one Nationally Recognized Statistical Rating Organization, such as Moody's, Standard and Poor's, AM Best or Fitch.
The City reviews those ratings at least annually. A downgrade partway through a long project is a real risk on a multi year subdivision, so it is worth asking your agent about the carrier's rating history rather than just its current letter.
The City accepts four security types in total.
A Performance Bond on form DS-401. An Improvement Agreement Bond on form DS-402. A Letter of Credit, which must match the approved cost estimate and comes from an institution meeting the same A category rating test, on the City's template. Or a Cash Bond, paid by personal or cashier's check payable to the City Treasurer.
The cash route ties up the full amount for the life of the permit, and refunds may take 30 to 40 days following As-Built approval. On a large improvement agreement that is a lot of working capital sitting still.
Bonds remain active until the As-Builts or As-Graded reports are approved and the permit is closed. Full release also requires valid permits, positive deposit accounts, and approved Final Closeout Checklists with As-Built drawings.
Partial release exists but it is capped. Partial release shall not exceed 75 percent of the construction cost estimate, and it requires a revised cost estimate of the remaining work plus form DS-3040 and a non-refundable fee under Information Bulletin 502.
The Map Act sets its own floor on what the agency can hold. Under Government Code 66499.7 the local agency may retain security up to 200 percent of the cost estimate of the remaining work. A mandatory partial release is triggered once the cost estimate of the remaining work does not exceed 20 percent of the total original performance security, and that process is available not more than once between the start of work and completion.
The same section runs on 45 day clocks. The agency has 45 days to review and comment or approve completion of the required work. The subdivider then has 45 days to provide cost estimates for remaining work. The agency has 45 days to review, comment, and approve, modify or disapprove those estimates. On completion the subdivider must be notified in writing within 45 days, and final release goes on the legislative body agenda within 45 days of that notification, or within 60 days of the written statement of completion where release is delegated to staff.
Budget the carrying cost of the bond against that timeline rather than against the construction schedule.
Information Bulletin 126 lists them with their code sections. Grading Permits under SDMC 129.0602. Public Right-of-Way Permits under SDMC 129.0702. Subdivision Improvement Agreements. Deferred Improvement Agreements under SDMC 144.0132. Parcel Maps under SDMC 125.0510. Final Maps under SDMC 125.0610.
A project can hit more than one of those, and each carries its own security. Work out how many you are facing before you price anything.
The City does not publish a figure. Information Bulletin 126 sets a process instead. A Construction Cost Estimate must be submitted and approved by the DSD Drainage and Grades reviewer as part of plan review, built off the latest Unit Price List and prepared by a California-licensed Civil Engineer. The percentage of that estimate comes from the Subdivision Map Act, which allows a range rather than a fixed number, so ask DSD what applies to your project.
Yes, three groups. Standard Public Improvement Right-of-Way Permits on a Construction Plan template. Projects with a Construction Cost Estimate of $100,000.00 or less. And permits issued to a government agency. There is also a narrow state exception at Government Code 66499.3(c) for California nonprofit corporations funded by the federal government or a state agency.
DS-402, the Improvement Agreement Bond, for a Subdivision Improvement Agreement or a Deferred Improvement Agreement. DS-401 is the Performance Bond and it covers grading permits, right of way permits and deferred improvements. Using the wrong one costs you a resubmittal.
No. The bulletin states you must use the City's form DS-402, as the City does not accept insurance company letters or other insurance company documents in lieu of the form. A broker letter or a certificate will not clear.
No. The company must be authorized to do business in California and must hold a credit rating in the A category or higher from at least one Nationally Recognized Statistical Rating Organization such as Moody's, Standard and Poor's, AM Best or Fitch. The City reviews those ratings at least annually, which matters on a multi year project.
No. The City accepts four security types. A Performance Bond on DS-401, an Improvement Agreement Bond on DS-402, a Letter of Credit matching the approved cost estimate from an institution meeting the same rating test, or a Cash Bond paid by personal or cashier's check payable to the City Treasurer. Cash ties up the full amount and refunds may take 30 to 40 days following As-Built approval.
The Subdivision Map Act contemplates one. Government Code 66499.3(b) provides for an additional amount of 50 to 100 percent of total estimated cost securing payment to contractors, subcontractors and persons furnishing labor, materials or equipment. Subsection (d) also allows a warranty amount guaranteeing the work for one year after completion. Confirm with DSD which of those apply to your agreement.
Not when construction ends. Bonds remain active until the As-Builts or As-Graded reports are approved and the permit is closed, and full release also requires valid permits, positive deposit accounts and approved Final Closeout Checklists with As-Built drawings.
Yes, within limits. Partial release shall not exceed 75 percent of the construction cost estimate, and it requires a revised cost estimate of the remaining work plus form DS-3040 and a non-refundable fee under Information Bulletin 502. Under Government Code 66499.7 a mandatory partial release is also triggered once the cost estimate of remaining work does not exceed 20 percent of the total original performance security, and that process is available not more than once between the start of work and completion.
Government Code 66499.7 lets the local agency retain security up to 200 percent of the cost estimate of the remaining work. The same section runs a series of 45 day review windows, with final release going on the legislative body agenda within 45 days of written notification of completion, or within 60 days of the written statement of completion where release is delegated to staff.
Nothing meaningful can be quoted before the Construction Cost Estimate is approved, because that is what sets the penal sum. Once it is, this is corporate surety underwriting rather than a small licence bond. The surety reads audited or reviewed financial statements, working capital, the developer's completion record and the nature of the improvements, and it prices the length of the exposure, which on a subdivision runs until as-builts are approved rather than until construction stops. Get the estimate approved, then get a real quote against it.
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