Archive for October, 2011

Federal Maritime Commission Seeks to Raise Performance Coverage Cap for Cruiselines

Written by JoAnn Smith on October 25th, 2011. Posted in Surety Bond Blog

Cap on amount of the surety bond required would be raised from $15 million to $30 million

Performance bonds for cruise linesThe Federal Maritime Commission is looking to raise the ceiling on the amount of performance coverage (i.e. surety bond) that can be required of passenger vessel operators (PVOs). Presently, the maximum performance bond amount can not exceed $15 million. If passed, the new rules would allow up to $30 million in performance guarantee to be required. The $15 million cap was put in place in 1991, and since then the unearned passenger revenue (UPR) has increased substantially. In effect, $15 million is no longer enough to cover customer refunds in the event that a PVO goes out of business. Performance surety bonds in place for a variety of cruise lines that have gone out of business since 2000 have only covered roughly 65% of the total UPR. The current $15 million cap places smaller cruise lines at a competitive disadvantage. With larger cruise lines, the $15 million represents a smaller percentage of their UPR. Conversely, smaller PVOs with UPR under $15 million end up having to cover 110% of their UPR. The proposed amendments would help level the playing field. Read more about the proposal

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Lack of Performance Bond Cripples Harrisburg, Pennsylvania

Written by JoAnn Smith on October 21st, 2011. Posted in Pennsylvania, Surety Bond Blog

Pennsylvania surety bondThe city of Harrisburg is reeling after the contractor for a major incinerator projector went out of business in the middle of the project, leaving the city $310 million in debt because there was no surety bond protection in place. When the local city council approved the $125 million loan for the project back in 2003, they didn’t think to include a surety bond provision that would have required the contractor to secure a performance bond prior to being awarded the job. Mayor Linda Thompson, who took part in the 2003 vote to approve the loan, recently commented about the lack of a surety bond to a local TV news station, “We were never told there was not a performance bond. I wish I had known there was no performance bond,” Thompson said. “If I had known there was no performance bond, I would have stayed at the table and made them have a performance bond. That was the responsible thing to do.” Pennsylvania surety bondA spokesman for Mayor Thompson said recently, “The city’s budget is in deficit. We’re looking for ways to trim the budget just to keep services going.” “Now the chickens have come home to roost,” the mayor said in a statement this summer.

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Alabama Adopts New Surety Regulations

Written by JoAnn Smith on October 17th, 2011. Posted in Alabama, Surety Bond Blog

Regulations will affect Alabama surety bonds

Alabama surety bondsNew regulations affecting the surety bond market have been adopted in the state of Alabama by two separate departments. The Alabama Department of Environmental Management recently adopted new rules for injection wells (Class VI). The operator of an injection well for carbon dioxide storage is now required to provide proof of financial responsibility covering various forms of corrective action, as well as securing underground drinking water sources. A surety bond is an acceptable form of financial responsibility. Also in Alabama surety bond news, emergency rules have been adopted but the Alabama Real Estate Appraisers Board concerning a new law enacted under SB 320 (2011). Now, Real estate appraisal management companies will be required to post a $25,000 surety bond (or cash/other security) in order to comply with the new law.

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Florida Department Transportation Thankful for Surety Bond

Written by JoAnn Smith on October 12th, 2011. Posted in Florida, Surety Bond Blog

Florida surety bondA major highway construction project in Lee County, Florida has been put on hold and taken over by Liberty Mutual Surety after the original contractor, Posen Construction, was fired by the Florida Department of Transportation (FDOT). Since the surety bond for the $30 million Metro Parkway Extension was provided by Liberty Mutual Surety, it’s now up to them to find a replacement contractor so the project can be resumed. It is still unclear whether or not the existing work can be saved, or if the new contractor will have to start from scratch. According to Jon Sands of FDOT, the process of selecting a new contractor is under way. “They have held a prebid meeting … several contractors were there,” commented Sands.

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Unique Deal Has Contractor Posting $3 Million Surety Bond

Written by JoAnn Smith on October 10th, 2011. Posted in Pennsylvania, Surety Bond Blog

Pennsylvania surety bondThe Whitpain Township Board of Supervisors in Pennsylvania recently approved an agreement with Walsh Construction to begin building a park. Overtly this might not seem very newsworthy as parks are continuously being built but this deal is unique. Walsh Construction will be using fill from a nearby construction site to build the park and the Whitpain Supervisors are requiring the construction company to follow 40 pages worth of guidelines or be subject to escalating fines and penalties. Among other things that Walsh Construction must do the major requirement is that the fill used for the park construction be tested by an independent EPA certified laboratory. This ensures that nothing toxic gets into the ground. Other requirements include how the construction company can access the site and what hours they can perform the work. The Whitpain Supervisors are requiring that an inspector from the town be on site and visually monitor the fill that is going in and that inspector will have the right to reject any fill. Walsh Construction company will provide a a $3 million performance surety bond, a $450,000 surety bond to cover maintenances needed one year after the park is completed, a $250,000 letter of credit to cover any litigation fees should they arise and a $25,000 penalty escrow. Both the Whitpain Township supervisors and Walsh Construction companies are happy with the contract and look forward to having a park that can be utilized by the public.

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