Developer bonds on unfinished projects?

Positively Palermo received this e-mail: "Penny, thank you for everything. Could you post this article from today's newspaper about bonds. We were told that the Palermo developer posted a public works bond but they maybe the city gave it back." Here is the article:

Cities across the Coachella Valley are cashing in hundreds of thousands of dollars in bonds from companies that go under before finishing promised streets, sewers and other public services. Developers must post the bonds before cities can approve a project. Rancho Mirage has gotten $321,000 after settling a lawsuit earlier this month with Arch Insurance.
Arch issued the bond ensuring Vista Del Sol Rancho Mirage Inc. would pay for improvements at a four-house subdivision on Vista Del Sol north of Country Club Drive. The developer went out of business after only moving some dirt around on its five acres. City Attorney Steve Quintanilla said the city then tried to get the bond money from Arch for the project that included extending the road and putting in sewers and gutters.
The city filed a lawsuit last year after Arch said it wasn't responsible for the costs. Arch's general legal counsel couldn't be reached for comment. The city will refund whatever isn't needed to finish the work or cover legal fees, Quintanilla said.
“The city's intention was never to make a profit on this case — just to get Arch to fulfill their legal obligations so the street can get built,” he said.
Rancho Mirage won $483,000 in 2008 in a similar case for putting utilities underground and finishing landscaping along the sidewalks and medians near Dinah Shore and DaVall drives.
La Quinta City Attorney Kathy Jenson said that city is still trying to get the $47,000 bond to finish the grading at Casa La Quinta near the historic downtown. Other similar cases have been resolved in the city's favor.
To avoid this situation, the city has given developers more time to break ground on a project before facing the risk of losing zoning. “If the developer is struggling, making them go forward doesn't make sense,” she said. Indio is trying to reach a settlement with a bond company over a slightly different issue, City Attorney Omar Sandoval said. The city claims a now-defunct builder left a faulty retention basin behind in the Shadow Hills subdivision, and is going after the bonding company for money to fix it.


Miss Penny Lane says: She doesn't know anything about developer bonds, but loves the neighborly bonds that unite the jolly crew of good spirits at Palermo.