How much can a Virginia locality require a subdivision developer to bond for administrative costs?

Plain-English summary

Delegate Kirkland Cox asked AG William Mims a narrow but consequential question. When a Virginia locality accepts a subdivision developer's bond (or cash escrow, letter of credit, etc.) to secure construction of streets, sidewalks, drainage, traffic signals, and similar infrastructure, the bond covers two things: the estimated construction cost itself, plus a "reasonable allowance for estimated administrative costs, inflation, and potential damage to existing roads or utilities." The General Assembly capped that administrative allowance in § 15.2-2241(5). The question was, what was the cap?

The AG's answer was straightforward but timely. The 2009 General Assembly amended § 15.2-2241(5) to reduce the cap from 25% to 10%. That was the only change in the amendment. Under standard Virginia statutory construction, when the legislature amends a statute, the change is presumed to mean something; otherwise, the amendment is treated as "unnecessary or vain." The only thing the 2009 amendment could have meant was to lower the developer's bonding burden during the recession by cutting the cap to 10%. Localities had no authority to impose more, because under the Dillon Rule local power must rest on express statutory grant (National Realty v. Virginia Beach).

A footnote flagged that the 2009 amendment contained a sunset clause: the 10% cap was scheduled to expire on July 1, 2014, with the 25% cap reverting on that date.

Currency note

This opinion was issued in 2009. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. In particular, the 10% cap was scheduled to sunset on July 1, 2014 under 2009 Va. Acts ch. 193. Treat this page as historical context, not current legal advice. Verify the current version of § 15.2-2241(5) before relying on any specific percentage or rule.

Common questions

Q: What was the administrative-allowance cap before the 2009 amendment?
A: 25%. The General Assembly cut it to 10% effective in 2009 and built in a sunset back to 25% on July 1, 2014.

Q: What does the bond actually secure?
A: Construction of streets, curbs, gutters, sidewalks, bicycle trails, drainage, sewerage, water lines for public systems, traffic signalization, storm-water management facilities, and similar public-use improvements within a subdivision, plus the administrative allowance.

Q: What forms of security can a developer post under § 15.2-2241(5)?
A: A certified check or cash escrow; a personal, corporate, or property bond with satisfactory surety; a contract for construction with a contractor's bond; or a bank or savings institution's letter of credit.

Q: Why did the General Assembly drop the cap to 10%?
A: The opinion does not state the policy reason, but the 2009 amendment and its 2014 sunset clause point to recession-era relief for developers facing high front-end project costs.

Background and statutory framework

Virginia is a Dillon Rule state, and the National Realty case is the standard citation: a local governing body's power "must be exercised pursuant to an express grant." Section 15.2-2241(5) is the express grant on subdivision performance bonds. It defines what infrastructure can be bonded, what forms of security are acceptable, and how large the administrative allowance can be on top of the construction estimate. The General Assembly used the phrase "shall not exceed" for the 10% cap, which the AG read as an ordinary statutory ceiling.

The AG's analysis also leaned on the statutory-amendment presumption: when the legislature changes a number in a statute, the new number controls. (Wisniewski v. Johnson; Sutherland; Cape Henry Towers.)

Citations

• Va. Code Ann. § 15.2-2241(5) (subdivision bond authority)
• 2009 Va. Acts ch. 193 (reducing administrative allowance from 25% to 10%)
• Nat'l Realty Corp. v. Va. Beach, 209 Va. 172 (1968) (Dillon Rule)
• Wisniewski v. Johnson, 223 Va. 141 (1982) (presumption of intent when statute amended)
• Cape Henry Towers, Inc. v. Nat'l Gypsum Co., 229 Va. 596 (1985) (amendment not to be read as meaningless)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2009/09-074-Cox.pdf

Original opinion text

COMMONWEALTH OF VIRGINIA
Office of the Attorney General
William C. Mims

900 East Main Street
Richmond, Virginia 23219
804-786-2071

Attorney General

October 16, 2009

The Honorable M. Kirkland Cox
Member, House of Delegates
131 Old Brickhouse Lane
Colonial Heights, Virginia 23834

Dear Delegate Cox:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether localities may impose bonding requirements in excess of ten percent of the estimated construction costs for the administrative allowance required from a developer.

Response

It is my opinion that localities may not impose bonding requirements that exceed ten percent of the estimated construction costs for the administrative allowance required from a developer pursuant to § 15.2-2241(5).

Applicable Law and Discussion

Section 15.2-2241(5) provides, in pertinent part, that:

5. (Effective until July 1, 2014) For the acceptance of dedication for public use of any right-of-way located within any subdivision or section thereof, which has constructed or proposed to be constructed within the subdivision or section thereof, any street, curb, gutter, sidewalk, bicycle trail, drainage or sewerage system, waterline as part of a public system or other improvement dedicated for public use, and maintained by the locality, the Commonwealth, or other public agency, and for the provision of other site-related improvements required by local ordinances for vehicular ingress and egress, including traffic signalization and control, for public access streets, for structures necessary to ensure stability of critical slopes, and for storm water management facilities, financed or to be financed in whole or in part by private funds only if the owner or developer (i) certifies to the governing body that the construction costs have been paid to the person constructing such facilities; (ii) furnishes to the governing body a certified check or cash escrow in the amount of the estimated costs of construction or a personal, corporate or property bond, with surety satisfactory to the governing body or its designated administrative agency, in an amount sufficient for and conditioned upon the construction of such facilities, or a contract for the construction of such facilities and the contractor's bond, with like surety, in like amount and so conditioned; or (iii) furnishes to the governing body a bank or savings institution's letter of credit on certain designated funds satisfactory to the governing body or its designated administrative agency as to the bank or savings institution, the amount and the form. The amount of such certified check, cash escrow, bond, or letter of credit shall not exceed the total of the estimated cost of construction based on unit prices for new public or private sector construction in the locality and a reasonable allowance for estimated administrative costs, inflation, and potential damage to existing roads or utilities, which shall not exceed 10 percent of the estimated construction costs. "Such facilities," as used in this section, means those facilities specifically provided for in this section. [Emphasis added.]

The power of a local governing body, unlike that of the General Assembly, "must be exercised pursuant to an express grant."[1] Section 15.2-2241(5) specifically provides that the amount for administrative allowance required from a developer "shall not exceed 10 percent." (Emphasis added.) Prior to July 1, 2009, the amount permitted by § 15.2-2241(5) was "25 percent."[2] When the General Assembly amends a statutory provision, a presumption arises that the legislature intended to change existing law.[3] Clearly, such was the intent of the 2009 Session of the General Assembly in amending § 15.2-2241(5) as the only change was the reduction of the required bonding amount.[4]

Conclusion

Accordingly, it is my opinion that localities may not impose bonding requirements that exceed ten percent of the estimated construction costs for the administrative allowance required from a developer pursuant to § 15.2-2241(5).

Thank you for letting me be of service to you.

Sincerely,

William C. Mims

1. Nat'l Realty Corp. v. Va. Beach, 209 Va. 172, 175, 163 S.E. 154, 156 (1968).
2. See 2009 Va. Acts ch. 193, available at http://leg1.state.va.us/cgi-bin/legp504.exe?091+ful+CHAP0193 (amending § 15.2-2241(5) and deleting "25" and replacing it with "10" percent). However, I note that on July 1, 2014, the amount will revert to "25 percent." See id., cl. 2 (mandating that provisions of act will expire on July 1, 2014).
3. See Wisniewski v. Johnson, 223 Va. 141, 144, 286 S.E.2d 223, 224-25 (1982); City of Richmond v. Sutherland, 114 Va. 688, 693, 77 S.E. 470, 472 (1913).
4. See 2009 Va. Acts ch. 193, supra note 2. Further, there is a presumption that an amendment to a law is intended to have some meaning and is not intended to be unnecessary or vain. See Cape Henry Towers, Inc. v. Nat'l Gypsum Co., 229 Va. 596, 600, 331 S.E.2d 476, 479 (1985); 2007 Op. Va. Att'y Gen. 69, 71. The amendment to § 15.2-2241(5) would be meaningless if not read to reduce the bonding requirement from twenty-five to ten percent during the effective period of the enactment. See 2009 Va. Acts ch. 193, supra note 2, cl. 2 (mandating that provisions of act will expire on July 1, 2014).