Surety Bond Authority Weblog

The following two bills were enacted within the past three months, and will both officially become Idaho law on July 8, 2009:

HB 32: Promoter Bonds (i.e. Boxing, Mixed Martial Arts Promoters, etc.)
Idaho House Bill 32, which has already been passed, but won’t go into effect until July 8, 2009, will allow the posting of alternate forms of security in place of the current surety bond requirement for fight promoters, such as boxing, wrestling and mixed martial arts (MMA) bouts.

SB 1012: School Bond (Proprietary Schools)
Effective on July 8, this new law will replace the current Idaho law pertaining to proprietary schools (for-profit private schools) by eliminating the requirement for school’s agents to become bonded. The agent’s surety bond requirement will be replaced with a requirement for the school to obtain the bond to cover both the agents and the school itself. The surety bond obtained by the school will be used to protect students from losses that may arise if the school were to close, and also from losses that could result from fraud or misrepresentation for solicitation to enroll in a particular course of study. This new law states that the bond amount shall be determined by the Idaho’s Board of Education.

The following Colorado House & Senate Bills pertaining to the state’s surety bond requirements were enacted within the past couple of months:

HB 1254: License & Permit Bond for Exchange Facilitators
Enacted on April 16, 2009, this bill requires all exchange facilitators operating in Colorado to post either cash, securities or an irrevocable line of credit for at least $1,000,000. The exchange facilitators can also opt to post a fidelity bond/s from a state-licensed insurer for the same amount if they so choose. Additionally, they must also obtain a $250,000 errors and omissions insurance policy. According to the Surety & Fidelity Association of America (SFAA), a surety bond (license bond) can fulfill this requirement as well, in place of the fidelity bond.

SB 40: Miscellaneous Bond
As of July 1, 2009, limited waivers may be granted for the surety bond requirement needed to get the certificate of title for manufactured homes in Colorado. Up until now, a commercial bond needed to be whenever someone applied for the title of a manufactured home, but did not possess adequate proof of ownership. Now, with the enactment of SB 40, waivers for this surety bond can be granted if the home is at least 25 years old, proof is provided that no property taxes are currently due, the home is inspected for its identification, and all other essential documentation for the title applicant is submitted.

SB 114: License & Permit Bond for Commodity Agents
The April 9th enactment of SB 114 canceled the previous licensing requirement for commodity agents in Colorado, to include the surety bond requirement. However, this bill upheld the license bond requirement for commodity handlers.

SB 117: License & Permit Bond for Home Food Service Plans
Effective as of its April 16th enactment, this bill requires all sellers of home food service plans to obtain a licensure as well as a surety bond from a state-licensed surety company. The Commissioner of Agriculture will determine specific surety bond amounts required by each seller, but the bond is conditioned not to exceed $50,000.

SB 141: Public Officials
Enacted on April 30, 2009, SB 141 formed Colorado’s Fountain Creek Watershed, Flood Control, and Greenway District (District). This bill created a surety bond requirement for the appointed custodian of this District’s funds. The surety bond amount will be determined by the District’s board.

Whether it be local, state, or federal government, it seems as if they all are extremely interested in the surety bond industry. The bottom line is that government entities require various forms of surety bonds by companies hired to work for them because the government needs to ensure that the money they are paying on behalf of U.S. taxpayers is guaranteed, and not wasted. Because the government is spending money on behalf of U.S. citizens, they are obligated to ensure that companies given government contracts do what they say they’re going to do, and follow through with their promises.

Requiring contracted companies to get bonded, via the many different types of surety bonds, provides government entities with peace of mind that if the work does not get done according to the terms of a contract, the deep-pocketed bonding companies will step in to remedy the situation.

State governments frequently require surety bonds, often in relation to transportation departments. State courts also require countless court bonds each calendar year, such as probate bonds, guardianship bonds as well as appeal bonds.

The federal government is perhaps one of the biggest generators of surety bond business around, due in large part to the extremely expensive contracts they have. For an example, you don’t have to look further than some of the current Department of Defense (DoD) contracts awarded to civilian contractors such as Halliburton, Blackwater, General Dynamics, etc. Additionally, like state courts, federal courts require countless court bonds as well.

Government interest in the surety bond industry is not going anywhere, which should come as no surprise. Taxpayers should know that their government is taking action, many times in the form of surety bonds, to ensure government funds aren’t lost in the event of a contractor defaulting, or failing to follow through with their promises.