New state regulations on the bonding processes of subdivisions by local governments are causing headaches for builders and for Fairfax County.
While the Northern Virginia Builders Association, which lobbied heavily for the changes in the recent legislative session, says the changes will limit potential builder defaults and local government liabilities, Fairfax County officials predict increased work loads for its staff.
In addition, the future of pipe-stem lots in subdivisions may be in jeopardy, along with the county's policy of issuing letters to the Veterans Administration that allow builders to construct homes for buyers using VA financing because certain facilities required by the VA have been guaranteed by bonds.
"We are currently looking at the regulatory implications of the new law," said Claude Cooper, chief of the county's Department of Environmental Management. "We are seeing what changes need to be made in our own requirements as to what can be bonded. We are looking at what we will now be permitted to bond to see if we need to make changes in our design regulations," Cooper said.
Although a last-minute amendment to the bill will allows Fairfax to continue to require builders to post bonds to cover private roads, pipe-stem driveways are not considered private roads. Cooper said many area developers are asking for as many as six pipe-stems in sections of some developments.
"If he a developer goes down, that will be six property owners that we the county will have to help build driveways for," Cooper said. The question of whether or not Fairfax will change its pipe-stem policy is yet to be answered, Cooper said.
"We are looking at our practice of giving those VA letters," Cooper said. Before a veteran buys a home, he must have VA approval. The VA requires that certain features be in place or that money for them be held in escrow. "If those features are not in place and the items are covered by bonds, builders have not had to escrow the items covered by the bond because they would be guaranteed by the bond," Cooper said.
If Fairfax backs away from this policy, there could be a severe impact on local builders who now construct town houses and detached homes only after the units are sold. There is little speculative building under way in Fairfax.
Fairfax officials predicted increased workloads generated by paperwork required to meet new regulations may mean an increase in administrative costs. Those costs are likely to be passed on to the builders in the form of increased application fees.
But that money would be "peanuts compared to the amount I have tied up in bonds," explained one builder.
Another builder, Jerry Carbone, said, "It takes as long to get bond money back now as it does to build a house."
Both county officials and the staff of the builders' group said they are anxious to meet and try to work out their differences. Members of the Board of Supervisors were angered by the builders' strong lobbying effort and held up action on several rezoning applications which involved private roads as a public statement of that anger.
"I spoke with Supervisor Tom Davis this week. We look forward to an early meeting," said Scott McGeary, legislative assistant at the NVBA.
McGeary said he had not heard about the county's concern over pipestem lots.
"It is very important that we the county and the builders association have a clear understanding of the clear intent of the bill from the start," McGeary said.
"From our perspective, it didn't take anything away from the county. It clarified what the county can do," McGeary said. McGeary and Samuel A. Finz, chief executive officer of the NVBA, both recently said the bill would help ease the number of defaults. But Fairfax officials are not convinced of that just yet.
The new regulations bar local governments from requiring builders to post bonds for tot lots and swimming pools. An NVBA spokesman said one of the strongest points in the new law requires local governments to respond in writing to requests made by a developer for a reduction or release of a bond within 30 days.
Also, the new law will not allow governments to hold up more than 20 percent of a bond until all work is completed. In addition, developers will be able to bond portions, rather than an entire subdivision.