The purpose of these guidelines is to help Sydney Water staff to be consistent when they:

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1 1. Background and Purpose Sydney Water sometime imposes requirements on applicants who want to deviate, adjust or extend Sydney Water s services. Applicants may ask Sydney Water if they can lodge a guarantee (bond) that they will meet the requirements because in that way they can get early certification that the requirements will be met and so they will be able to finish the project early. The purpose of these guidelines is to help Sydney Water staff to be consistent when they: (a) (b) (c) apply the policy; assess a bond application; and administer any bonding arrangements that are made. 2. Scope These policy guidelines apply to all bonding arrangements between Sydney Water and applicants deviating, adjusting or extending Sydney Water s services. 3. Definitions Act: the Sydney Water Act, 1994 and any regulations in force under it. Also known as the Act. Agreement: a formal contract between a developer and Sydney Water that sets out the terms and conditions under which Sydney Water s systems will be extended or altered. (See also Deed.) Bond: money given to Sydney Water before the applicant meets Sydney Water s conditions. The money covers the cost of the construction of works and is usually in the form of a bank guarantee or cash. Customer Contract: a document that sets out the rights and obligations of Sydney Water and its customers (see Section 55 of the Act). These rights and obligations are in addition to the ones given by the Act or any other law. Deed: a formal contract between a non-developer applicant and Sydney Water which sets out the terms and conditions under which Sydney Water s systems will be extended or altered. (See also Agreement.) Developer: a person who has been given an approval as defined in Division 9 of the Act. Developer Charges: a contribution towards the cost of systems (e.g. reservoirs, treatment plants) which serve a development. They are calculated using base charges that are registered with the Independent Pricing and Regulatory Tribunal (IPART). Sydney Water cannot waive or change these charges. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 1 of 11

2 Development Servicing Plan (DSP): a document that contains the information that is used to calculate the Developer Charges. Easement: a document that sets out the rights of one party to use land owned by another party. Added Government Trading Enterprises (GTEs): government-owned or government-controlled entities that produce goods and services on a commercial basis by substantially or fully covering their costs. They are outside the general government sector and separate from government financial enterprises in banking, insurance and related sectors. GTEs are also commonly referred to as, amongst others, state owned corporations (SOCs); government owned corporations (GOCs); and government business enterprises (GBEs). Guideline: a Sydney Water document that sets out how a Sydney Water policy is applied. Homestead subdivision: a subdivision that creates a lot with an original dwelling on it (also known as a homestead ) and that is separated from the original land parcel. The lot containing that homestead can also be known as a homestead lot. Infrastructure: the pipes (usually less than DN 375), pumps, reservoirs and other items that make up all of Sydney Water s systems. Notice of Requirements: the Notice of Requirements that is issued by Sydney Water when a developer applies for a Section 73 (Compliance) Certificate. Operating Licence: a licence issued under the Act that explains how Sydney Water should do its work. Policy: a Sydney Water document that sets out a plan of action for Sydney Water in a distinct area of its business. A Policy is read in conjunction with the related Guideline. Recovery (also Recovery Charges): the process of charging developer applicants for part of the construction of works by either Sydney Water or a previous developer. Section 73 Compliance Certificate (also Section 73 Certificate): a compliance certificate referred to in Division 9 of the Act. Sydney Water: Sydney Water Corporation constituted by the Act. Water Servicing Coordinator (Coordinator): a service provider engaged by the development industry and authorised by Sydney Water. Work as Constructed: documents showing the details of works as they were actually carried out. Works: as specified in Sections 3 (2) and 69 of the Act. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 2 of 11

3 4. Guidelines 4.1 Types of Bonding Arrangements Bonding arrangements should be regarded as an exception rather than the rule. In the majority of cases Sydney Water s statutory obligations require compliance with the relevant Notice of Requirements. Sydney Water may accept a bonding arrangement under one of the four following circumstances. In and it will be the developer who applies to have a bond. In and it will be Sydney Water that will require the bond. The bond may be accepted to: allow the early issue of a Section 73 Compliance Certificate before completion of the required works. This enables the applicant to obtain title and complete sales, thus generating cash flow for the project and helping them to pay for the required physical Works; allow Sydney Water to suspend its objection to a road closure application; ensure that any existing Sydney Water services being adjusted, deviated, or extended are satisfactorily reinstated and that other customers rights are protected during construction. This enables Sydney Water to continue to meet its Customer Contract obligations; or ensure any easements are registered after the works have been completed and that the easements have been located by a survey and all the land and easement action has been completed. Bonding is not accepted for: (a) developer charges; (b) reticulation recoveries; or (c) early issue of certificate in advance of completion of the works in a Community Title development. This is because the works must be completed before an associated easement can be defined. Sydney Water will return the guarantee/ cash bond, or what is left of any money that has had to be taken out by Sydney Water under condition , as soon as practicably possible after all the requirements have been met. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 3 of 11

4 4.2 Criteria for Acceptance/Bonding Conditions Bonding is accepted at the discretion of the Sydney Water approving officer for cases and above. Sydney Water requires a bond for cases or above. Use the following guidelines, as appropriate for the type of bond When someone is applying for a bond, the applicant must: (a) submit a letter requesting the bond; (b) tell us why the bond is needed; (c) give us a project management plan; (d) give us details of supplier availability; and (e) give us enough time to complete our processes so that the relevant requirements can be finished on time. In response to this, Sydney Water will issue a bonding letter confirming its conditions Where Sydney Water requires the bond, we will send a standard letter informing the developer of this In all cases, the applicant, and no one else, including the Water Servicing Coordinator, must agree in writing to the bonding conditions. The bonding agreement has four parts: (a) the request from the applicant; (b) the bonding letter; (c) the written agreement; and (d) the security IT IS NOT PERMITTED TO ENTER INTO A BOND FOR EARLY RELEASE OF CERTIFICATE IN THE FOLLOWING CIRCUMSTANCES: (a) (b) A BOND is not permitted for works up to 25 metres and for work that can be completed in up to 4 weeks construction time, as agreed by Sydney Water. This four weeks does not include the time it takes for the design/work as Constructed package submission. A BOND is not permitted where the requirement includes a major infrastructure item (that is a carrier, trunk main) unless: - there has been significant construction completed; and - Sydney Water is convinced that such work can be completed within the agreed timeframe. It is NOT generally permitted for pumping stations because of significant risks of delay in completion. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 4 of 11

5 (c) A BOND is not permitted if a third party is constructing lead-in works, unless Sydney Water is convinced that they will be finished on time. A BOND IS PERMITTED IN THE FOLLOWING CIRCUMSTANCES: (d) A bond is permitted for required works that can and are to be completed within an agreed negotiated time frame. Generally, construction time must be over 4 weeks and up to 12 weeks as agreed by Sydney Water, e.g. where housing construction is to proceed at the same time as the subdivision. (e) A bond is permitted for a facilitating homestead excision subdivision where the physical services can and are to be provided on the subdivision of the residue within 12 months. In this case, Sydney Water must inform the applicant in writing: - that services cannot be provided; - that services will only be extended to all future lots including the homestead lot at the cost of the owner or applicant; and - the cost will include developer charges and physical extension. The letter must be issued with the Section 73 Certificate telling the applicant of the above. The letter must also tell the applicant that he or she must in turn tell anyone who buys the development of all these facts. This obligation is called the Vendor Disclosure legislation provisions. Sydney Water s records are to be noted accordingly Where Sydney Water requires bonding for an adjustment/deviation, the work must be completed within a negotiated, specified time that may be reviewed/ extended as necessary Sydney Water must have received and approved a design package and the signed agreement or deed The amount of the bond: (a) must not limit the liability of the applicant to Sydney Water; (b) must be the full cost of the works plus a contingency factor of 50%. The contingency factor is necessary to cover additional costs that may be incurred. These include the follow up of a non-complying applicant, the tendering process if it is necessary for Sydney Water to complete the works, and the rectification of unsatisfactory work. (c) must include project management, design and construction costs and be accepted at Sydney Water s discretion, see section 5. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 5 of 11

6 Bond amount for low risk projects Sometimes the method of construction significantly reduces Sydney Water s risk (for example, Sydney Water s live main remains untouched until new works are available for connection). In these cases, the amount of the bond will be based on the facts of each job. The bond amount in these cases will be based on the cost of the connection(s) component of the works plus a contingency factor of 50%. The calculation includes the Constructor s costs for connection(s), the estimated project management costs supplied by the Water Servicing Coordinator, Sydney Water s operational area charges and administration costs The bond will be held until the requirements have been satisfactorily completed and may be in the form of either: (a) a cash bond (see note 3); or (b) a guarantee or insurance bond from a financial institution that has a credit rating of at least A (Standard & Poor s) or A2 (Moody s Investor Service); or (c) an undertaking (see note 2) acceptable to Sydney Water. Notes: 1. As credit ratings are only updated when a rating is revised, a financial institution s rating may be a number of years old. If a rating is over 2 years old or there is any doubt about the rating, Sydney Water s Treasury Management Unit on either or will advise you on the current rating. Updated 2. Undertakings are only accepted from Government (and declared Government) Trading Enterprises (GTEs) including Landcom, Energy Australia, Energex, Integral Energy, Sydney Ports Corporation, Australia Post, Airservices Australia, State Transit Authority, Rail Corporation (NSW) and Sydney Ferries. They are not accepted from councils (because councils are not Government Trading Enterprises) and from Corporations doing relevant business with Government, for example the constructor of a motorway. 3. Where work cannot be completed in a short period of time, that is up to 4 weeks, and the value of work is less than $25,000, then only cash as security will be accepted, eg minor deviation works that can only be undertaken after completion of building works. (Guarantees have proved to be ineffective in ensuring the completion of low value works) Guarantees must be unconditional, have no time limitations and be stamped by the institution as evidence of validity. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 6 of 11

7 Sydney Water will decide when the work is complete. The developer will need to have lodged the Work As Constructed plans and have produced and/or recreated all documents and reports for the work to be called complete All outstanding Developer (DSP, DSP Upsizing and Reticulation Recovery) charges must be paid within 28 days of the invoice or before Sydney Water signs the agreement whichever date comes first It is the applicant s job to inform all prospective purchasers and their agents (eg solicitors and plumbers) about all aspects of when services will be available. If Sydney Water has to answer these kinds of questions, it will charge the developer contract administration fees for doing so If the applicant fails to comply with any of the conditions of the agreement, Sydney Water may WITHOUT FURTHER NOTICE call up the unconditional guarantee or draw from the cash bond. Sydney Water may spend or keep some or all of the money at rates determined by Sydney Water. This is: (a) so that they can complete the Works and/or see whether the Works are up to Sydney Water s standard so Sydney Water can take over the ownership of the Works; and/or (b) as compensation for all the costs that Sydney Water has incurred. This amount will include all costs of completing the work, administration and operational costs, any payments made by Sydney Water out of any breach of its Customer Contract (including Customer Redress) and reimbursement of Sydney Water for forgone Service charges If the applicant fails to complete the Works in accordance with any of the conditions, Sydney Water may provide applicants for connection with a copy of the agreement with the applicant If the applicant s delay in carrying out the Works interferes with the servicing of other parts of the development (or other developments) by Sydney Water, Sydney Water may do whatever is necessary to minimise the impact of the applicant s delay. 4.3 Blanket and Rolling Guarantees Sydney Water will only accept blanket and rolling guarantees covering staged development if the applicant provides regular updates that can be audited by Sydney Water. These updates should include: (a) developments completed to Sydney Water s satisfaction in the reporting period so the guarantee for that component is no longer required; Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 7 of 11

8 (b) (c) developments covered by a guarantee, amount, agreed completion date and construction progress; and total current guarantee dollars. The total dollars cannot exceed the blanket guarantee amount. 4.4 Approval and Release of Guarantee A signature and counter signature by appropriate Sydney Water officers is needed for the release of a bond following satisfactory completion of the Work. 4.5 Failure to Meet Bonding Conditions If an applicant has not complied with the bonding conditions within the agreed timeframe or other specified condition then a reminder letter may be appropriate. Note: A reminder letter may not be appropriate if urgent completion of works is required. Sydney Water will put in the letter: (a) details of the conditions in the bonding agreement that have not been met; (b) why action is required particular mention should be made of building activity on site or sale of lots and obligation to provide serviced lots or maintenance of supply to other customers; (c) what action is required, e.g. completion within 30 days; (d) that if the applicant does not comply with the requirements of the bond, then the letter will have served as the last reminder and, without further notice, the guarantee will be called up or the cash guarantee drawn upon. When Sydney Water sends the letter we must ring the applicant at the same time. We will tell the applicant what is in the letter and make a file note of the advice given over the phone. The diary note should include details of any action required. Note: Call up of a guarantee is a serious matter as it effectively jeopardises the applicant s credit rating. 4.6 Approval to Call Up Guarantee If the applicant has not complied with the bonding conditions and has been reminded, if that was appropriate, a (Level 4) Manager, Development Operations might approve the call up of a guarantee and arrange the construction of works using the bond money. The following procedure must be followed to ensure that Sydney Water treats the applicant fairly: (a) A Development Services Representative (DSR) must prepare a report that covers: Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 8 of 11

9 (b) (i) The failures of the applicant to complete works; (ii) Actions taken to advise the applicant of the need to meet requirements; (iii) A schedule of events that demonstrates that the applicant has been given adequate advice and warnings and reasonable opportunity to respond; and (iv) A recommendation for call up. All documentation including the approval must be filed and stored. At this stage, a letter advising of the intention to call up is NOT to be given provided the reminder as per section 4.5, if appropriate, has been sent. 4.7 Calling Up A Guarantee Without any notice to the financial institution, other than inquiring whether a Manager with appropriate authority will be on the premises, Sydney Water officers with appropriate identification and the guarantee should, when they arrive at the institution, do the following five things: (a) identify themselves and ask for the Manager or equivalent; (b) state that they have an unconditional guarantee, are calling it up and ask that the institution s cheque be provided immediately to honour the guarantee; (c) advise of the condition in the guarantee that the guarantor is NOT to be informed; (d) wait until the cheque is handed over and DO NOT take no for an answer; and (e) advise, if necessary, that failure by the institution to honour the guarantee will jeopardise the institution s credibility in financial circles and they are in no position to refuse to honour the call up. If necessary the institution representative could confirm this with their head office A deal MUST NOT be negotiated over the phone between senior Sydney Water management and senior financial institution staff whilst Sydney Water officers are in the institution because Sydney Water s credibility in financial circles under this circumstance would be undermined The cheque should be cashed as soon as possible. 4.8 Advice to Applicant After Call Up After Sydney Water has called up the guarantee or approved the use of the cash bond, only then can the applicant be informed, and that information must be in the form of a letter. In addition, the applicant should be advised that the money will be kept until either the applicant, or Sydney Water at its discretion, completes the requirements. (The applicant may propose to complete the works in a timely manner rather than be in the hands of Sydney Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 9 of 11

10 Water and Sydney Water may accept this.) The money will only be refunded if the costs incurred by Sydney Water are less than the guarantee, otherwise the applicant will be required to pay any extra costs above the bond amount. 4.9 Construction of Works The money will be held until the applicant has complied with the bonding conditions or Sydney Water has moved to have the work constructed/taken over As the applicant is funding the work, the value of the work is a nominal $1.00 from Sydney Water s point of view. Therefore any Sydney Water officer authorised to award nominal sum contract work can award the contract The DSR is to: (a) determine what work and documentation is required to complete the work to our standards; (b) call for a quote or quotes as appropriate and award the work; (c) receive all documentation; (d) determine and detail all costs incurred by Sydney Water both from the work and those arising from the applicant s failure to complete the work as required; and (e) refund to or invoice the applicant, as appropriate, for the difference between the costs and the guarantee amount. The applicant should be advised of the itemised costs. 5. Responsibility Manager, Development Operations 6. Regulatory Context Sydney Water Act 1994 Sydney Water Corporation Operating Licence Sydney Water Customer Contract Independent Pricing and Regulatory Tribunal Act 1992 Environmental Planning & Assessment Act Associated Documents (Policy) 8. Effective Date Unless otherwise noted, these guidelines are effective from and including the date of approval. Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 10 of 11

11 9. Endorsement and Approval Effective Date: 8 September 2008 Review Date: September 2010 File No: 2006/05123F Prepared by: Endorsed by: Bruce Hansard, Senior Development Services Representative Name: Paul Saxby Signature: P. Saxby (sgd) Position: Manager, Developer Asset Services Name: Steve Purcell Signature: S. Purcell (sgd) Position: Manager, Asset Integrity Services Approved by: Name: John Ethell Signature: John Ethell (sgd) Position: Manager, Development Operations Date: 29/8/08 Authorised by: Manager, Planning, Reporting & Compliance Authorised by: Manager, Planning, Reporting & Compliance Page 11 of 11