Streets and pipes are a construction job. The city treats them as public risk. That is why you post a bond, why inspectors sign off in stages, and why a lender will not treat asphalt-in-progress as finished-lot inventory. If you want the hearing and zoning layer, use entitlement and platting diligence. If you want phase pricing, use subdivision development financing. This page is what we ask for on horizontal cost and bonding.
Qualified horizontal files use construction-style draws at 8.99%–13.5% interest-only. Contingency 10%–15% of hard cost is normal. Land that is still acreage does not get house leverage. Apply through submit scenario or newbuild once the civil set is real.
What “horizontal” actually includes
Earthwork, erosion control, storm, water, sewer or septic laterals to a main, curb, stone, binder, wearing course, sidewalks, streetlights, and dry utilities. Off-site work — a bored crossing, a lift station, a turn lane — is part of the job even when the listing omitted it.
Get unit-price bids from contractors who have passed inspection in that town. A paving crew from two counties over will miss the local stone spec. Hold retainage. Use the engineer who sealed the plans for inspection, not a friend with a truck.
Weather is schedule, not color commentary. Clay in a wet spring can erase six weeks. That is interest.
How cities size performance bonds
The city (or county) wants a number that would finish the remaining public improvements if you disappear. The civil engineer’s estimate of those items is the usual starting point. Staff may add a percentage. Some towns require 110%–125% of the estimate. Ask. Do not guess from a Facebook group in another metro.
Forms of security differ. A surety performance bond carries an annual premium and a claims process if called. A letter of credit counts against bank lines even if never drawn. Cash escrow is simplest for the city and most painful for your liquidity.
Pick the form the town will accept and that you can actually post. A cheap surety that takes sixty days to issue is not cheap if your option expires in thirty.
Maintenance bonds are the second trap
After substantial completion, many towns keep a smaller maintenance bond for a year or two. Streetlights, sidewalk ramps, and storm as-builts live here. Builders may already be closing lots while this bond is outstanding. If punch-list items linger, lot releases pause anyway.
Budget the maintenance bond in the stack. Do not spend that cash on kitchen upgrades in a model home you have not started.
Lot release is the only date builders care about
A recorded plat is necessary. It is not sufficient. The city engineer’s release rules decide when a builder can pull a permit.
Ask, in writing:
- Release after binder, or only after wearing course?
- Must lights and signs be in?
- Does each lot need a storm as-built first?
- Can we bond remaining sidewalk and still release?
If release is “when we feel it is done,” get a checklist. Lenders follow that checklist because a loan on “almost released” lots is still a street loan.
What we require in a horizontal package
Sealed construction plans. Unit-price bid or engineer’s estimate with quantities. City bond estimate and accepted security form. Lot-release rules. Contractor license, insurance, and a resume in this jurisdiction. Geotech that matches the pavement section. Off-site items called out as line items, not footnotes. Retainage and inspection language. Carry through weather slip.
Jaken Finance Group will not fund “mobilization” as a 30% first draw. Visible work, then money. Same discipline as ground-up construction.
Draws that match dirt, not hope
A sane sequence: erosion control and clearing → rough grade → wet utilities → stone and curb → binder → dry utilities and lights → wearing course. Five to seven inspections on a small street is normal. Front-loading more than a fifth of the facility before pipe is in the ground is how unfinished plats happen.
Change orders need paper. Rock clauses and unsuitable soils belong in the bid. Surprises still happen. That is why contingency sits in the facility.
Worked example — nine lots, bond larger than the down payment
Illustrative. Your city will replace every number.
| Item | Amount |
|---|---|
| Recorded nine-lot plat, city sewer | already done |
| Horizontal bid | $640,000 |
| City performance bond (115% of remaining public work) | $410,000 equivalent security |
| Security form | letter of credit against the sponsor’s bank line |
| Lot release | after binder + bonded sidewalk punch list |
| Builder takedowns | three lots at binder, three at wearing course, three uncommitted |
The LOC did not fund the street. It blocked $410,000 of bank capacity the sponsor wanted to use for a separate flip. That is a real cost. We sized the horizontal facility on the $640,000 bid with 10%–15% contingency and interest-only at 8.99%–13.5%. We did not ignore the LOC just because it was “off balance sheet” in the sponsor’s head.
If the three uncommitted lots sit, the maintenance bond and taxes still run. Absorption still matters. That math lives in the subdivision guide. Here the point is: bonding can be the largest invisible line on the file.
Called bonds and unfinished streets
If you miss punch-list items long enough, the city can call the instrument. Work gets completed without you. Your reputation in that planning department is not theoretical. The next plat is slower. Title companies ask questions.
From a lending seat, a called bond means the collateral story changed. Lot sales may freeze. We would rather extend a facility to finish lights than watch a call. That only works if you tell us early.
Unfinished remainder tracts are a cousin of this problem. Phase one streets are accepted. Phase two never starts. The best frontage already sold. Do not hide a remainder that cannot be financed later.
Off-site work is not a footnote
A force main, a lift station, or a highway bore can exceed the on-site street cost. If the will-serve letter assumes a main that is not at the property line, you are buying a utility project. Put it in the bid. Put it in the bond estimate. Put it in the term.
Dry utilities have their own queues. A paved street with no power is not a finished lot to a production builder.
How this connects to the rest of the stack
Land and hearings: entitlement diligence and vacant land. Phase pricing: subdivision financing. Houses after release: new construction loans for investors and spec / BTR. Stalled vertical on a lot that already exists: mid-construction refinance.
Submit scenario · New construction · (833) 264-7776
What we pass on horizontal files
A lump-sum bid with no quantities. A bond number the sponsor “will get later.” Lot-sale contracts dated before the city will release. Pavement sections that ignore the geotech. Contractors who have never passed inspection in that town. Requests to treat binder as 100% complete so we can max lot-inventory leverage.
Second scenario — binder down, lights not in, builders waiting
A seven-lot infill had binder in the ground and a performance bond still at full amount because lights and ADA ramps were open. Two builders wanted to close. The city would not release.
The financeable move was not a new house loan. It was a small holdback to finish lights and ramps, a request to reduce the bond per the city’s own checklist, then lot-level vertical on the released parcels. Skipping to houses would have funded into a freeze.
Geotech drives the street section — and the bid
A pavement section designed for sand will fail on fat clay. Borings are not a luxury. They set stone thickness, undercut, and whether you need lime or cement treatment. Skipping geotech to “save eight thousand dollars” is how a $640,000 street becomes $820,000 after undercut.
Give the geotech report to every bidder. If two bids assume different sections, they are not comparable.
Erosion control is a permit, not straw wattles
NPDES and local grading permits can gate the first shovel. Inspectors will shut a site down for muddy runoff into a creek. That shutdown is interest and a possible bond conversation. Put erosion control in draw one. Photograph it. Keep the SWPPP current when the grading changes.
HOA ponds and private streets after the bond
If the storm pond stays private, the HOA must exist and have a maintenance line. Lenders on later lot loans will ask. If streets stay private, you own mill-and-overlay forever. Bonding may still apply during construction. Acceptance is a different legal event than a private-street completion certificate. Know which one you are chasing.
Surety underwriting is its own delay
A surety will ask for personal indemnity, financials, and sometimes a completion plan. That can take longer than our loan committee. Start the bond application when the city estimate is in draft, not the week you want to pour curb.
If the surety declines, the fallback is cash escrow or an LOC. Have a backup. Do not discover the decline after you have scheduled the pre-con meeting.
Quantity takeoffs beat round numbers
“About six hundred thousand for the street” is not a bid. We want linear feet of pipe, tons of stone, square yards of asphalt, and each structure. That is how change orders get judged. That is how we know the bond estimate is in the same universe as the bid.
If the engineer’s bond estimate is $410,000 and the contractor’s public-improvement number is $220,000, someone is wrong. Reconcile before we fund.
Winter shutdowns and liquid asphalt dates
Northern and high-elevation towns have paving cutoffs. If you miss the window, binder sits all winter. Freeze-thaw and traffic chew it. Budget a wearing-course season, not a wish. Interest reserve should assume you miss the cutoff once.
Traffic control and school-hour restrictions
Infill streets next to a school can limit haul hours. That extends the calendar without changing the bid units. Ask public works. Put it in the contractor’s means-and-methods note so the bid is real.
Utility company design fees
Electric and gas design fees and transformer pads show up late. They are often outside the civil bid. Ask the utility for a design schedule the same week you bid pipe. A three-month utility queue behind a finished curb line is still a three-month queue.
As-builts and video of pipe
Cities increasingly want video of sewer laterals and GPS as-builts before acceptance. Budget the surveyor and the camera truck. A binder that looks finished in photos can still fail a mandrel test. That failure delays lot release and keeps the performance bond at full amount.
Do not wait until builders are in contract to schedule as-builts. Put them on the calendar when pipe goes in. If the contractor argues that video is extra, it is still extra you need. Pay it or watch lot release slip.
Stop signs, street names, and mailbox clusters are small line items that punch-list inspectors love. Put them in the bid so they are not a surprise the week of the first lot closing. The same is true of seed, sod, and right-of-way restoration. Inspectors will not accept a mud strip as a finished parkway. They also will not accept a pond fence that does not match the approved detail. Photograph the detail sheet against the field work before you call for inspection on that item.
After acceptance
Get the acceptance letter. Get the reduced maintenance bond in writing. Get as-builts to the city. Then lot inventory is a real product. Until then, you are still in the street business — and that is the business we will underwrite.
Horizontal and bonding examples are nationwide investor illustrations, not engineering or surety advice. Rates and terms apply to qualified borrowers and may change without notice. Jaken Finance Group finances business-purpose investment property only.