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Panel approves allowing second‑class townships to accept letters of credit instead of bonds
Summary
The committee unanimously passed House Bill 1194, a Local Government Commission bill that would authorize second‑class townships to accept irrevocable letters of credit and other forms of security as contract performance guarantees, aligning their options with other municipal classifications.
The House Local Government Committee unanimously reported House Bill 1194, a Local Government Commission bill that authorizes second‑class townships to accept irrevocable letters of credit and other alternative performance security instruments for contracts in place of surety bonds.
Rob Gardner and representatives of the Local Government Commission explained the change is intended to provide flexibility and consistency across municipal codes. David from the Local Government Commission told the committee, "This is about flexibility and consistency," and explained procuring bonds can be more difficult than letters of credit, with higher costs ultimately passed to taxpayers.
Representative Fleming asked about historical reasons for differences across municipal classifications. Commission staff explained second‑class townships historically had a more limited set of powers as rural road districts, and the commission continues work on uniform procurement code efforts where uniformity makes sense.
The committee approved the bill unanimously and will forward it to the House floor.
