When approving a land development project, municipalities require assurance that developers will construct the required public improvements, and that in the event of default, the surety will be responsive, so that the project will be completed promptly, without risk to the municipal treasury. A form of guarantee sometimes used is the letter of credit. The case law involving public improvement letters of credit is sparse, yet the contingent liability to municipalities from defaulted land developments, with illusory sureties, should not be underestimated.
James P. Downey,
The Letter of Credit as Security for Completion of Streets, Sidewalks, and Other Bonded Municipal Improvements,
U. Rich. L. Rev.
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