American Institute of Certified Planners (AICP) Practice Exam

What requirement do performance bonds fulfill for city and county governments?

1. Cover operating costs associated with public developments

2. Contribute to general fund revenue

3. Cover offsite public improvement obligations

4. Support emergency funds for development projects

The correct answer is: Cover offsite public improvement obligations

Performance bonds are financial instruments that ensure the completion of a project according to the agreed-upon specifications and timelines. When a developer or contractor is required to obtain a performance bond, they essentially provide a guarantee to the city or county government that they will fulfill their obligations related to public improvements. Specifically, the purpose of a performance bond is to cover offsite public improvement obligations, which may include infrastructure improvements such as roads, sidewalks, and utility connections that are necessary for the development's impact on the surrounding area. If the developer fails to complete these obligations, the government can draw on the performance bond to fund these improvements, ensuring that the development does not adversely affect the community. This answer highlights the protective role performance bonds play in urban planning and development, ensuring that municipalities are not left to cover the costs associated with the infrastructure investments anticipated from new developments. Other options do not accurately align with the specific purpose of performance bonds; they pertain to different aspects of municipal finance or cost management that are not directly related to covering public improvement obligations.