Arizona Encroachment Permit Bonds: ADOT, Phoenix and Tucson

Bulletin 25-03, effective April 3, 2025, sets requirements for design engineers and contractors when a development alters or modifies a highway under ADOT control. It defines major developments as large commercial sites such as motels, resorts and shopping centers, subdivisions with 50 or more single-family dwellings or any development that generates 1,000 or more average daily trips or 120 vehicles per peak hour, whichever is more conservative. Alteration of existing roadway includes new pavement for right or left turn lanes, acceleration lanes or travel lanes needed for the development's traffic.

For those projects, the abutting owner or developer retains an Arizona-registered civil engineer to prepare a traffic impact analysis or statement, which ADOT's regional traffic staff must approve before the permit process begins, and a registered engineer designs and seals the improvement plans. The contractor section then says the owner, developer or contractor submits a certificate of insurance with endorsements showing ADOT and the State as additional insureds, and that ADOT district offices may also require a surety bond and third-party quality assurance and quality control. A developer building a large subdivision entrance on a state route should plan for both.

ADOT's conditions for utility permits say all utility encroachments in the highway right of way require a valid permit that can be revoked. No party other than the named permittee or the permittee's contractor may work under it. Any change to the design, location or construction of an approved permit's plans needs ADOT approval before it happens. After the work, the utility must provide drawings showing the horizontal location and vertical elevation of its facilities within 90 days of completion, which ADOT notes are not a substitute for marking facilities under Arizona's underground facilities law, A.R.S. §40-360.21 and following.

The bond enters when a utility falls behind. Section 2.3.18 lets ADOT require an installation drawing bond on new permits after written notice of noncompliance with the drawing rule, upon a demonstrated history of noncompliance and failure to correct it within a reasonable time. The amount is based on the estimated cost of verifying the location of the utility's facilities, the bond is refunded upon compliance and failure to comply may result in forfeiture. For an underground contractor working under a utility's permit, a missing drawing set can therefore become the utility's bond problem and, through the subcontract, the contractor's.

ADOT's permit requirements ask the permittee to assume legal liability and financial responsibility for the encroachment activity for its duration and to indemnify, defend and hold harmless ADOT and the State for claims arising from the negligent or willful acts or omissions of the permittee, its contractors or subcontractors. That indemnity extends to claims under the workers' compensation law and to the contractor's failure to follow applicable law.

The permittee and contractor provide certificates consistent with the ADOT Permit Insurance Matrix, naming the State of Arizona and ADOT as additional insureds on general liability and automobile liability and providing a waiver of subrogation in favor of the State and ADOT for all coverages. The insurance must stay in force for the permit term and may not be canceled or materially changed without 30 days' written notice to the State, and ADOT may raise or lower limits based on the risk. Whether a contractor's existing endorsements meet that wording depends on the policy forms, which is why a broker review before application is worth the time.

Phoenix calls its permit security a construction assurance. Chapters 31 and 32 of the Phoenix City Code require the customer to provide an assurance that improvements will be installed according to the approved plans and that the customer will provide record drawings. The customer's civil engineer determines the secured amount, which the Planning and Development Department approves under the City's fee schedule, and posting the assurance is a pre-condition to final construction plan approval and release of right-of-way construction permits. It is also a pre-condition for site plans, subdivision plats, lot divisions, off-site improvements compliance and plat recording.

Phoenix accepts cash, a performance bond or a letter of credit, each in an amount equal to the cost of the right-of-way work, and on building projects it may accept an occupancy clearance agreement that withholds final utility clearance until the work is accepted. That agreement attaches to the parcel and binds later owners. The City's bond form recites that the code makes it unlawful to cut or grade pavement, driveways, sidewalks, curbs, gutters, pipelines or landscape in the right of way without a permit and incorporates Chapters 31, 32 and 32A. Cash, bonds and letters of credit are released after the off-site inspector accepts the permit and required as-builts are submitted.

Tucson issues right-of-way permits through its Department of Transportation under Chapter 25 of the City Code, and a permit may go to a public utility, public agency, contractor or individual. The City's permit brochure points to a site plan, a traffic control plan where lanes or sidewalks are affected and ATSSA-certified barricading for any excavation, and right-of-way work is built to details and specifications set by the city engineer. It also describes a pavement cut moratorium: major streets newly built or overlaid within the past five years are subject to it, and permits on them are issued or denied case by case under TDOT engineering stipulations.

The brochure we reviewed does not set out a bond amount, so confirm current security requirements with the permit center before bidding. The moratorium matters even without a bond, because a cut allowed on a recently overlaid street may carry heavier restoration conditions and longer exposure for paving and utility contractors. Phoenix and Tucson are only two examples; Arizona cities each adopt their own right-of-way rules, so read the permit conditions of every city on the project.