builders outlook april 2011

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Builders OutlookIssue 4 2011 Building El Pasos tomorrow today

El Paso TimEs sTory sTirs quEsTionsCity drives builders costs up, lowers tax revenueBy Ray Adauto, EPABThe El Paso Times ran a story on the front page of the Sunday Times on April 3 concerning the City of El Pasos new surety bond of $50,000. In the story reporter Vic Kolenc looked at the high dollar amount of the bond and told the readers that the Association was opposed to it. Interestingly in the story the City admitted that only 385 contractors were now registered with the City. In January 2010 there were approximately 2,500 registered with the old $10,000 bond. Thats a shocking downturn in registered contractors and tells of what consequences follow actions like this. There was apparently only enough space in the paper to share some of the interviews that took place between Mr. Kolenc and me. The risk that is run anytime someone does an interview is to have only some of the information get printed or told, while so much more just doesnt make it to print or onto the airwaves. The story behind the story is fascinating look into the thinking of those in charge at the City of El Paso and how decisions are made regarding construction in El Paso. The story begins about two years ago when the City was looking at they didnt have enough assets, or had dings on their credit report, Peinado said. That problem also surfaced with members of the association who sell the bonds as some of their clients also found it difficult or impossible to get the new bond. For well established companies the new bond just adds an addition fee to the increase in fees at the city. Those increases eventually end up at the sale of the home, but higher costs also mean that fewer people can qualify. We hear the argument a lot that its only $500 or that its $3000 here or there, but in reality its not a one time thing, EPAB President Greg Bowling said. Its that amount mortgaged over 15 to 30 years, and it may seem like a small amount now ends up costing a lot over the life of the mortgage, he concluded. Sometimes that little amount makes qualifying buyers much more difficult, he said. The jury is out as of this writing as to whether or not the current City Council will do anything about the bond, or anything about other significant changes to the El Paso City Code. Making it more difficult and more costly to do business within the City limits just creates opportunity elsewhere including the County and cities like Anthony, Canutillo, Socorro, Clint and Horizon. Even Santa Teresa will benefit from council actions. What is interesting is that these actions will create what the majority on City Council dont want, urban sprawl. It will also diminish the tax base just enough to create problems for future councils. Having the issue of the bond made public was an important decision since it does carry considerable consequences, intended and otherwise. Perhaps the development and builder community is being singled out again, but then again most of the time theyre used to being on the hit list first. The El Paso Association of Builders will continue to speak to issues like the bond and through its volunteer members work to find solutions that are positive for both sides. Arbitrarily forcing something on a business is counter productive and has no place in this community. The EPAB is asking publically that the City of El Paso reconsider the bond amount and do so quickly. The contractors and roofers in this community are vital to its future.

revamping a lot of the codes and ordinances related to development and construction. Back in 2009 the far east part of the El Paso, including Horizon City and some areas of the county, was hit by a substantial hail storm. The storm left the area with a lot of hail damage to cars, homes, and businesses. Following that storm were a number of storm Chasers, traveling contractors who follow hail storms and tornados, floods and other disasters and offer their services. It is these companies that were cited by city officials as the reason for looking at the blanket surety and construction bond amount. They claim that there were a large number of complaints about the repairs that were made by some of those companies, and in an effort to protect the consumer the City department heads came up with an arbitrary figure to use, and that figure was $50,000. Their thought process was that a roof cost $20,000, but they failed to ask contractors or roofers if indeed that number was right. Secondly it was determined to go two and a half times that for the dollar amount in order that two or three consumers would have money to go after if there was a default. Theres a lot that is wrong with this method and it starts with what does a new roof cost for the average 2000 sq. ft home. Taking into account two different types of roofing (new and reroof) local contractors say that roofs are costing $6000 to $10,000. Taking the citys method the new

bond requirement shouldnt be more than $20-$25,000. That makes business sense to most. Reducing the amount also reduces the target for unscrupulous people and in particular actions from unscrupulous attorneys. Roofers and builders have been subjected to increasing attacks by several attorneys and so called roofing inspectors, leading to costly court battles. Enlarging the target amount will surely cause others to join in the attacks, and that is a major concern for the industry. While the stated goal of the action is to protect consumers it leaves out protecting the contractor or roofer, particularly when it comes to options against putting a claim against the bond. The citys ordinance does not take into account that contractors and roofers carry general liability insurance to cover incidents after the completion of the project. The new ordinance is specific in saying that a bonding agency pay the party attacking the bond automatically apparently overriding the right of the contractor to use arbitration (by contract) or getting a court settlement. The new bond is stated by one city council candidate as the reason he is running. Abe Peinado is running in District 1, Westside/upper valley seat. He has stated at forums that as an insurance agent he was shocked to find that at least seven of his clients were refused the higher bonding because of the new financial documentation that is required by the larger amount. I found myself looking at good people, clients that are good pay, being denied because


2 APRIL2011

Builders Outlook

3Presidents MessageGreg BowlingPresident, El Paso Association of Builders

Builders Outlook

The year is just going and going. I guess all of us have to wonder where the time has gone but were entering the second quarter and theres so much to do. As I recap the first three months of the year I can tell you this: the El Paso Association of Builders is a strong and viable organization. While that statement may seem to some as strange let me tell you why in a couple of words: great volunteers. Thats right where the heart of the association lies, in our willing volunteers who take time off from their busy schedule to give time to the EPAB. I like telling folks

that these members who do this understand what this association is about. They get it. An Association is designed to get the input from many and funnel it down to a cohesive point of view or effort. To me nothing demonstrates this more than when we go to Austin for our Rally Day event. Let me assure you that the El Paso Association of Builders is well known at the Capitol through our efforts by members, staff and lobbyist. All of our state representatives understand that this association is more than just builders or developers and includes prominent businesses in the community. They are often surprised when they meet someone from what they would consider outside of the builder side. They admire that we have a group willing to travel to them to express how important the homebuilding business is in El Paso. My thanks to all who went and took the time, money and effort to make the trip. It was a blast, perhaps the best Rally Day in our history. Locally we are focused on city issues. First its the $50,000 surety bond that the city has imposed on contractors. Ray and I,

along with Bryan Sanderson, Kelly Sorenson and others have spent a lot of time trying to get the city to act reasonably. Nothing yet and yet I am hopeful that the city will come around and amend the current version of the ordinance. Secondly is the work trying to get permits out from the 5th floor. Nothing is easy but this new system that City Manager Joyce Wilson has put in place is not working yet and everyone seems to have a real dislike for it. Once again our volunteers and staff have been busy trying to get city hall to figure out the problem and get it resolved. Its costing everyone, including the city, a whole lot of money. Third and probably the most challenging is the exclusion of the home builders in vetting changes to title 18 and 19 of the city code. Smart Growth code in its present form will take away our ability to choice, our ability to selection and our ability to build and sell what the consumer is asking for. Our main issue is the rewrite of the set back lines, or build to lines as the city calls them. Not much was brought forward by the city before they were sent to council for vote. In its present state

not one builder in town will have usable plans. We will need to redesign all our floor plans at a substantial cost, which will then be passed on to consumers through higher costs. Other issues remain with parts of the new code in its present form. Ray and I will continue to work on getting these ordinances rewritten, and if all else fails then we will make sure the city gets our message. Which brings me up t