With the city’s El Paso Public Service Board about to close the sale of 4,833 acres in Northeast El Paso with Hunt Communities for $131 million, government watchdog Ray Gilbert is charging that the transaction is illegal.
Gilbert, who contends that many of the actions of the city’s water utility are suspect, said he believes the negotiated terms of the sale have changed so much that state law would require the city to start over and call for new bids.
“They have renegotiated the sale of the 4,800 acres out there and changed the conditions completely,” Gilbert said at a press conference Thursday morning.
“They changed the first phase of 2,400 acres, which was for $65 million at $27,100 an acres with 800 and some odd acres for open space. They reduced that down to 1,100 acres at $31 million.”
In a written explanation of his stand, Gilbert said, “The law requires strict compliance in order to protect the citizens from the sale of land in the way this sale has been handled.
“The PSB has represented this to the City Council and citizens of El Paso as being the same as the original bid but just 'tweaked’ a little.
“This is far from the truth, and, under those conditions, the original bid should have been rejected and the project sent out for rebid under the present proposal.”
Gilbert cites the Texas Local Government Code, Section 272, regarding the sale or lease of property by municipalities, counties and certain other local governments.
City and PSB officials say the original bid documents clearly permit negotiated changes in the phasing of the land sale and contend that Gilbert is wrong in charging that the new terms violate state law.
“The original bid document gave us the authority to do that as market conditions change,” City Rep. Susie Byrd said. “Our attorney reviewed it to see if it was in conformance with the bid documents, and it was.”
The original bid documents divided the project into three phases and required the successful bidder to pay $65.5 million upfront for the 2,417 acres in Phase 1.
That phase includes 827 acres of open space – undevelopable arroyos and parks – and 1,528 acres of developable land for homes and businesses, plus public rights-of-way for streets that total 61 acres.
The negotiated contract, which PSB expects to close by Sept. 28 without further review or approval by City Council, requires Hunt to pay far less in the beginning: $31.6 million for 1,166 acres in the new Phase 1 that include just 113 acres of open space and 957 acres of developable property.
The original bid also required to winning bidder to put up $3.3 million in escrow that would be forfeited if the developer defaulted on the contract.
The negotiated contract, Gilbert said, cuts that in half and offers the developer half of the $1.6 million back upon the completion of Phase 1.
That means Hunt could, conceivably, walk away from the project after Phase 1 forfeiting more than $700,000 but leaving 714 open-space acres to be paid for by some future developer.
Gilbert said there is no way that a new developer would match the original $27,100 an acre bid for 714 acres of open space that would offer no return in order to acquire and develop 2,588 acres.
Mayor John Cook said Hunt wouldn’t walk away.
“I don’t think you have the liability that Mr. Gilbert is bringing up,” Cook said. “It is possible that someone could walk away after doing Phase 1, but I don’t think that is likely.
“It wouldn’t be good business practice or good for their reputation.”
All told, the original phasing schedule for open space purchases went from 827.5 acres in Phase 1, 50 in phase 2 and none in Phase 3 to 113 acres in Phase 1, 342 acres in Phase 2 , and 411 acres in Phase 3.
Newspaper Tree was unable to reach the head of Hunt Communities, Woody Hunt, or any other top executive to address the issues Gilbert has raised.
Hunt Communities spokesman, Mark Smith, said, “We just don’t have any comment at this time. That’s our policy.”
The PSB, through its staff attorney, Bob Andron, issued a lengthy written response.
“Mr. Ray Gilbert in his “News Press Conference” this morning is wrong that the current contract with Hunt Communities is not consistent with the bid request documents under which the contract was made,” Andron’s response read. “The bid documents contemplated that some changes in the way the sale was structured might be made and permitted such changes.
“Changes reflected in the final contract with Hunt are such permissible changes.”
By the time the project is completed in 12 years, Andron said, Hunt will have paid for all of the 4,833 acres and for infrastructure improvements at a price that will, with added interest, exceed $150 million.
Andron’s statement goes on: “Mr. Gilbert ignores that the basic features of the bid document remain unchanged. The three-phase structure for purchase and development is still what is in place. What has changed is the precise configuration of the Phase 1 parcel, primarily shifting some acres involved in drainage infrastructure to the other two phase parcels.”
It continues; “The same infrastructure for storm water drainage, parks, trails, and other public open space is required to be developed by Hunt as was called for in the bid request documents.
“The improvements are still required to be made at the developer’s expense, and, once developed as required, those lands and improvements are still required to be dedicated to the city.
“This is a very important project for the city and the community as a whole. It will be a model raising the standards for communities developed in El Paso in the future; and it is a needed and timely project considering the anticipated expansion of Fort Bliss. The sale … has been properly bid and awarded.”
Last year, the PSB advertised nationally to attract the interest of major development companies in El Paso’s 4,800-acre master developer project.
The city qualified six interested development companies as having the financial capability and expertise to bid on the Northeast Master Plan.
Only two companies, Hunt and EPT, submitted bids.
The question Gilbert raises is whether more companies would have participated and, perhaps, bid more than Hunt’s $27,100 an acre to become the master developer under the new terms.
In August 2007, Hunt Communities submitted the highest of two bids to be the master developer for the project.
For more than a year before, the city, PSB and their development consultants had worked on an ambitious and controversial plan to set the stage for a first-of-its-kind development to be owned and overseen by a single development company.
Hunt’s $27,100 an acre bid was significantly higher than that of Richard Aguirre’s EPT Land Communities and a big surprise to the city.
The deal was to close in March, but the housing market, though strong in El Paso, was nose diving.
Hunt Communities refused to close the deal and blamed the city for not completing a new subdivision ordinance and a code for so-called smart growth standards that were to be used in designing neighborhoods and commercial developments.
Hunt went so far as to declare the deal dead and city officials openly expressed suspicions that the respected development company wanted to back out because it had bid too much for the land.
Cook, City Manager Joyce Wilson and PSB officials entered quiet negotiations with Hunt and the deal was officially revived with the agreement that there would be changes in the deal reducing Hunt’s early land payments and obligations.
But the $131 million bottom line would not change.
In May, after the City Council had approved a new subdivision ordinance and the smart growth standards that developers could substitute, Hunt commissioned a new land study, outlining how the development would take place and the zoning that would be required.
Byrd said she was surprised by the quality of that work and that it has convinced her that Hunt intends to see the project through.
“They said they would bring in their land study first before the deal closed, which would give us time to finish up the regulatory work,” she said. “They did that and about a month ago, we finalized the land study, which was really beautiful. I have to tell you, it almost made me cry.
“When the sale first started to unravel, my feeling was they were going to walk away from the deal. But, as I have I seen the amount of resources and time and effort they have put into the land study and the zoning, I know they mean to build this and to make it happen.”
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To reach David Crowder, write to dcrowder@epmediagroup.com or call (915) 351-0605.
Saul
September 19, 2008
Please do not give this gilbert dingbat guy any more publicity. As long as the media covers his statements, he is getting what he needs from society. He has a bottemless need to be the center of attention.
Concern
September 19, 2008
It's interesting that the development was advertised "nationally", and HUNT got the contract. Do we really trust the PSB, I think NOT!
Thank you Ray for looking out for El Paso.
Ray E. Gilbert, Jr.
September 19, 2008
David, I am glad to see that all of the City and PSB people all agree that the whole project has been renegotiated. Now it is just that Hunt would never walk away from this deal. Do we have any guarantee of that. When I have about 20 million more in my pocket that I would have to spend to complete a project and I could buy it out for about 750 thousand dollars, what do you think any good business person would do? I note one error in the third paragraph when you state they reduce that down to 2100 acres at 31 million dollars. It is 1100 acres at $27,100. The only comparison of the whole project is the original number of acres and the price per acre. The rest of it is just ENRON method of negotiating. Are they going to put up the entire 65 million and 3.3 million at closing?
Many others could bid the project as now proposed.I wonder what the Council and Mayor would do if this were their won money. It belongs to the Citizens of El Paso and is only in Trust to them. Any Trust officer would be hung out to dry for this if it is completed as proposed. I do not blame Hunt, They are out to get the best deal they can but so should the people of El Paso.
Ken G
September 19, 2008
Not rocket science. The developer will make money on home construction. The open spaces, parks, hiking/biking trails, although desireable produce no revenue. Those costs will be bourne by the home buyers. There are always trade-offs.
JG
September 19, 2008
Concern, re-read the article, two companies bid and they were both locally owned.
Lupe
September 19, 2008
So little Mississippi Sue Byrd wanted to cry for big sugar dad Hunt. I wonder if she checked her back pocket. It's just the same good ole bubby & bubby system. She is the most anti good business practices person on council. What happened to common sense. They should re-bid, and oust the personal interest lady and company. Good job, Ray Gilbert Kudos to you .
jose
September 20, 2008
If Gilbert doesnt get them, the Feds will !
What comes around, goes around.
Carl Starr
September 20, 2008
34 Envtl. L. 175 the issue was over development agreements to reserve a certain amount of acreage as recreational and open space to serve the entire three phases of the development, which the landowner had put off until the last stage. n101 When he was then forced to leave a significant proportion of the final phase undeveloped, and then sought compensation for a taking, his case was rejected primarily because the open space requirement served more acres than those he still owned in the last phase.
City of Annapolis v. Waterman. n246 Developers of a three-acre parcel, who had promised to set aside 2,375 square feet of recreational open space for residents in later phases of a subdivision as a condition of approval in the first phase, sued the City when a condition of subdivision approval on the third and final phase of the project required them to leave "lot 1" of the final proposed five-lot phase open for recreational use.
The Carrier proposal either phased-down the project, or it phased-in the project -- it could not do both. n162 If Phase I represented the total development, then the undeveloped portion could be viewed as open space, buffer zone, or wildlife habitat, and factor into the analysis as a mitigation factor. n163 However, if Phase I was the first stage, and the complete development proposal was not presented, then fragmented review was necessary. The Board avoided fragmented review, choosing to view Phase I as the terminus of development and assessing the development on three lots in relation to the undeveloped six lots, finding that the proposal conformed to Act 250. n164 In addition, the Board took measures to insure that the undeveloped lots of Phase II would remain undeveloped. n165
Carrier exemplifies the two problems with fragmented review, the analysis of a proposed project, such as Phase I, differs according to its context, particularly in assessing its impacts. Therefore, a project viewed in isolation will have different cumulative effects n166 or impacts than the same project viewed in combination with subsequent projects. n167 Secondly, the analysis of a subsequent project, such as Phase II, will also differ according to its context. A subsequent project may become more likely to be developed once a prior project has been allowed. n168 Thus, where subsequent projects are actually phases of a single larger project, the Board should review the larger project as a whole to accurately insure that it complies.
Chas
September 22, 2008
There is not much question that the Real estate contracts approved by the council had major changes in all phases and no amount of Susie's tears are are going to change this fact. The new phase one is much more easy to fund than the first in both area and public space. I'm sure new bids would result if this was properly rebid as any open bid real estate bid should do.
But our system is broke. The city attornies who are paid by the taxpayor-hens to protect them, are beholding to the foxes,the Mayor et al, who hired them.
And where was the media. Couldn't they compare the two versions of the contract and see the changes?
NE
September 22, 2008
Saul hit it right on - Mr. Gilbert believes he speaks for all of the citizens of El Paso. He doesn't and he should have learned this when he ran for office and lost so badly. The man needs to learn manners - shouting accomplishes nothing and just because he says it doesn't make it true like he believes. El Paso would be better off if he would just fade away.
Carl Starr
September 23, 2008
The City Of Crockett, Appellant v. Earl Murdock, Appellee Court of Civil Appeals of Texas, Twelfth District, Tyler 440 S.W.2d 864; Tex. App. LEXIS 1958.
We recognize that the generally accepted rule is that where a statute requires that a contract for public works shall be let to the lowest responsible bidder, municipal corporations or administrative agencies cannot evadethe law by making a substantial change in the contract after it has been awarded pursuant to the law.
If the deviations from a contract awarded for the construction of a public work vary so substantially from the original plan as to constitute a new undertaking, the contract could be let only by competitive bidding.
However, in order to render the contract void because of the changes or deviations, the same must be substantial. Wantland et al. v. Anderson et al., 203 S.W.2d 787 (Tex.Civ.App., 1947).
Inasmuch as there is no evidence showing what effect, if any, the addendum would have had on the contract or its performance, it can hardly be said that the addendum was a material change as found by the trial court. Appellee cites and relies principally upon the case of Cotter et al. v. Casteel et al., 37 S.W. 791 (Tex.Civ.App., 1896), wherein the court held that a contractor was entitled to the return of his bid security when the City of Galveston made certain changes in the contract submitted to the successful bidder. This case is easily distinguishable from the one now under consideration because the changes made by the City of Galveston after the bid were material and substantial and were obviously more onerous upon the successful bidder.
The contract tendered by the City in Cotter varied materially in at least three respects from the provisions in the specifications. Although the specifications called for the payment to the contractor in monthly payments as the work was completed, the City, in the contract tendered, provided that the contractor wait for his money until most of it could be collected by assessments. Moreover, a provision was added in the tendered contract authorizing the City to seize all of the contractor's tools and appliances if the force of workmen or quantity of the tools employed by the contractor were considered insufficient to insure completion within the stipulated time, and, finally, the tendered contract further purported to authorize the City to deduct from any money due whatever it might deem necessary to protect it against what it might have to pay out on labor claims in connection therewith. The court held simply that these changes were material and substantial and entitled the successful bidder to withdraw his deposit after he refused to sign the tendered contract. In the case at bar, there is no evidence sustaining the trial court's finding that Addendum No. 1 was a material or substantial change relieving appellee from default, and we do not consider that the Cotter case is controlling. We do not reach the question as to whether such finding is against the great weight and preponderance of the evidence, but if we were called upon to pass upon that question, we would likewise hold that the trial court's finding in that regard is against the great weight and overwhelming preponderance of the evidence.
Ray E. Gilbert, Jr.
September 23, 2008
Hunt has now withdrawn from the project. They quote the original phase as not financially feasible at the present time.
Remember, the illegal revision was to be closed next week and the acreage in the first phase would have been down to 1,100 acres with the front money to be $31 million instead of $65 million. There was to be very little open space compared to the 837 acres in the fist phase of the original bid.
The quietly negotiated sale by the city manager, Mayor Cook and the PSB would have been totally illegal and, thank God, the Hunt people finally recognized that. It would have been a good project for them if all was well. I hope the city uses the plan they had negotiated as the basis for their new request for bids as they should have done in the first place.
NE
September 23, 2008
Ray, get over yourself. The article in the paper details exactly what happened. No one was afraid of your senseless lawsuit. Stop wasting taxpayer money with all your nonsense. If the citizens of El Paso believed in you and wanted to listen to you, they would have elected you one of the several times you ran.
Stan Schettler
September 23, 2008
Thank you Mr. Gilbert for opposing the PSB-HUNT land sale contract. The legality of this contract looks very questionable. Now that Hunt has pulled out due to lack of funding the next time this property is put up for sale lets hope it is fairly put out for a qualified competitive bid.
Ray E. Gilbert, Jr.
September 24, 2008
Apparently HE can not read. Put both of the articles on the Hunt project together and actually see what happened. It was not lack of money for the revised 31 million dollar deal (which was a project anyone would like to have) but the only legal thing that could have been legally closed on this coming Monday was the original bid ( the 131 million deal) which has been dead for a long time. Hunt did not mess up on this, the City and PSB did. This is nothing but long time Texas Law. I would be very happy to provide HE with the true details if he (or she) would call me. All we want for El Paso is good Government and a fair and equal chance when sale of land is put up for bid.