March 6, 2008
The $131 million sale of PSB land to Hunt Communities is off, a stunning development in a multi-year process that proponents hoped would provide needed housing and amenities in Northeast El Paso near Fort Bliss, bring millions to the PSB, and perhaps most important, create a new type of community in El Paso, where homes, schools, shopping and work are arranged to limit the need for auto travel.
Hunt issued a statement early Thursday, along with a letter notifying the PSB and city of its decision to withdraw its bid, which at more than $27,000 per acre was well ahead of the rival bidder. The bids were awarded in August, and marked the culmination of a process that goes back many years and cost many hundreds of thousands of dollars already.
The failure of the land sale -- in a period of falling property prices -- set off finger-pointing between the city and Hunt over who was to blame. It raises the question how much the public will realize from an a new attempt to sell.
With the decision, Hunt forfeits $3.3 million put down to secure the sale, said Mayor John Cook. [Editor's note: an earlier version of this story incorrectly put the figure at $4 million
The collapse of the deal also might affect the growth of Fort Bliss, he said. Tens of thousands of soldiers and their families are expected over the next few years. The influx and anticipated growth already has fueled a construction boom on post; ironically, the Hunt letter withdrawing the offer came the same day as a Chamber of Commerce tour to promote Bliss, in which a post spokesman was quoted in the El Paso Times as saying there was a shortfall in housing.
"This will raise some concern on Fort Bliss, but I think we will have enough elbow room to adjust and adapt. The impact of delaying the project will be felt a few years down the road, not immediately," he said.
Cook, who formerly was Northeast El Paso city representative and worked for years on setting the stage for the sale, said that the City Council's failure Tuesday to give Hunt an extension on the closing deadline gave the company the excuse it needed to withdraw from the deal. However, he disputed Hunt's assertion that the city was at fault because it failed to provide new development rules that would be used for the project.
The city is in the midst of a long process to review its development ordinances, and Hunt argued that the city failed to provide it with specific details necessary to adhere to the bid specifications that Hunt commit to "smart growth," which at its core means placing the various elements of a community -- the homes, shopping and work, and public institutions -- in ways that draw people out of their homes and lessen the dependence on the auto.
Hunt's statement argued that "The Agreement (and the Bid Documents) requires the successful bidder to design, develop and construct the Community using Smart Growth Principles and in accordance with the City's master plan vision for the property. Without clearly defined subdivision regulations that support the City's development outcome, there is no legal way to successfully implement the City's vision for the Community."
The statement was expanded upon in a letter dated today to El Paso Water Utility General Manager Ed Archuleta and the city manager, and copied to the city attorney. It was signed by Gary Sapp, chairman of Hunt Communities. [letter]
City Council members disagreed, and said while specific city rules might have been useful, there was no timetable or other commitment tied to the sale of the land to develop those rules.
"Not one of us on City Council ever knew that a new subdivision ordinance was a condition for purchase. My number is in the phone book, my email address is publicly available, and yet no one from the organization told me that this was the case until this Tuesday (seven months after they agreed to purchase the land)," said city Rep. Beto O'Rourke. "It is apparent that this has become a convenient public reason to walk away from the project."
In addition, another local developer, Doug Schwartz of Southwest Land, sent a letter to the city earlier this week arguing that the city has provisions for variances in its development code available to a land planner who wants to try a different style. [letter] Schwartz considered but did not bid on the PSB land.
He said in an interview Thursday that his company might consider bidding.
Sapp's letter addresses the variance issue and the city's responsibility to create rules for the development.
He notes that Section 16f of the agreement provides that the buyer not be required to seek a variance of any of the requirements in the bid.
"The City and the PSB have created the vision, but the City does not appear to be willing to adopt the tools to implement it," states the letter.
In addition, the letter cites an example where Hunt applied for a variance in order to use "smart growth" principles on a West Side development and was denied by the city.
"The City's reluctance, if not refusal, to amend its regulatory scheme ... was not anticipated," Sapp wrote. "Given today's economic environment, we cannot accept the risk that the City will eventually get around to amending its ordinances in a manner that will permit the development of Parcel MPC in accordance with the requirements of the (purchase) agreement."
O'Rourke said he was "disappointed in the tone and content of Gary Sapp's letter to Ed Archuleta, which blames the city for Hunt's failure to meet their obligations. It is obvious that the market, the premium that Hunt bid on the land, and the inability for Hunt and the city to come to terms on conditions requested by Hunt for the development of the land are important factors."
Because Hunt's bid was so high, many people wondered whether they could make the deal work financially. As the housing market cooled off, that became even more of a question.
"They made a very generous bid of $27,000 ... now that the market is depressed I think they wanted out of the deal," said city Rep. Steve Ortega. "Any company wants to work under the terms that make the most financial sense. When it became clear it was going to be difficult to get all the concessions they wanted from the city I think they realized that financially the deal wasn’t going to cost out for them."
The botched land sale was by far the largest in PSB history, with close to 5,000 acres going for $27,132 per acre, for a total of $131 million. It was somewhat controversial among some local builders, who thought the land ought to be divided and sold in smaller pieces, but the PSB argued that one master developer would better adhere to the goals of the PSB master plan for the land. The process was more than a year in the making, but after qualifying six bidders, only two groups submitted bids. [aug. 1, 2007 npt background]
Cook said the next deal might not be all or nothing.
"I think we may have to break it up into three separate packages that should correspond with the three-phased approach we had in the original deal," he said.
The sale is seen as a test of the development market in El Paso, in terms of development style and scale, as well as the PSB, where the prior largest sale to a developer was 642 acres in 1986. [nov. 27, 2006 npt background] [june 8, 2007 master plan background]
While "smart growth" is a buzzword in vogue with city planners and developers, in many southwestern communities, the term has been used as a catch-all phrase that is used to hash out details between developers and governments, such as landscaping, park and other public amenity set-asides, and who pays, and how much, for public infrastructure such as streets and utilities.
In some communities, such as Las Vegas, "smart growth" is used to promote gated communities and homeowner associations that pay for amenities such as parks, open space and hike and bike trails.