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.
