Requirement that local vendors be used is dropped

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NEWS-SUN FILE PHOTO

A worker with JAB Stucco Co., from Roswell, prepares to do some stucco work on a home for ABS Homes in Hobbs recently. The Hobbs City Commission has approved a blueprint for financial incentives for homebuilders such as ABS Homes.

The Hobbs City Commission on Monday night approved an incentive program to encourage contractors to build new housing in the city, while dropping proposed requirements that would have made developers use local vendors to receive the incentives.

The new infrastructure reimbursement incentive program was approved by a 7-0 vote. It is based on previous development agreements and programs adopted by the City Commission.

“These are great tools for municipal staff because following up on this program, or adoption of this program, will be development agreements from those people utilizing the program wishing to receive the infrastructure incentives through a development agreement,” City of Hobbs development director Kevin Robinson told the City Commission.

The individual development agreements will still require approval from the City Commission, Robinson said.

The city approved its first multi-family housing development agreement in February 2012. Subsequently, a total of $3,872,886 has been awarded to contractors in multi-family housing development agreements that incentivize the production of market rate multi-family housing, valued at almost $91.8 million. The city says the multi-family development agreements, when fully disbursed, will have helped add 997 new multi-family housing units in the city.

In addition, the city has appropriated $4,955,805 in single-family housing development agreements since June 2012, resulting in 320 new single-family homes in the city.

The taxpayer-funded subsidies pay contractors for the installation of municipal infrastructure, such as water and sewer lines, streets to access new homes, and sidewalks.

“This is a reimbursement for those public infrastructures adjacent to the front property line of that structure,” Robinson said.

Robinson said the blueprint for development agreements has been tweaked on an annual basis in recent years.

The resolution adopting the incentive program for the current fiscal year states any development agreement for single-family housing may not exceed $100,000, or be less than $30,000, and must produce at least three new homes. It also caps the incentive at $250,000 for multi-family development agreements, with a minimum incentive of $75,000, and no stipulation regarding the number of multi-family units that must be built.

New language that required buying locally was stripped out by the City Commission Monday night. The proposed language required all developers of single-family housing seeking the incentive to “attest that no less than 65 percent of the delivered product was sourced through vendors within Lea County.” The proposed language required all developers of multi-family housing seeking the incentive to “attest that no less than 40 percent of the delivered product was sourced through vendors within Lea County.”

Mayor Sam Cobb asked City Commissioner Dwayne Penick, a private contractor, if Penick believed the 40 percent requirement was too high for developers.

“I think 40 percent might be a little high,” Penick said. “In my experience, no sir, I think that’s probably a little high estimate. We’re having to outsource so many different things because there’s such a shortage here of subcontractors that they know they’re needed, so their price is doubling in some cases. So, we’re forced to go outside the state or outside the city for other subcontractors, and material also.”

Cobb agreed that the 40 and 65 percent requirements were too high, saying the city “has some good velocity going in our housing.”

“And I want to be sure that we don’t lose our velocity by creating a barrier to that,” Cobb said.

City Commissioner Christopher Mills said requiring contractors to buy locally could raise local home construction costs even more.

“So that may have the opposite effect of what we would want,” Mills said.

Penick suggested lowering the requirement for multi-family housing contractors from 40 to 30 percent, if there’s any requirement at all to use local vendors.

“I think if we were to remove that, we would encourage other subcontractors to come here and work, which would help our economy and drive our price down for home construction costs,” Penick said. “Absolutely I would encourage to use local contractors, me being one, and local vendors to buy your materials from. There are a lot of times it’s just not the case to be able to get done in a timely manner.”

Mills said the language could be changed to make buying locally a goal, not a requirement.

“I just don’t want us to lose momentum,” Cobb said. “I just want to be sure that we don’t create an environment that in our effort to create housing, that we slow it down. I’ve got some real concerns about it.”

Robinson said the city’s current and past development agreements have had no requirements to use local vendors or buy locally.

Nonetheless, Cobb said ABS Homes, which has received prior incentives, proved that they were using local vendors.

“They were not required to, but they know politically that if they don’t, we’re not going to keep giving them incentives,” Cobb said. “If we find out that they’re making a conscious effort not to use local vendors, then we control that ability through the ability of being able to change the incentive program.”

“I definitely do encourage local vendors and keeping our local money,” Penick said. “But in some cases, you can’t.”

After more discussion, Cobb asked for a motion to remove the local vendor requirements. The City Commission voted 7-0 in favor of the amendment that entirely removed the requirements to buy locally. The resolution was subsequently adopted by another 7-0 vote.

After the resolution was adopted, the City Commission voted 7-0 in favor of a development agreement with Gold Creek Homes that will reimburse the Weatherford, Texas-based contractor up to $100,000 for the installation of municipal infrastructure.

Robinson said Gold Creek Homes is constructing homes south of East Bender Boulevard, in the Homestead area.

“They have been past recipients from our incentive agreements and they have complied with each one of those development agreements and delivered much-needed single-family homes into the city of Hobbs,” Robinson said.

In June, the City Commission approved three development agreements with homebuilders totaling $305,000 that will subsidize the development of 40 single-family housing units in the city.

One of those development agreements, with ABS Homes, guarantees the Hobbs-based contractor an infrastructure incentive reimbursement of up to $100,000, or $10,000 for each of 10 single-family homes, being built in the Zia Crossing subdivision, which is west of Zia Park Casino, south of West Millen Drive.

Another development agreement guarantees French Brothers of Alamogordo a subsidy of up to $100,000, $10,000 each for 10 single-family homes, also in the Zia Crossing subdivision.

The third development agreement also unanimously approved by the City Commission on June 18 allocates up to $105,000 to Habitat for Humanity of Hobbs for the development of 20 low-income, single-family housing units west of Memory Gardens.

The development agreements are intended to ease the city’s housing crunch.

Jeff Tucker may be reached at managingeditor@hobbsnews.com.