ColoradoBuilder Spring 2010
FORUM
Journal of the Colorado Association of Home Builders www.hbacolorado.com
Colorado’s new face of thriving home builders lean, smart and agile, they’re finding and closing deals
Legislature on the Attack
Builders rally defense against 50 (really) bad bills
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1 2 3 S A N TA F E D R I V E
features
ColoradoBuilder FORUM
contents »
spring 2010 vol. 14 no. 2
Legislature marches ahead Beleaguered builders muster strength to defend against 50 economy-destroying bills
photo provided by richmond america
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olorado’s changing face C of home builders Today’s successful builders are nimble, bottom-line smart and focused
On the Cover: The master suite of Richmond American Home’s Cascade model is complete with coffee bar, lavish master bath and an optional fireplace. With nearly 4,500 sq. ft. and base priced at $514,950, the two-story home has five bedrooms, four and a half baths and a three-car garage. // COVER PHOTO BY joe swift
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Member Spotlight Emil Wanatka is all about building community. That’s his goal as CAHB president this year, too.
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departments contents »
10
President’s Letter
12
From the Hallway
30
In Memory
34
Olympian mind-set will make us all winners
Worst session in years leaves business battered by Legislature
Village Home’s John Osborn will be missed
Giving Back
After ten years, HomeAid Colorado still puts roofs over homeless’ heads as they get back on their feet
40
HBA and You
44
Home Building’s Impact on the Economy
46
Protect Yourself
How local HBAs boost members’ businesses
Charts show industry’s importance in Denver
Spring cleaning comes to subcontractor agreements
Colorado Builder Forum is printed on elemental chlorine-free paper in conjunction with the International Joint Commission and is consistent with the U.S. Environmental Protection Agency’s standards.
Please recycle this magazine.
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President’s Letter
Olympic athletes are great examples of how we can enhance our businesses Like millions of others across the world, my wife and I spent a number of evenings in February eating dinner on the living room floor, watching the Winter Olympics. I came away from this thinking that while the Emil Wanatka CAHB President most well-conditioned athletes have the greatest chance of winning a medal, what is equally, or perhaps more important is the mental attitude the winning athletes possess. There are many stories of competitors who trained and sacrificed for years for their one chance at a medal, only to become injured or fall down and miss that chance. The ones who do succeed possess an indomitable spirit and unwillingness to quit. That eventually leads them to success. I believe if we take some of that spirit and mindset from these athletes, it will benefit our businesses and enhance our daily lives.
Thanks to IBS sponsors The record rainfall in Las Vegas during this year’s International Builders Show didn’t seem to dampen the spirit of those attending the Colorado reception. The reception provided a respite from the rigors of walking the show floor and an opportunity to network and catch up with friends from Colorado. This fun event would not have been possible without the support of our sponsors. Thank you all for a wonderful evening:
ColoradoBuilder
FORUM
www.hbacolorado.com Spring 2010 vol. 14, no. 2
Official Publication of the Colorado Association of Home Builders
CAHB Senior Officers President Emil Wanatka President-Elect Peter Tobin Treasurer David Tschetter Secretary Jeff Piper Immediate Past President David Hansen Government Affairs Chair Chris Elliott Executive Officers Council Chair Roger Reinhardt State Representative to NAHB Skip Howes
CAHB Staff Executive Vice President Rob Nanfelt Vice President of Public Affairs Amie Mayhew Executive Secretary Sally Kemp
CAHB editorial board Tom Brinkman, Chair Bill Armstrong Randy Feuerstein
Tom Hayden Duane Marlatt Peter Tobin Merlin Widick
600 Grant Street, Ste 550 Denver, Colorado 80203 P: 303.691.CAHB (2242) F: 303.639.4954 www.hbacolorado.com Dedicated to the advancement of the home building industry, Colorado Builder Forum is published five times a year for members of the Colorado Association of Home Builders. Copyright © 2010 by CAHB. No material may be reproduced without the express permission of CAHB. Acceptances of advertisement in Colorado Builder Forum do not imply endorsement or approval of the product or service advertised.
O ur title sponsor: Sierra Pacific Windows O ur key sponsors from the insurance industry: Willis of Colorado, Crump, Ironshore, and First Mercury Financial O ur law firm friends from: Foster Graham Milstein and Calisher
Our contributors: StrucSure Home Warranty and Boise Cascade HomeAid Colorado celebrates ten years On any given night in Colorado, there are more than 18,500 people homeless, many of them children and families. As president of CAHB, one of my duties is to serve on the board of directors of our charity of choice, HomeAid Colorado. I’m very proud of the fact that since 2000, the home building industry has contributed more than $2.8 million worth of in-kind donations of labor and materials to this worthy charity. HomeAid is currently working in partnership with the Volunteers of America to build three homes over the next three years to provide housing for homeless female veterans, who are, unfortunately, a rising demographic in the homeless population. Thank you to staff, board members and everyone who has contributed in the past. You should be proud of your achievements!
6160 S. Syracuse Way, Ste 300 Greenwood Village, CO 80111 T: 303.662.5322 F: 303.397.7619 www.custompublishingco.com vice president – group publisher
Maureen Regan-Cannon 303.662.5215 mregan@wiesnermedia.com project manager
Martha Dickenson 303.662.5280 mdickenson@wiesnermedia.com editor
Kim Jackson kim@writingwerks.com art director/advertising production
Lindsay Hayes
account executive
Martha Dickenson
marketing coordinator
Kelly Trujillo 303.662.5208 ktrujillo@wiesnermedia.com Dan Wiesner Jon Rich vice president – production/operations Amy Korb credit manager Patty Barbosa accounting specialist Amber Stroud director of first impressions Christy Markley chief executive officer
chief financial officer
Emil Wanatka CAHB President
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from the hallway
True or False: Legislature is creating new jobs As the gavel dropped January 12, 2010 and
Rob Nanfelt CAHB Executive Vice President
called to order this year’s legislative session, many in the Colorado business community were pleased to hear the strong, bipartisan and unanimous message from our legislative leaders that they were going to focus on strengthening our state’s economy by protecting and cultivating new jobs. Unfortunately, that sentiment lasted for all of five minutes. This session has been the most damaging for business that I’ve ever experienced. Here are a few examples of anti-business bills that are being promoted at the Capitol this year. HB-1012 limits the ability to verify the validity of workers’ compensation claims through commonly used fraud detection procedures. There are abuses of all systems; checks and balances must be required to ensure fairness, especially for those workers who are injured. This bill makes it more costly and time consuming to address fraudulent behavior, which leads to an increase in the cost of doing business. HB-1017, alters a 1981 state law, which prohibits counties and municipalities from enacting any ordinance that would control rent on private residential property. The legislation was adopted due to a concern that, if rent controls could be imposed on private properties, investment in rental housing in Colorado would significantly decrease. As crafted, the bill calls for a voluntary system with local governments. Yet this opens the door for any remodeling, construction or new development project – regardless of size or scope – to be subject to such requirements. Obviously, it is in the best interest of our state to have a strong and healthy housing market. A recent Denver Post editorial noted that 93 percent of U.S. economists believe a ceiling on rents reduces the quality and quantity of housing available. It quoted Swedish economist, Assar Linbeck, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.” SB-185 modifies residential warranty of habitability laws, which are currently implied into every residential rental agreement. The existing law was put into place less than two years ago, following an extensive mediation process that cost taxpayers thousands of dollars. This bill removes the requirement for a tenant to provide written notice before a warranty breach, and it modifies the standard of condition that would constitute a breach. Additionally, it creates a right of action for tenants including disciplinary action and treble damages. This bill will lead to an increase in rental housing costs, as well as limit building new properties, due to possible litigation. HB-1263 increases the state income tax on individual total compensation above $250,000 and limits the deductibility of income above that amount for corporations. That means the company pays taxes on an amount over $250,000 rather than deducting it as an operating expense. This bill will hurt future job growth and drive company headquarters and high-paying jobs away to other states, making Colorado less competitive. HB-1107 restricts including agricultural lands within urban renewal areas and outlines procedures for county assessors when classifying agricultural land for property tax purposes. That damages the prospects of additional job growth in Colorado and could eliminate 12 to 15 percent of the total number of jobs our state could gain in the next year. HB1269 significantly increases the damages in state employment discrimination lawsuits by adding, for the first time, pain and suffering penalties, punitive damage, attorney’s fees and other remedies already available under federal law. Duplicating expanded lawsuit remedies for large businesses already available under federal law is unnecessary and will permit plaintiffs to “forum shop.” Exposing small businesses — currently exempt from federal law — to significantly expanded new liability every time they make a decision to hire or fire will discourage critical small business job creation. As you can see, we’ve certainly had our hands full this year. Hopefully we’ll be successful in minimizing the damage and be able to come back next year with a new slate of more businessfriendly legislators.
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The changing face of home building in Colorado
From a home building giant to statewide and oneman shops, builders are finding opportunities and closing deals by Kim Jackson
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Everything’s changed.” You hear it at meetings, lunches and dinners. Part of the change is the face of Colorado’s home builders. Some have thrown in the towel. Others are frozen like deer in headlights. Still other hang on, doing things as they’ve always done and expecting different results. That’s one side of the story. The other side is here, in this one. Sure, permits are down, banks are tight fisted and buyers are cautious. Even so, some builders are moving on
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and thriving in Colorado. There’s the big national builder who’s kept a close eye on the balance sheet — and is building in several communities this year. There’s the statewide builder who’s risen from the ashes of bankruptcy to build and sell homes again. And there’s the brand-new builder who’s turning a layoff into new jobs — and homes for his buyers. Bottom line: Everything HAS changed. If you want to be one of the faces of home building, it’s time. Get creative. Get focused. Whatever you do, get moving.
High liquidity minus low debt and land equals great position for Richmond American Homes After building homes for the past 40 years, David Mandarich has learned a thing or two about the cyclical nature of the business. The president and chief operating officer of Richmond American Homes began building homes in 1972 and when he teamed with Larry Mizel in 1977, they built just 27 homes in the Denver metro area that year.
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Four decades later, Richmond American Homes has built 47,000 homes in Colorado and more than 162,000 nationwide. “We’ve seen a number of downturns,” Mandarich reflected, “both small and large downturns. You have to be always prepared. And to be prepared means to have a lot of cash on hand, to make sure we survive any kind of change in the housing cycle.” The company has certainly done that — and then some. On the New York Stock Exchange for 25 years, Mandarich said the financial statement at the end of the fiscal year reflected more than $1.7 billion in cash. That means, according to Mandarich, that out of the top builders in America, Richmond American Homes has the best balance sheet and is the lowest-leveraged home builder in the industry. The approach Mandarich and Mizel have taken to building homes has been a disciplined one. As the home building industry hit its peak in 2005 and many builders were snatching up land left and right, Richmond American put the brakes on buying it. “It took a lot of discipline to stop buying land in those times,” Mandarich said. “Through our experiences over many years, we keep our land at a moderate level, keep our debt at a low level and we keep high liquidity. In good times and bad, we’ve been very disciplined with our balance sheet.”
As market changed, focus shifted to first-time buyers
Customer personalization and financing ensures Richmond will be around a while At the heart of Richmond American’s success is its customers. “We really want to make sure we take care of customers,” Mandarich said, “because customers are what makes it work. Customers are what have made us a leader in Colorado for several decades. That’s very, very important to us. The last couple years, we’ve really picked up the pace of customer satisfaction.” During downturns, you don’t see discounts on Richmond American’s homes. Instead, the builder adds value to its EnergyStar®-rated homes by providing special financing and its secret ingredient: personalization. For every home the company builds, customers can visit the home gallery to select their cabinets, counter tops, floor coverings, structural options and even finish their basements. “We make it very personal,” Mandarich said. “And that way, we distinguish ourselves from other builders where everything is included. It also distinguishes us from a resale. We have to give the customer a great experience, starting with our web site. We have to give them great customer service in the sales process. We have to give them a great house. We have to give them great financing.” The builder also maintains its own warranty program. Mandarich noted that customers know they can count on the company to be there to service the house in a year. “So many builders have gone broke and run away from the customer; people know when they buy a house from us, we stand behind a wonderful home.” provided by richmond america
With housing size shrinking to an average of 2,000 to 2,200 sq. ft., Richmond American is well poised to capitalize on that trend. The company builds first-time, first-move-up and
second-move-up single family homes, ranging from $200,000 to $300,000 in Colorado. “But when the market changes,” Mandarich said, “we put more emphasis in first-time homes — and we’ve been able to open more affordable subdivisions.” It’s a good strategy, not just for the house size and number of prospective buyers in that niche, but for the fact that financing is more readily available for government conforming mortgages — which Richmond American provides for its buyers. In fact, the company finances more than 90 percent of its buyers.
Liquidity is key for survival
With four bedrooms, two and a half bathrooms and a two-car garage, Richmond American Home’s Aaron at Brighton East Farms is a cozy 1,650 sq. ft. At just $189,500, the home features an open and spacious main floor with family room, kitchen and breakfast nook.
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Going forward, it’s business as usual for Richmond American Homes. “This is a great industry. It’s a great business to be in,” Mandarich said. “The most important thing is to always understand your costs and who your customer is, then to take care of your customer. And in good times and bad, make sure you have a lot of liquidity, so you can continue to survive in a volatile industry. You have to be nimble on your feet and builders
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Richmond American Home’s Alison at Buffalo Run East features a living room or optional study off the front entry way that leads to open living among the kitchen, family room and breakfast nook. At $239,950, the 2,100 sq. ft. home has four bedrooms, two and a half baths, a two-car garage and an unfinished basement.
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that are in trouble have always had too much land and too much debt. One of our mantras is: A lot of liquidity, less land and a really strong balance sheet.”
Good advice. And a big lesson Matt Osborn just learned first hand. When the market began to move in the wrong direction late in 2007, the president of Denver-based Village Homes was forced into a bind. While the company had closed on nearly 10,000 homes during its 25-year history, the banking syndicate he had worked with for years changed some of its terms and caused Village Homes to stumble. Village Homes provided financing for all its vertical construction, along with a significant portion of its land development work. Expecting the banks’ usual one-year extensions in mid-2008, Osborn was surprised by the additional equity requirements, higher interest rates and slashed extensions to just 90 days. “We had a significant land position,” Osborn said. “With some of those new constraints from our lenders, combined with absorption that started to slow down, things started getting pretty challenging through the middle of 2008. In early November 2008, we began filing for Chapter 11 protection.”
Tough situation: How to continue making money when banks wouldn’t close loans? Through the end of that year and the beginning of 2009, Village Homes had 130 homes under construction — along with a significant amount of land. “We tried to work with banks to determine the best way to approach the liquidation of various assets and at the same time, work some formulation of the plan for a reorganization,” Osborn said. During first quarter last year, Osborn said they reached an agreement that would let Village Homes sell and close homes, yet not build new ones. That in itself raised challenges because the builder had buyers under contract who wanted to move into their homes. In many cases, the house was finished and the banks would not let the builder close on them. That was finally ironed out by last May.
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Investors pick up Village’s land and homes — and get rid of banks’ liens While working through the operational challenges, the company searched for financing and investor partners. Part of Village Homes’ agreement with the banking syndicate was an outline of a process that allowed the company to purchase certain land assets that Village Homes owned and the syndicate financed. Last summer, Osborn began working with Lowe Enterprises, a California-based company with a local presence. Osborn expected Lowe Enterprises to follow the banks’ plan, yet Lowe had other ideas. Lowe’s plan was to buy up all the The new Village Homes’ Del Mar has 2,370 sq. ft. with three bedrooms and two and a half baths. Village Homes assets, including the The great room combines the living and family room for more living space. The house boasts a homes under construction, land and separate master suite and a three-car tandem garage. lots — which eliminated all the banking syndicates’ liens on the properties and took them out of the As part of the new face of Village Homes, Osborn said picture. After a few months of negotiating, Osborn said, “we it’s outsourced its design center to a trade partner. The got an agreement with the bank in October and we were able company has also outsourced its architectural and mainto close the deal at the end of last year.” As of January, Lowe tenance groups, while maintaining purchasing, accountEnterprises is now the managing partner and Homebuilding ing and human resources with a smaller team in house. Capital Solutions — an affiliate of Lafayette-based Colorado “Frankly, we’re able to do more with less than we have in & Santa Fe — is majority owner of the New Village Homes. the past,” Osborn said. “When the market is good, a lot of The new company bought just under 60 homes and builders — and we were right there with them — added close to 1,000 lots; all were formerly Village Homes assets. people. That was easier to do than really address a more Osborn said they began selling and closing homes then, as efficient approach to a challenge that may arise.” Looking well, focusing primarily on the homes they had in inventory ahead, he plans to remain lean and nimble. “We’re going before the fiasco. He’s beginning to sell new starts on some to be operating more efficiently with a smaller team and of the lots that were purchased, and is selling some of the take advantage of the functions that can be appropriately other lots to developers and builders. outsourced,” he said.
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Leaner staff, lower-priced land basis positions Village for future
Financing will be biggest challenge to smaller builders
This experience has changed the way he does business. “With the transaction and purchase price, [the restructuring] allowed us to re-establish a new basis in the land and lots — and lets us approach the market in a different way than the old company could. The new company has the advantage of a lower land basis, which lets us set at market pricing and still have some profit in the home. That’s one big advantage.” A more efficient, smaller company now, head count hovers around 25 people in the metro area. “We’re more nimble in the marketplace, which will allow us to take advantage of new opportunities that will be out there,” Osborn said. “Whether it’s land, product or whatever the case, we’re going to be able to address those opportunities out there. And we’re a much more cost effective, efficient organization going forward, than the company was in the past.”
Osborn sees challenges ahead with financing large, masterplanned communities. As such, he expects that most building activity in the near term will be with finished lots and returning to some communities that may have been overlooked before. “I don’t think sprawl is going to be as big an issue in the near future,” he said, “because there are so many available and finished lots on the ground in good locations that are going to feed the demand here for the next three to five years.” The biggest challenge to smaller builders throughout these next two years will be access to capital. “There’s going to be very limited traditional debt financing,” he said. “Builders who are going to survive are going to look for different alternatives and that’s going to be expensive, private money. People are going to have to get more creative about that access to capital, because it’s just not as prevalent as it has been.”
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Opportunity knocks: New builder answers Osborn nailed it on the head — and one of those companies got started last year. Chris Lonigro has worked both sides of the fence — both as a superintendent and national product manager for Richmond American Homes and as a national builder sales rep for a material supplier. “It was good exposure on the construction side,” he said, “and I learned the more corporate and finish side of things on the supplier side.” When he was laid off from the supplier in January 2009, Lonigro stood up, dusted himself off and looked around for opportunities. Throughout his eight years in the home building industry, the CSU Construction Management grad had been approached by investors to build homes. Yet as an employee, he didn’t have any free time, and truthfully, didn’t really consider it. After all, there’s something to be said for getting a regular paycheck. So when he was approached last year, he said, “The biggest piece I struggled with was getting over that fear of whether I could make this work on my own. At the end of the day, you have no options but TO make it work. So I said, ‘Hey, let’s give it a shot,’ and we closed on our first property March 13 last year.”
He also hired consultants for his branding and web site design on the first building. “Right now,” Lonigro said, “it’s really about the design and brand of the product. Down the road, after several successful products, our company name will mean something. As a small company, you look for consultants that make the partnership work.”
Small means flexibility and agility Being small is good for Lonigro. “The low overhead we have enables us to get into projects that some of the bigger guys can’t touch,” he said. “We can be more flexible and nimble — and can switch gears a little faster, depending on where the market stands.” For now, he’s focused on building in the Highlands neighborhood. The company broke ground on its first project early in March and has bought another property in Highlands. With its proximity to downtown, local restaurants and commercial activity in the area, Lonigro feels Highlands is a vibrant area with great upside potential. What’s more, he sees an opportunity for a product that fits with the young professionals who want to live there, yet can’t afford the higher-priced condos and town homes in the area. Starting a business made a lot of sense to Lonigro. “Right now,” he said, “I think there’s a lot of opportunity. Builders really have to look at their models and adjust what they’re doing. That’s what we’re seeing. A lot of people, who were trying to push through what they did and how it worked when things were booming, are finding it doesn’t work. What it takes now is really looking at the development side and finding a need in the market. If you can do that, then hopefully, you’ll have a little more success.”
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For the near term, he sees big builders dominate the market, “because they have access to capital that the small builders don’t,” he said. He also expects to see new building companies emerge from the fallout of this latest downturn. “There’s always such an entrepreneurial spirit in the industry that smaller, new companies are created,” Osborn said. “As the market recovers, you’ll see some of these small builders take advantage of smaller opportunities that the publics won’t touch. You start to put a number of those deals together for the small builder and you can build a decent book of business. That is the next group of profitable builders that will have a significant impact on the marketplace going forward in the next five, ten years.”
Strategy: Focus on one neighborhood, subcontract almost everything With his investor partner, they formed Generation Development, which builds condominiums, town homes and flats for the lower end of the market in Denver’s Highlands neighborhood. He observed, “The Denver market continues to be strong in a lot of areas and there are still opportunities. With land values coming down as much as they have, you can actually come in and build a product that does make sense for the market.” As a one-person shop with silent partner investors, Lonigro needs to make the most of the time he has available. It’s why he’s opted to subcontract nearly everything. The partnership formed a general contracting company, which subcontracts to Generation Development. He outsources his purchasing because “that really makes sense for a small builder like myself. I get the big builder systems at the price a small builder can afford.”
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Legislature Builders, businesses fight against
50 damaging bills this session
by Kim Jackson
A
s we approach the home stretch in this Colorado legislative session, beleaguered builders are mustering their strength, will and conviction to defend against several bills that could cripple the industry — and ensure that this key economic engine for the state will not recover for many years to come. That means no new jobs for Coloradans — and for the consumer, less affordable housing — if key bills are passed. And while he’s looked around for evidence of good news anywhere, Chris Elliott, chair of CAHB’s
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Government Affairs Committee, said, “I’m not coming up with any. We’re under assault and HBA members need to become actively involved in the process. There’s no government program to bail us out, so we’ve got to negotiate some mine fields to make sure that we can continue to operate and not be beaten up too badly by any one of these things.” Steve Durham, CAHB lobbyist, added, “There are 50 bills that adversely affect business in one way or another, and with which we need to be concerned.”
Construction defects legislation is the biggest concern Topping the list of legislation to defend against is an anticipated measure that would overturn the previously decided Goodyear case and award plaintiffs in a construction defects lawsuit prejudgment interest from the home’s date of purchase. “That has the effect of doubling or tripling the cost of construction defects suits,” noted Durham. Similar legislation was introduced and defeated last year and while it hasn’t been introduced yet, Rob Nanfelt, executive vice president of CAHB, expects it to be introduced by the end of the session. The leadership of Colorado’s General Assembly produced a YouTube video that decried home builders, portrayed the industry as a predator to home buyers and urged viewers to support legislation that gives home buying consumers their “rightful due.” “That’s one of the roughest things I’ve seen in my ten sessions here in Colorado,” Nanfelt said. “To single out an industry like that and kick us while we’re down is pretty unfortunate. Three of the four members of leadership in the House and Senate were actually viewed in the video. The fact that they all signed off on the resolution that went out to participants in Democrat precincts indicates that something’s up. We need to stay on our toes, because we just don’t know what exactly it is and when it’s going to happen.” The CAHB has introduced legislation that essentially corrects the General Security Insurance Company decision, where the Colorado Court of Appeals upheld a lower-court decision that under its general liability policy, the insurance company did not need to cover builders’ or their subcontractors’ defense costs and lawsuits on construction defect claims — even though they had paid premiums for that coverage. Durham said, “The legislation introduced will ensure that the insurance everyone purchased to cover construction defects litigation is in fact valid and that the builders get the insurance coverage they paid for.” The usual plaintiffs’ attorneys in construction defects cases are supporting the CAHB-introduced legislation because, according to Nanfelt, “it’s in their best interest if that bill passes. They have to sue people with deep pockets, so they can get paid. And if there are no deep pockets, there’s no incentive. On the other hand, we don’t want our builders to be without any kind of protection at all, which is potentially the case right now.”
Several workers’ comp bills could hurt industry “There’s a lot of anti-business sentiment this session, probably the most I’ve seen since I’ve been around,” Nanfelt said. “It started with a number of bills that addressed the removal of the tax exemptions, which more or less dinged everybody. Then it moved on to a number of bills dealing with workers’ comp.” In fact, seven workers’ comp bills are before the legislature that could hurt both the industry and general business in Colorado. [See sidebar.]
Slew of workman’s comp bills will ultimately cost consumers big bucks Seven proposed workman’s compensation bills have been introduced so far this session. Here’s a brief explanation of each one. For more info, your weekly Capitol CloseUp gives details on each bill.
House bills
H B10-1009 proposes to change the board of directors at Pinnacol Insurance. H B10-1012 limits insurance companies’ use of surveillance on employees who have filed worker’s comp claims. Nanfelt said, “If indications are that employees are cheating on worker’s comp, this bill says insurance companies can’t use surveillance on them. Obviously, if this passes, rates are going to go up.” H B10-1038 mandates an employer or the insurance carrier to provide a brochure to a workman’s comp claimant that describes contacts, as well as rights to medical treatment, benefits payments and the claims process. H B10-1356 rules that if the surplus of Pinnacol Assurance is more than 800 percent of risk-based capital, a dividend credit must be issued to policy holders so that it drops below that 800 percent watermark.
Senate bills
T he four-section bill proposed through SB10-011 ranges from mandating a physician disclose his or her relationship to an insurer’s claim to prohibiting denial of a claim, prohibiting a physician from communicating with the insurer without the claimant present and reversionary interests of an insurer for indemnity benefits are void against public policy. S B10-012 changes the penalty for violating workman’s comp law from $500 to $1,000 and for knowingly delaying medical payments for more than 30 days after the claim. S B10-013 is another three-part bill that requires workman’s comp insurers to survey a limited number of claimants and report those findings to the department of labor and employment and post on the web site. It also requires the CEO of Pinnacol to submit an annual report to the Governor and the General Assembly’s designated subcommittees on the business operations, resources and liabilities of the Pinnacol Assurance Fund. Finally, the bill requires the division to post on its web site the procedure for filing a complaint with the division.
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Durham added, “That’s too many bills. We have seven bills to ask the building community to take an active role in defeating these bills. Talk to your representative and senator and encourage them to vote ‘No’ on all of them.”
explained that this is something that’s not being done anywhere else in the country. “We’ve been trying to work with the Governor’s Energy Office for the last 18 months, to get its support for this program. Finally, we decided to run this legislation. If we don’t get anywhere this year, we’ll introduce it again next year.”
Rent control bill is back While most governments and economists have deemed that rent control is a failed experiment, the issue has surfaced once again in a bill this session. “It’s shocking that I’m actually talking about that in the 21st Century,” Nanfelt said. The issue has been introduced for the last several sessions, and while CAHB has always been successful in killing it, he added, “I don’t know if we will be this year.”
Land use bills could surface by session’s end
Military base buffer bites dust A bill was introduced that would allow military bases in Colorado to expand their buffer zones to two miles around the base. This bill restricted property already zoned for residential use and allowed the military to sterilize the land around bases without paying for it. “We’ve managed to convince legislators to amend it down to a notice bill,” Nanfelt said.
Bill mandates water-smart homes Building water-smart homes is already a standard business practice for many builders who offer ultra-efficient water fixtures, including faucets, toilets, dishwashers, clothes washers and landscaping. Yet CAHB opposes the government foisting mandatory offer bills on the industry. Nanfelt explained that if the governor’s office wants to create a better way for consumers to use water-efficient fixtures in their homes, “they shouldn’t put it on our backs. If something happens and someone doesn’t get the memo and offer it properly, then it’s a ‘Gotcha’ provision on us.” He added that because only six percent of the water in Colorado is used by municipalities, if the state wants to address water conservation in a real way, it “needs to find solutions that are going to affect the greater users of water,” he said. “Creating a mandate on those of us who use only six percent of the water in Colorado is a very inefficient way to reach that kind of solution.” For its part, CAHB introduced an innovative green building bill that provides incentives for builders to build above code for their buyers. The bill provides grants for people to make their existing homes more energy efficient, and therefore more attractive to prospective buyers. Nanfelt
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The Government Affairs Committee is closely watching a series of bills that would restrict the use of urban renewal authorities in agriculturally zoned land. Elliott explained, “If you have a big employer that’s coming to town and wants to build a new building where there’s not sufficient infrastructure, you really need the ability to tap into urban renewal-type funds to make that work. And if they take that away, that will strongly discourage business from coming here.” As we approach the end of the session, Elliott is concerned that more land use issues will surface and some general business issues will further erode, due to budgetary concerns. “We’re spending a lot of time finding people to testify and we’re directly negotiating with proponents of some of these bills. We also have a press strategy to counter some of the provisions we’re not able to negotiate.”
Defend your livelihood. Get involved. If you haven’t done it yet, Elliott encourages you to contact your legislators. Tell them how these bills will hurt your business and your community’s economy. If you don’t know what to say, check out the talking points on CAHB’s CapWiz. When the CAHB sends out legislative alerts or asks for your help in contacting legislators, do it. “There’s strength in numbers and we need everyone to get excited about preserving our industry and moving forward,” he said. Nanfelt added, “The folks who are in charge right now talk about how they want to create jobs, but they do things that create the opposite effect. We live in a constitutional republic and it’s our prerogative every couple of years to make sure we have the right people in charge. If the building and business communities are willing to put the dollars and the right efforts in play, we can get folks who will understand those issues, want to grow the economy once again and basically support the American way.”
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member spotlight
by Kim Jackson
Whether snow or water, Emil Wanatka’s favorite sport is skiing. And it’s become a family affair with Susie and their children Amanda and Max. He also likes to skate, as with Amanda above. And he met his business partner while volunteering to teach people with disabilities to ski.
Emil Wanatka takes on challenge of CAHB President is to visit with characteristic Goal each local humor and optimism HBA this year
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Regardless of the direction their lives
Met wife while living in tepee
have taken, Emil Wanatka has been lucky to have his wife of 32 years, Susie, by his side — especially when you consider how they met. The president of Durango-based Timberline Builders, and 2010 CAHB president, grew up in a Wisconsin resort community, where his family owned a large resort. “It was the most wonderful place in the world for a young guy to grow up,” he said. “You could go anywhere by water that you could by land. The network of lakes were interconnected and very beautiful.” His work ethic was instilled at the resort, by doing whatever jobs needed to be done, such as tending to the grounds, working in the kitchen, stocking shelves, cooking, waiting on tables, yard work. Even so, he had plenty of time to be a kid. “In the summer, all we did was swim, water ski and fish, all day long,” he explained. “There were many summers where I never slept indoors at all. We would just kind of crash at the end of the day and start all over again the next. It was a magical way to grow up.”
While their grandfathers were best friends, Susan and Wanatka never met during their formative and high school years. He was graduated from high school in 1972 and three summers later, while living in a tepee, a mutual friend and Susie stopped by to see him. “The first time we met was when I was literally sitting in the middle of a tepee by myself with a loincloth on,” he said. “The tepee was in a really cool spot, on an isthmus between a lake and a river. It was public land and back in the day, nobody really cared. You could pitch a tent, or in this case, a tepee, and nobody really bothered you at all.” They married in 1978. Skiing has always been a big part of Wanatka’s life, whether it’s been on water or snow. For about six years after they were married, he worked in the ski industry — in Taos, NM, Washington and Bozeman, MT — in the winter, and together, they ran a retail store during the summers. “Once we got married and kids were eminent,” he said, “that wasn’t really a sustainable way for us to go forward.”
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Colorado Builder Forum
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member spotlight
Transformed a small business into a big company As an entrepreneur who’s had an eye for business, the couple bought a small California swimming pool service in 1983. “From that little business,” he explained, “we grew it into a pretty large company that manufactured products for swimming pools.” They packaged chemicals for the swimming pool industry and provided services for commercial complexes. Financially, it was great for the couple, but, Wanatka said, “we didn’t like the pace and hubbub in California.” So in 1989, they sold the business and traveled the west, looking for a nice, small town where they could raise their children. From Bozeman to Jackson Hole, Taos, Telluride and Santa Fe, “we went everywhere,” he said.
Introduction to industry was by helping build his own home They flew into Durango on a Thursday and nearly missed their flight that Sunday; they were putting land under contract. Because he had sold the business and was on a hiatus from work, he worked on the crew to help build his home. “Of course, they didn’t pay me anything, which was good,” he said, “because I didn’t have any experience.” From there, he and the builder went on to build some small investment properties. Curious about the process from start to finish, Wanatka in 1991 built a small home from the ground up by himself. The following year, he and his builder friend built 15 homes. From there, he’s built a number of multifamily projects, apartment buildings, custom homes and light commercial projects. After building those first15 homes, something changed in Wanatka. “I became passionate about building homes and communities,” he said. “I can remember the day and the circumstances, vividly. It was the first little development I did and I had built homes on both sides of the street. It was the end of the day and as I walked where my truck was parked, I glanced over my shoulder back up the street. I saw three different families, at the same time, leave their homes to walk up the street or across it to a neighbor’s house. It hit me that not only did I just build a house, I created a community and this interaction of families that led to friendship. At that point, it became a passion for me. I got the bigger picture of it all right there.”
Met future business partner while volunteering on the slopes Wanatka has spent many years volunteering for the Adaptive Sports Association, teaching people with disabilities how to ski. It’s where he met business partner Jerry Pope. “We were both builders, we shared the passion in helping people with disabilities and shared a lot of the same perspectives about life,” he said. And while they spoke often of working together, they didn’t begin until two or three years later, when Wanatka had a chance to pick up a property — and had 24 hours to close on it. “That was in 1995,”
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he said, “and since then, we have built hundreds of homes together. We’ve never had a cross word and to this day, we don’t have a signed agreement between the two of us. It’s just been this wonderful relationship; we’re still best friends, business partners and have never gone sideways.” Today, Wanatka’s favorite thing is giving back. “Being in the industry allows me the opportunity to meet with my peers and make a positive impact on housing,” he said. “And giving back is that contribution to community in terms of providing housing, in helping to guide how the community goes forward, being able to participate with charitable organizations — all of those things that business people should do when they’re part of a community.”
Actions speak louder than words Of all he’s accomplished in his life, Wanatka feels lucky to have had Susie by his side. They have two children, Max and Amanda and Wanatka said, “I’m so fortunate to be married to someone who is just so supportive of me, who has bought into my visions for where we go and had faith that I could take the family through life.” One man has had an irrevocable impact on Wanatka’s life. Bill Mashaw had retired as executive officer of the National Hardware Association in Durango. A tireless, selfless man, Wanatka said Mashaw gave back to the community at every turn, including launching the roundup program where the electric bill is rounded up to the next dollar, and the difference is donated to charity. He also started the local Big Brothers/Big Sisters chapter. “He was instrumental in working in affordable housing. He always, always saw the positive in people, took the cooperative approach and never wanted accolades for himself.” As such, Mashaw became Wanatka’s mentor, without even knowing it.
One morning, Wanatka wrote a long letter to Mashaw, thanking him for his mentorship. “Shortly thereafter,” Wanatka said, “he passed away. Even though I had a sense of community and giving back, he’s the guy who really, really instilled that desire in me. The thing to take away from that is more than what you say, how you act is so important, because you never know who’s watching you or who may use you as an example of somebody to model.” Outside work, Wanatka stays busy. Like he did, his children have grown up water and snow skiing. He still volunteers with the Adaptive Sports Association, as well as Big Brothers/Big Sisters. He likes to roller blade and whenever he travels, he brings his skates. And he’s a tinkerer, specifically with old English motorcycles. Currently, he’s restoring a 1965 BSA motorcycle.
Year’s goal: Visit each local chapter, serve as conduit for locals, state While serving on the CAHB executive committee, he had ideas about what he thought his role should be when he became president. Yet that changed, due to the state of the industry. “Now, it’s really important for me to act as
an ambassador and spread the word about the benefits of membership in the home building federation,” he said. His goal is to visit each of the 15 local chapters throughout the year and sees himself as a conduit, where he can take information from the locals to the state or to one another, “where we can work together toward a common goal of success for everybody.” He sees the biggest hurdles this year as the economy, jobs and the legislature’s continued attacks on the home building industry “We have enough challenges as an industry, without the increased regulations that we’re still seeing come at us every day. These regulations make it harder than ever for us to move forward and my fear is that it’s just going to prolong our ability to recover.” “Every president has a goal of what he wants to achieve,” Wanatka said. “I’m following a succession of really wonderful, bright, intelligent guys. For example, Jack Acuff laid a foundation to ensure the organization is on the best financial track it could be. David Hansen has skill sets in negotiating things and looking at situations with a really good perspective. Since some of those more foundational things are in place, I see myself acting as the face of CAHB this year.”
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in memory of
John Edward Osborn
September 25, 1943-March 27, 2010 John Osborn was born to Bernetta and Eugene Osborn on September 25, 1943 in Norfolk, Nebraska. The fourth of eight children, he grew up in York, Nebraska, where he attended St. Joseph’s Catholic High School. He earned a bachelor’s degree in Physics from Creighton University and a bachelor’s degree in Civil Engineering from Marquette University. While attending Marquette University, John met Mary Elizabeth Ross. After graduating from Marquette, John and Mary both enlisted in the U.S. Navy; she as a nurse and he as a member of the Seabees. They married during the middle of their service in Grosse Pointe, Michigan on May 11, 1968. After service in Vietnam, among other stops, John and Mary settled in Denver, Colorado. John attended the University of Denver and earned a master’s degree in Business Administration. He joined the Writer Corporation, a local home building company, in the early 1970s and was involved in developing such communities as Willow Creek in Centennial and The Pond in Arvada. He later moved on to become a senior vice president for the Ken-Caryl Ranch Corporation, the master developer of Ken-Caryl Ranch in Jefferson County.
In 1984, John Osborn founded Village Homes. Over the next 25 years, he built the company into one of the nation’s premier residential real estate development companies. Builder magazine named Village Homes America’s Best Builder in 2002. John was a well-respected leader in the home building industry, both locally and nationally. He was President of the Home Builders Association of Metropolitan Denver in 1992, was named Builder of the Year in 2003 by the Colorado Association of Home Builders, and was a Life Director of the National Association of Home Builders. John also served as a member of the Board of Trustees for Metropolitan State College in Denver and as a founder and board member of Steele Street Bank & Trust. John is survived by his wife Mary, his sons, Matthew and Mark, his daughter Kate Lively, daughters-in-law, Kelly and Melissa, son-in-law, Ethan, eight beautiful grandchildren, five sisters and two brothers.
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giving back
by Kim Jackson
With Builder Captain Camarata Homes at the helm, HomeAid Colorado completely remodeled an existing home for girls for Boys Hope/Girls Hope. The project budget was $113,000, of which $81,000 were in-kind donations.
Builders and their subs help save the day for thousands
Ten years later, HomeAid Colorado keeps building safe places for homeless to get back on their feet On any given night, more than 18,000 people are homeless in Colorado. According to a 2009 study by the National Center on Family Homelessness, one in 50 of them are children. Some are chronically homeless, often due to substance abuse or mental illness. Yet for most, homelessness is transitional. A lost job, huge medical bills or even violence in the home tosses families out to survive on the streets or live in their cars as best they can. For these transitionally homeless, they’re looking for relief —not a hand out, just a little help. With that in mind, HomeAid America got its start in 1989 and HomeAid Colorado followed suit ten years later. HomeAid Colorado’s mission is to build dignified housing where homeless families and individuals can rebuild their lives. As of January, the Colorado Association of Home Builder’s charity of choice had built 31 housing units with 222 beds. This represents nearly $3 million of the building industry’s in-kind contributions — on average, 68 percent of a care provider’s costs — to serve Colorado’s homeless. You’d think, with the state of the home building industry, that HomeAid Colorado may have quietly closed its doors.
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Yet it’s opening even more doors to transitionally homeless people this year, in a big way. HomeAid Colorado will work again with Colorado Homeless Families to build seven town homes. And for the first time, the nonprofit will build the first of three homes with Volunteers of America for women veterans this year. These homes are only made possible through the generosity of others. Executive Director Laura Brayman explained that while the number of individual contributors grew last year, cash donations were down. “People are still giving,” she said. “They’re just giving less. Even so, she’s pleasantly surprised at the level of donations HomeAid Colorado has had for their projects — and even completed four homes last year. “Because builders aren’t building, we know a lot of trades are really hurting,” she added. “Yet they’re still doing whatever they can in terms of giving their time and materials.”
giving back
Board adapts business model to industry changes Like home builders themselves, Brayman and her board realized that they needed to change their business model if they wanted to continue helping agencies provide homes for their homeless populations. In the past, the builder captain handled asking trades for contributions, along with tracking the project’s progress. “Now,” she observed, “I’m helping with the tracking and calling the trades for donations. Our board is doing it as well.” The nonprofit started HomeAid Cares last year, which helps a homeless care provider with needs other than construction. For example, HomeAid Cares can help create a community garden, remodel a soup kitchen or put shelves up for a food bank. The program is well suited for corporations who want volunteer projects for their employees. “They may not provide cash donations, but they still want their staff to be involved in community events,” she said.
Board gets more involved, for personal reasons The board has also become more involved, each according to his or her own skills and talents — and for personal reasons. Peter Tobin has been on the board since HomeAid Colorado started. The vice president with Land Title had helped build homes for other nonprofits, yet was disappointed “because they weren’t being taken care of after we built them,” he said. “After we put our blood, sweat and tears into these homes, and even though the people owned them, they weren’t really taking care of them.” What gratifies him most now is the agencies take care of their homes. “You can go back to any of the homes we’ve built and they’re all in really good shape,” he explained. “Visit the Discovery Home today, where it’s housed a series of eight young men for ten years, and it’s still in great shape. They take care of it and I think it’s terrific. It’s the gift that keeps on giving.” For Steve Prokopiak, “the building industry has been good to me and my family,” he said. “It seemed like a logical place to give back.” In addition to the board, the owner of Stephan A. Prokopiak, LLC serves on the Project Development Committee, which reviews all applications. With Colorado Homeless Families, Prokopiak will prep the ground and handle all permits, so builder captain KB Home can then build its own models. Working with HomeAid, Prokopiak said, “I’ve become very much aware of how close so many people are to being homeless, typically one or two paychecks away. Everybody recognizes
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With Village Homes, in partnership with Streamline Builders as builder captains, HomeAid Colorado’s first project in northern Colorado was for Interfaith Hospitality Network. The 2,260 sq. ft. duplex incorporated many energy-saving features and more than 60 percent was donated for the $298,000 project.
that the building industry needs to give back. A lot of these transitionally homeless people will graduate out of one of our care providers’ facilities, move on and actually buy a house.” Anne Olson’s firm has been committed to donating a project each year. The president of Olson Architecture, Inc. got involved with HomeAid several years ago when her firm donated drawings for Alternative Homes for Youth. Now on the board, her firm also donated drawings for the Safe Shelter of St. Vrain Valley. “HomeAid is really perfect for us,” she said. “My thing is primarily women. The projects that we’ve worked on for HomeAid have been mostly women and children.” Her firm will donate the architectural drawings for this year’s Volunteers of America home for veteran women in the Mayfair neighborhood of Denver, with Wonderland Homes as building captain. “For people who are involved in the home building industry,” she said, “you can give back to the community by doing what you do best.”
Care provider would do it again — in a heartbeat Sometimes, there are bumps in the road to getting a home built. Last year, the Loveland Berthoud Interfaith Hospitality Network hit a few while working with HomeAid on its first transitional shelter for families built. Executive Director Anne Marie Arbo explained that a few years earlier, she had been
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watching Extreme Makeover: Home Edition “and I saw what was going on in Denver. I saw a HomeAid sign and wondered who they were.” So she did some research, then met with Brayman. It was good timing, because “they wanted to do a project in Northern Colorado,” she said. With builder captain Village Homes beginning the project, then switching mid-stream to Streamline Builders, the care provider got its certificate of occupancy last April. Two families immediately moved into the duplex with three bedrooms on each side. “The relationship I had with Laura was incredible. If I could crown her queen of America, I would,” the Brit quipped. “She just did an amazing job While Third Way Center wanted three buildings simultaneously built, it was too much for for me. When I look back on it — now I can one builder captain. The nonprofit had the funds to pay trades if HomeAid Colorado could with humor and thankfulness — Laura and provide a donor builder captain. John Laing Homes was up to the task; after going out of the board were there for me all the time.” business, former employee Ryan Durfey stepped up and seamlessly finished the project. She also learned a thing or two about her own organization. An architect on her board insisted on using materials and building a certain way, Lesson learned: No event is needed to participate placing the builder captain in an awkward position and in HomeAid. As a result, it will host a fund-raising delaying the project. “I would build again with HomeAid breakfast and some small fundraisers. Brayman will in a heartbeat,” Arbo said, “but I would build specifically to also continue focusing on writing grants, an area that’s HomeAid’s designated plans. It was a real learning process gaining increased focus from the organization. “The last where my board was concerned. All of the builders we had couple of years, we’ve done more grant writing,” she working with us were absolutely amazing.” said. “We’ve focused on some of the family foundations in Colorado, as well as a lot of corporations that have foundations.” The board is also looking into creating Looking ahead: New ways to sponsor, corporate giving opportunities. more grant writing Brayman and the board have learned a few lessons of their own and will use that education as they move Welcome mat is always out for your help forward. “We’ll be looking at fundraising differently this Moving forward, HomeAid Colorado welcomes any year,” Brayman said. For one, the long-standing fashion help and donations you can offer. With its HomeAid show has run its course and will not be an event this year. Care program, the organization can use your help with “We found that people were willing to sponsor the fashion a clean-up day, toy drives, clothing drives, painting, show, but didn’t want to come,” she said. putting up shelving — anything a care provider needs that’s not construction related. Another necessity is an ongoing one. “We do need builder captains,” Brayman said. “There’s no cash commitment to be a builder captain at all. It can be a good morale booster for staffs because they’re doing what they already do for a worthy cause. And HomeAid and a care provider will be incredibly grateful for what they do.” Tobin added, “I truly feel we’re eliminating homelessness. It’s doing it in a way that’s really helpful. We’re giving them a hand, and they’re working on their end to become self-sustaining citizens. And I think our little formula is working. Really, the people who actually do the physical labor and provide the materials, they’re the real heroes in this deal. It’s been a great white had for the industry as a whole.”
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how hba’s help
by Kim Jackson
Local HBAs’ education, creativity and innovation boost members’ businesses and involvement As a member of your local HBA, you get it. You get political representation at the local, state and national levels. You get education. You get camaraderie with your colleagues. You get breaks on insurance and other products. That’s all because your local HBA is working hard to ensure that you have all the tools you’ll need to be successful now, and for many years to come. What’s more, if you’re taking full advantage of all your HBA offers, you know that it actually pays to belong. What’s that old American Express tag line? Oh that’s right: Membership has its privileges. If you want to be more productive and profitable, get more involved with your local HBA. The Housing & Building Association of Colorado Springs enjoyed an increase in overall membership last year, along with a significant jump on both its Remodeler’s and Sales & Marketing councils. It’s also implementing innovative programs that have caught the attention of NAHB and landed it a few awards. Like every local HBA, Colorado Springs’ mission is to keep housing affordable. Within that, each council and committee’s annual business plan applies its action to one of five critical success factors: political influence, fiscal responsibility, promote regulatory influence, membership engagement and education and leadership development. “Everything we’re doing applies back to our critical success factors,” observed Renee Zentz, executive officer. “Our committees and councils own it, then they move it forward to help our membership.” While the emphasis this year is on fiscal responsibility — to be financially sustainable — education keeps its members involved and gives them a competitive edge in the market. For instance, the Remodeler’s Council has recognized the need to be more educated on code issues. As such, the Remodeler’s Council staff liaison has a background in code, “so it’s a lot more technical now.”
Education boosts business In fact, education is one of the cornerstone benefits HBAs offer their members. Roger Reinhardt, executive vice president of the Home Builders Association of Metro Denver, explained that the HBA has beefed up its educational programs this year with a two-pronged emphasis. The first is a variety of “fairly sophisticated programs that are designed to give a professional designation from the NAHB,” he said. Because many of its members want to distinguish themselves from the competition, Denver has seen an increase in requests for classes such as the Certified Aging in Place Program and the Certified Active Adult Specialist in Housing.
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After a recent accessible housing program, members “said it was the most invaluable program they have attended, because they gained such great insight about the changing accessibility market,” Reinhardt said. Another seminar that same week attracted 30 people to Boulder. “People left the meeting saying it gave them information they wouldn’t have had otherwise.” The second prong has focused on business management, including social networking, strategy, working with lenders in the current economy and even computer enhancement classes. “We’ve embraced the philosophy that knowledge is power,” he said. “Through our educational enhancements, we’ve given our members the tools they need to survive this economy.” Debbie Rich, executive officer of the Housing & Building Association of Northwestern Colorado, said that education is really woven into nearly everything it does for members. At each monthly meeting, after 30 minutes of networking, “we have an educational or informational program for members,” she said. “We also keep members up to date on certification.” Currently, the HBA is offering lead-based paint courses to comply with the recent EPA ruling on mitigation. She added that requiring members to adhere to a code of ethics enhances their professionalism. And because members stick to the HBA’s code of ethics, she said, “they are the cream of the crop in the business,” she said. “It sets them apart because we give them continual education.”
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Innovate programs bring results In additional to its education programs, Colorado Springs has been creating and implementing innovative programs that attract members and make them profitable. Each February, the HBA’s Sales & Marketing Council hosts a Breakfast for the Builders, where realtors in the region are invited to spend the morning visiting with 30 or 40 builders who showcase their inventory of homes. “Realtors see what products are going to be available for the coming year and what communities are available,” Zentz said. “We had builders call that night, saying they sold houses based on the Breakfast with the Builders.” The HBA also hosts a Remodeled Homes Tour, to showcase remodeling members’ projects. And in December, the HBA hosted its first Parade of Holiday Homes. The 20 model homes in three communities were “totally decked out,” Zentz said, and were open just two weekends in December. “We sold about 5,000 tickets. It was wildly successful.” Part of the strategy was tied to a National Association of Realtors’ poll that reported people make their most-critical decisions of the year the 30 days before Christmas. Zentz explained that they decide if they’re going to get married, have children, get a divorce. “People really focus on their own needs and wants at that time,” she said. The event was also tied to the Empty Stocking Fund, where the Colorado Springs community raised $4 million for 14 local charities. “We were one of the premier events for it this year, and one of the larger donors, so we got great exposure with the local media,” Zentz said. Since then, builders have told Zentz they’ve sold houses from that event.
Member ideas become HBA programs Sometimes HBAs have ideas that can work. Many times, though, members bring their ideas to the HBA. Reinhardt said, “We’re always open to suggestion. In fact, a lot of the programs we have today have been a result of member suggestion. As our members have told us what their needs and wants are, if we can determine there is a potential value and participation, we’ll go ahead and get it on the calendar. And our members have not been shy about telling us what they want.” Rich’s process is a bit different in that ideas are brought to the board. “If the board decides it would be something worthwhile for our membership, we do it,” she said. That’s similar to Colorado Springs’ process. Zentz observed that to implement some of the programs they have, she and her staff have to be visionaries, to see a bigger picture when approached with an idea. “Sometimes somebody comes up with an idea, and somebody else comes up with another one that fits. The idea gets bigger and more defined,” she said. One builder brought an idea to the HBA three years ago and now has its own web site. Ready New Homes (readynewhomes.com) is a site that lists all of Colorado
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Springs builder members’ new homes available for sale. It’s now linked with the local newspaper, Hanley Wood and a hub of another 40 sites. The access fee ranges from $200-$400 a year and is based on how many permits were pulled the previous year. “It’s pretty exciting stuff,” Zentz said. “Builders can manage it through one site, and it gets the word out through many more.” Because it was such an innovative idea, the NAHB and CAHB awarded grants to get it up and running. It’s popular with other HBAs, too. While the focus has been on building awareness for Colorado Springs’ builders, three HBAs have joined the site: Pueblo, Northwestern Colorado and Teller County. “That was a huge undertaking,” Zentz said, “and it was a great member idea.”
Demographic member shifts mean education of a different kind Attracting and keeping members is one of CAHB’s prevailing goals for this year. And HBAs are looking for new ideas to keep members engaged, excited and educated. “Membership is paramount,” Zentz said, “and we’re always trying to figure out how to make it better for them.” Noticing that demographics of membership are changing, the board has added a focus on young decision makers in the community. Each quarter, the HBA hosts receptions where they learn what these young decision makers needs and wants are, along with their perceptions of what’s going on with the HBA. The HBA created a scholarship and sent six young decision makers to the International Builder Show. “We’re also going to send them to the Rocky Mountain Builder Conference,” she said, “to give them the culture of associations.” The Colorado Springs HBA has walked away with NAHB awards over the past five years that recognize the uniqueness of its activities. “I’m so proud of our board because they allow us to take risks in a down time,” Zentz said. “We just go along day to day and we look back and see that we’ve done some pretty cool stuff in a time where a lot of people have decided to put their heads in the sand.” Rich added, “I think we help our members every day. Now is a great time for our members to take educational classes we offer, so they’re up to date and speed on the latest and greatest. Through the three web sites — National, state and our local association — there’s no reason why they aren’t up to date.” Knowledge IS power. “We’re giving members tools, resources and the knowledge that gives them the ability to make a good, sound business decision,” Reinhardt said. “This economy has dictated a whole new set of norms and if you have the knowledge about what’s going on in your market and your economy, you’re gong to be able to take advantage of those new norms.”
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greener building
Impact of the Home building Industry on the seven-county metro area in colorado Total Impact by Year Year
# of Single Family Homes Built in the Seven-County Metro Area in Colorado
Local Income
Taxes and Other Revenue (fees, fines, etc.) Paid to Local Governments
Local Jobs
2006
11,463
$3.83 billion
$675.1 million
62,452
2007
6,951
$2.01 billion
$398.9 million
33,381
2008
6,100
$1.79 billion
$361.4 million
29,553
Direct & Indirect Impact by Year Year
local income
business owners’ Income
local wages and salaries
Local taxes
local jobs supported
2006
$2,367,702,000
$660,311,000
$1,707,391,000
$533,345,000
37,532
2007
$1,210,252,000
$338,456,000
$871,796,000
$323,938,000
19,748
2008
$1,072,379,000
$299,867,000
$772,512,000
$294,610,000
17,164
Induced (Ripple) Effect of Spending the Income and Taxes by Year Year
local income
business owners’ Income
local wages and salaries
Local taxes
local jobs supported
2006
$1,463,852,000
$403,155,000
$1,060,697,000
$141,770,000
24,920
2007
$797,892,000
$211,296,000
$586,596,000
$74,944,000
13,903
2008
$714,324,000
$187,996,000
$526,327,000
$66,773,000
12,389
Ongoing, Annual Effect that Occurs When New Homes Are Occupied (Based on Number of Single-Family Homes Built By Year)
local income
business owners’ Income
local wages and salaries
local taxes
local jobs supported
11,463
$556,633,000
$161,449,000
$395,185,000
$112,342,000
9,782
2007
6,951
$307,434,000
$89,436,000
$217,998,000
$60,777,000
5,494
2008
6,100
$271,194,000
$78,878,000
$192,317,000
$53,689,000
4,820
Year
# of single family homes
2006
Data Source: NAHB’s “The Local Impact of Home Building in Seven Counties of the Denver CO MSAS.” This study was completed for the Colorado Association of Home Builders by NAHB, in coordination with MetroStudy. 44
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It’s Spring! That means it’s time to clean up your subcontractor agreements Spring has arrived and the annual ritual of of builders’ “spring cleaning” should include a thorough review, sprucing up and updating your subcontractor agreements, particularly in this tough time for the industry. Ensure that your contracts with subcontractors properly protect you and allocate risk between the parties by reviewing these “clean up” provisions.
General obligations The subcontractor must agree to assume all obligations and responsibilities related to the manner of its performance and any losses, costs or damages for non-performance or negligence. The contract should require the subcontractor to acknowledge it has carefully reviewed the subcontract documents and state that it is duly licensed and possesses sufficient expertise, manpower and equipment to perform its obligations. Clearly define the scope of work and reference all pertinent attachments, specifications, drawings and plans.
Payments and retainage The subcontractor should be obligated to submit all documentation required by your lender, which may include invoices, construction progress reports, conditional and unconditional lien waivers and similar documents. In addition, if the funding for the construction is from the ultimate home buyer/owner, the subcontract should expressly state that you as the home builder shall have no obligation to make payments to the subcontractor until you have received payment then due and owing from the home buyer/owner. Retainage provisions should be carefully reviewed and any automatic “flow-down” provisions modified if you want more control over payment of retainage to your subcontractors. In addition, be aware that House Bill 10-1162, currently being considered by the Colorado legislature, limits retainage amounts and specifies deadlines for payment of retainage to subcontractors. The proposed bill also allows a subcontractor to provide substitute security for release of its retainage. This bill, if enacted into law, will have serious impacts on your ability to obtain and control retainage from your subcontractors.
Indemnification and Insurance Many construction contracts continue to require indemnifications that violate C.R.S. § 13-21-111.5(6), and may not be enforceable. Your indemnity provision cannot require the subcontractor to indemnify you for damage to persons or property caused by the negligence or fault of the home builder itself, and such an indemnification is void as against public policy and is unenforceable. Often a “savings” provision is added to an indemnification that is not in compliance with this statute, such as “to the fullest extent allowed by law,” however, it is not clear that such a savings provision will make the indemnification enforceable.
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Rebecca W. Dow
Also, have your insurance requirements reviewed by your insurance professional and legal counsel to ensure that the subcontractor will carry insurance to cover your indemnities. By endorsement or otherwise, be sure to cover construction defects as an “occurrence” under the subcontractor’s liability insurance, due to the General Security decision by the Colorado Court of Appeals. The decision held that construction defects are not an “occurrence” under a builder’s liability insurance policy and therefore are not covered. Although House Bill 10-1394 was recently introduced in the state legislature in an attempt to overturn the General Security case, at the time of this writing, it is not clear if the bill will be passed, and it would be prudent to confirm insurance coverage requirements.
Compliance with laws and association requirements The subcontract should require compliance with all applicable laws and regulations, including, as applicable, environmental laws (specifically including mold), storm water permits, water quality control laws, OSHA, air-quality laws, waste disposal, state and local noise control laws, wastewater, erosion control and/or dust mitigation best practices, and state and federal immigration reform and control acts (including specific compliance with C.R.S. § 8-2-122, 8-17.5-101 and 8-17.5-102 to verify the subcontractor does not employ illegal aliens). The subcontract should also require compliance with any home owner association and master developer rules and regulations regarding parking, hours of construction, waste material recycling, site clean-up and similar requirements. In addition, due to potential home buyer allergies and similar issues, strict no smoking rules in the home under construction should be specified. While you’re “sprucing up” your subcontract forms, be aware that both the American Institute of Architects (AIA) A401-2007 subcontract documents and the Consensus Docs 750 subcontract are extremely subcontractor-friendly documents. The Associated Specialty Contractors, an umbrella group of major construction specialty trade associations, has endorsed both the AIA A401 and Consensus Docs 750. The American Subcontractors Association has endorsed the Consensus Docs 750. Therefore, you will need to make substantial revisions to either form to appropriately allocate risk and protect yourself. Finally, sit down with your attorney to discuss these items as part of a general “spring cleaning” and updating of their subcontractor agreements. Rebecca W. Dow is a partner at Holland & Hart LLP, with more than 25 years of experience representing commercial real estate developers and home builders. Ms. Dow has extensive experience drafting construction contracts, architect agreements and “green” building contracts. Ms. Dow can be reached at rdow@hollandhart.com or (303) 295-8413.
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