(Written by Mike Buechter – NMHBA President – Originally published in the July 2011 Housing Journal)
Builders Trust – Our Own Success Story
I moved to New Mexico over 25 years ago and I have enjoyed living here ever since. Moving here from Lake of the Ozarks required some adjustments on my part, like learning to eat green chile and the total absence of rain for most months. I still miss boats and the big lakes. I first lived in Portales, where the weather was mostly great, but I was told by wise locals, “If the tumbleweeds pass you on the highway, turn around and go home, it’s too windy to work.” March in Portales can be tough, and every spring I threatened to move back to Missouri because of the winds and dust.
I was working for a contractor building low income apartments and even then I was thinking of working for myself, so I starting quizzing some of the locals about becoming a contractor. They told me about the licensing procedures and then warned me in solemn terms to watch out for the GRT and the work comp. I said, “Okay, I know about work comp, but what’s GRT?” They explained and I replied, “It’s just like sales tax.” Right, they replied, but it is on everything you take in, including all the labor. I was shocked at the very idea of sales tax on labor. I thought it was definitely un-American. I still feel exactly that way.
Work comp was a very big issue for contractors at that time. Back in Missouri, I did small jobs for extra money, so I usually had a work comp policy. It was cheap protection and gave me peace of mind, costing only 3% to 4% of payroll, so I did not consider it a real burden. The local boys then read me the facts of life about work comp in 1985 in New Mexico. They told me of rates approaching 25% of payroll or more (roofing class code was around 100%), and every injury becoming a messy court case. The situation seemed impossible to me and I quickly discarded the idea of contracting in New Mexico. Just too many problems, too much overhead, too much risk.
Any of you who were around here at that time will remember New Mexico’s construction industry was in rough shape then, but out of this crisis was born one of our greatest success stories: our own self-insurance fund, now known as Builders Trust of New Mexico Affiliated with New Mexico Home Builders Association. BT will be 25 years old next year and now is one of the best and strongest self-insurance workers’ compensation funds in the United States. Out of crisis came opportunity!
BT is a group self-insurance fund, something that was not even legal in New Mexico in the early 1980s. But ours was a results-oriented group even back then and our association helped push through groundbreaking legislation and laid the groundwork for BT’s formation. Our leadership was ready to go when the New Mexico legislature and governor finally okayed things in 1986. Jack Milarch and NMHBA Senior Officers hit the road to sell this new idea to the members. In a nutshell, this concept was simply for association members to pool their work comp premium and start their own insurance company. This took a lot of courage, because this concept was a venture back to the very basics of insurance – every participant shares in both the good and bad fortunes of the group. Starting with little money in the bank, those initial participants took quite a risk. Mike Drunzer of Alamogordo, George Rawson of Las Cruces, and George Beall of Albuquerque were instrumental in selling the BT concept to the other HBA members around the state. Donations were collected and their new office building was pledged for collateral. Drunzer recently told me the roughest part of it was getting people to sign the indemnity agreement – they understood that’s where the risk was. The leaders managed to sign up around 70 contractors that first year. The first couple years were financially rough going, but somehow we made it, and Builders Trust has been growing stronger ever since.
BT has only one customer base, and that is members of New Mexico Homebuilders Association. If you want to buy your workers’ compensation insurance through BT, you have to join NMHBA. Likewise, if you let your NMHBA membership lapse, you will quickly get a notice of cancellation from BT. You can’t have one without the other. In addition to drawing customers, BT also draws talent from NMHBA. The BT Board of Trustees is composed primarily of former association Presidents, plus the current year’s President serves as an ex officio trustee. Both the state association and BT share a CEO, Jack Milarch. Having participated with the Board of Trustees for nearly a year now I can tell you the trustees are amazingly strong and dedicated to both the association and BT. The lines of communication are always open between the two organizations.
At the recent Builders Trust Strategic Planning Meeting, attending to this close relationship between the two organizations was a big topic of discussion. Plans were made, and during the coming months you will see BT and NMHBA staff and leadership show up together at local association meetings, spreading the message about why we are here and what we do. The BT trustees understand the value of strong underlying local associations and wish to take a more active role in promoting that philosophy.
So, what else is new at Builders Trust? BT has recently lowered its rates about 15% overall and is actively reaching out to new markets, especially commercial contractors. Many of BT’s early participants were commercial contractors and without their support the early organization would not have been successful. BT trustees have always been a mix of commercial and residential contractors and BT has always had a good foothold in the commercial contracting arena. However with new programs specifically designed for commercial contractors, I believe we will do even better.
The mood at BT this year is upbeat, optimistic and focused on the future. BT’s sponsoring organization, NMHBA, has also weathered the storm well. As your leadership we see portions of the state’s construction industry starting to get busy and contractors, including my business, are “staffing up” again. Things are getting better! Both organizations will keep doing what they have been doing for years, offering a great product and great services to members and the participants. I am proud to be your President. CONTRACTORS BELONG HERE!