City agrees to pay $495,000 to homebuilders group

The city on Wednesday night agreed to pay a $495,000 settlement to a homebuilders group contesting a fee that supported the city’s affordable housing efforts.

The City Council unanimously approved the settlement, capping an eight-year legal battle with the Homebuilders Association of Kitsap County and three Bainbridge development companies.

“I’m very pleased we can settle this matter,” Councilman Barry Peters said. “But the key issue is: it’s a lot money.”

The settlement will take a sizable chunk of a $1.8 million reserve the cash-strapped city is trying to build by the end of the year.

The homebuilders association sued the city in 2001 over a 10 percent fee added to building permits to help pay for affordable housing programs on the island. In its lawsuit, the association argued that the fee, which adopted in 1999, is an “illegal tax” because it covered more than cost of processing building permits and related services.

“Our concern was that state law establishes things that can be charged for, and affordable housing was not specified,” homebuilders association executive vice president Art Castle said Wednesday. “No matter how well-intended it is, an illegal tax is an illegal tax.”

A Kitsap County Superior Court judge ruled in favor of the city in 2005, but the state Court of Appeals later struck down the lower court decision because it erroneously put the burden of proof on the homebuilders association.

The case was remanded back to the superior court with a trial date set for August.

The city stands by its permit fee but opted to settle out of court to avoid additional legal costs.

“Even when we believe the case has no merit, there’s always the risk of having a ruling against us,” City Manager Mark Dombroski said. “And if we prevail, there’s still the legal costs and the likelihood of an appeal.”

Dombroski estimated that the city has spent about $250,000 on lawyers and legal fees related to the case over the last eight years.

The city repealed its affordable housing ordinance in 2007 and no longer requires the fee the homebuilders association objected to in 2001.

“They did away with (the fee) and now handle things a little different,” Castle said. “The city of Bainbridge Island adopted it in 1999, so it’s taken a very long time. We’re glad its over with.”

Housing Resources Board Director Carl Florea said the settlement will likely make the city more hesitant about affordable housing initiates.

“With this lawsuit, I think the city will be more cautious and less willing to step outside the box for creative solutions,” he said. “It does put a damper on things at a time when we need all the encouragement we can get.”

The homebuilders association plans to pay $165,000 of the $495,000 settlement to its lawyers. The remainder will go to association members Jefferson Properties, Hillandale Homes, Andy Mueller Construction Company and several individual plaintiffs.

The city’s payment will come out of an estimated $600,000 in future surplus property sales and cost savings attributed to earlier layoffs and service cuts.

5 thoughts on “City agrees to pay $495,000 to homebuilders group

  1. A stitch in time saves nine. Eh !! No what about the other backlog of lawsuits? The same expensive solution?

  2. WOW, just another mess created by EX-Mayor K administration cleaned up. The question is how many more of these messes will be uncovered and how long will it take to put the bad experience of Mayor K behind us?

  3. The article did not specify what the costs-to-date have been for COBI in in-house/outside legal costs, staff time, expert witnesses and court costs in this case. Oh, and how goes the “affordable housing” program that was the inception of this 10% tax on development permits.

    I find it curious how government can run over the little guy who simply says ouch. Run over a larger group and COBI ends up in court attempting to defend their policy of taking.

  4. Why should Mayor Kordonowy and her administration be held responsible for this “mess.” The fee that the developers objected to dated from 1999, and the Council and the Director of Planning at that time were principally responsible. This was before our latest Mayor took office. And I believe the objectionable affordable housing ordinance was repealed long before 2007. I’d like to know how much money was actually collected “illegally” before the policy was changed.

    In spite of very extensive efforts to involve developers in the crafting of an affordable housing ordinance that will work to their benefit as well as serving the larger community’s interests, we do not have more than bits and pieces of a housing policy today. In general, everything depends on the market’s ups and occasional downs. Policy makers and concerned citizens (with some developers and real estate professionals prominent in that group) know all too well what the pitfalls and obstacles are. I doubt that the problems will be any easier to solve in the absence of a mayor.

  5. Jon Q asks: “Why should Mayor Kordonowy and her administration be held responsible for this “mess.” While the original fee may have happened on the watch before Mayor K, the fact is Mayor K, various councils and senior staff have been at City Hall for the past 8 years with this legal challenge brewing. The cut-loss decision interim manager Dombroski made could have been made any where along the las 10-year time line. By my reckoning, Mayor K, as our Chief Executive, does have responsibility for the $750,000 +++ that went down this sink hole.

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