The cash-strapped city no longer wanted to fight the Kitsap Home Builders Association, which sued over a permit fee add-on that was no longer charged as of 2007.

By Tristan Baurick

For the Kitsap Sun

Bainbridge Island

The city of Bainbridge Island 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 Home Builders 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 of money.”

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

The home builders 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, adopted in 1999, is an “illegal tax” because it covered more than cost of processing building permits and related services.   

The city no longer charges the fee.

“Our concern was that state law establishes things that can be charged for, and affordable housing was not specified,” Home Builders 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 home builders 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The city repealed its affordable housing ordinance in 2007 and no longer requires the fee the home builders association objected to.

“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 it’s over with.”

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

“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 home builders 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.

NEW YORK (AP) — A handful of positive earnings reports are giving investors a reason to buy stocks.

Gains in homebuilders, retailers and other consumer discretionary stocks pushed the market higher Thursday.

Initially, investors sent stocks lower after the government said new claims for unemployment benefits rose by 15,000 to 627,000 last week. The market expected a drop.

While disappointing, the report was not enough to stop investors from moving back into stocks.

Rising unemployment claims shouldn’t be surprising to investors, because unemployment usually continues to increase even when the economy is improving, said Arthur Hogan, chief market analyst at Jefferies & Co.

Instead, investors turned their focus to a handful of positive earnings reports.

Shares of homebuilders rallied after Lennar Corp. said orders for new homes jumped 63 percent during the second quarter and revenue topped expectations.

That news eclipsed the company’s slightly larger loss over the year-ago results.

Meanwhile, retailers and other consumer discretionary stocks rallied on an upbeat report from Bed Bath & Beyond Inc. The home furnishings store said its fiscal first-quarter profit climbed 14 percent as sales rose after the liquidation of rival Linens N Things.

In midday trading, the Dow Jones industrial average rose 138.53, or 1.7 percent, to 8,438.31, after dropping as much as 40 points in the early going. The Standard & Poor’s 500 index rose 14.41, or 1.6 percent, to 915.35, and the Nasdaq composite index rose 29.02, or 1.6 percent, to 1,821.36.

Advancing stocks outnumbered decliners by about 3-to-1 on the New York Stock Exchange where volume came to a light 405.3 million shares compared with 382.9 million shares at the same point Wednesday.

Uncertainty about when the economy will turn around, and how fast it will grow when it finally does, have made for a rocky market this month. The Dow Jones industrial average remains up 26.8 percent from its 12-year low hit on March 9, but is down nearly 500 points, or 5.7 percent, from the five-month high it reached on June 12.

Analysts say traders need to see more concrete evidence of growth before restarting the market’s rally.

“People are hesitant to take a position one way or the other,” said Doug Roberts, chief investment strategist at Channel Capital Research.

The market is expected to remain volatile throughout the summer months, which are typically marked by light volume that can skew movements in the market.

On Wednesday, the Fed said that “sustainable economic growth” should gradually resume, and inflation will “remain subdued for some time.” The statement did little to reassure investors, though, causing stocks to give up gains and finish mixed. Some were hoping the central bank would articulate how it will curb inflation.

Government bond prices edged up after the economic data, and ahead of the last big Treasury auction of the week: $27 billion in seven-year notes.

Most auctions have been attracting solid demand so far this year, but investors are looking for signs of weakness. If demand wanes, the government will have to boost yields sharply to lure buyers. Treasury yields affect consumer borrowing rates.

Demand for debt fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.64 percent from 3.69 percent late Wednesday.

Lennar shares soared more than 16 percent, adding $1.29 to $9.11, while Toll Brothers Inc. rose 66 cents, or 4.1 percent, to $16.90.

Bed Bath and Beyond gained $3, or 10.6 percent, to $31.39.

Among other retail stocks, Home Depot Inc. rose 89 cents, or 3.9 percent, to $23.57, and J.C. Penney Co. jumped $1.77, or 6.7 percent, to $28.37.

Investors also got a piece of good news from a slightly improved reading on gross domestic product. First-quarter GDP shrank 5.5 percent, the Commerce Department said, less than the previous estimate of 5.7 percent.

Crude oil rose $1.52 to $70.19 a barrel on the New York Mercantile Exchange.

The dollar gained against the euro and the British pound. Gold prices rose.

In other trading, the Russell 2000 index of smaller companies rose 9.28, or 1.9 percent, to 504.23.

Overseas, Japan’s Nikkei stock average rose 2.2 percent. In afternoon trading, Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index fell 0.7 percent, and France’s CAC-40 fell 0.7 percent.

Here’s what Candidates Lynn Horton, Gene Hart and Roger Zabinski have said so far in the meeting that started at 5:15 p.m. Tuesday.

Hart: Stands for no new taxes and lowering of current ones. Is a 26-year resident of the county. Has varied background, including Navy.

Horton: Describes past as Bremerton mayor and worker for Pierce Transit on the Orca card.

SEED: Zabinski likes the idea, calls SEED a “Catch 22,” in which comes first the buildings or the businesses? Highway 3 is bad and cannot support the business. Instead, try downtown Bremerton. I see the airport area as more of a airport hub and industrial hub. 

Horton: Has reservations. They have a perfectly good building standing empty. Use it rather than build again. Also, with green tech, “today’s cutting innovation is tomrrow’s 8-track tape.”  Taxpayers shouldn’t pay for obsolescence.

Hart: SEED is an “abused, mistreated dying horse that should be allowed to have a dignified death.” Let’s get on with the work of stopping the port using taxpayer dollars to subsidize losses. The port has had $14 million to $18 million in losses.

Zabinski: No general obligation bonds for SEED. Green businesses don’t look for places at ports. They look for cheap space.

NEW TOPIC: Bremerton Marina

Hart: $44,000 a month that the port is pouring into the marina. Both marinas are losing money. There was no marketing plan. We should be marketing that thing up the hilt to get people there. Harborfest helped. So it’s half a million bucks a yeara to run that. Add that to the other subsidies, and it has to stop. 

Zabinski: Yes, we need to market the marina. Slips need padding, boats getting dinged. Need to look at covered moorage. Parking is an issue, but there again, you’re dumping money into the property. I perfer mixed used of the property. We’re now in a hole and we’re going to have to dig ourselves out. Put a moratorium on major spending and work toward breaking even.

Horton: Yes, marketing. Give visiting boaters things to do. The port should partner with groups to connect the events with the boaters. There’s a huge pool of businesses that could benefit from boater business. Advertise. Maybe a concierge program. Package deals. We don’t need to build something, we need to connect the people coming in with the businesses through marketing. As to the waterfront parcel, some development, parking.

Hart: Show me the money. How are we going to develop it. If proposed development pencils out, I’m on board.

Zabinski: Many businesses at the Bremerton waterfront have been displaced. How friendly is that area for families? More that we could do with green space, waterfront accessibility. Yes, look at all the numbers before building. There’s no plan yet.

Questions from Ed board members

Why didn’t the port attract the beer distributing business?

How would you all work with Cary Bozeman

Horton: Cary and I get along just fine. I am a strong believer in strategic planning, but you must establish a “resource-loaded timeline.”

Up 44 points this morning to 8,367.

NEW YORK (AP) — A surprise jump in orders for big-ticket manufactured items is boosting stocks ahead of the Federal Reserve’s decision on interest rates.

Investors were upbeat about a Commerce Department report Wednesday saying durable goods orders rose 1.8 percent in May. Economists surveyed by Thomson Reuters had anticipated a drop.

The major indexes rose but pulled off their highs. The Commerce Department said sales of new homes fell 0.6 percent last month, while the market had expected a rise.

The gains come as investors wait for the Fed to finish its two-day meeting on monetary policy. The central bank’s statements this year have tended to bring big moves in the stock and bond markets. The Fed is widely expected to leave its key rate unchanged at a range of zero to 0.25 percent, but investors are less sure about its outlook for the economy.

Recent gauges of the economy have been improving, but they have not yet pointed to growth. Many investors are nervous that a recovery could be hampered if the Fed raises interest rates too soon or starts dismantling its emergency supports for the financial system.

“It’s pretty obvious that the Fed has a delicate tightrope to walk here,” said Craig Peckham, market strategist at Jefferies & Co. He said policy makers must acknowledge the long-term potential for inflation, but at the same time calm investors’ worries about any near-term removal of liquidity from the system.

“You’ll see this statement dissected more closely than anything we’ve seen in last couple of meetings,” Peckham said.

In early afternoon trading, the Dow Jones industrial average rose 62.80, or 0.8 percent, to 8,385.71. The Standard & Poor’s 500 index rose 11.51, or 1.3 percent, to 906.61, and the Nasdaq composite index rose 37.24, or 2.1 percent, to 1,802.16.

Although the Fed has held its target rate steady since late last year, its statements have touched off big moves in stocks. In January, the statement coincided with hopes for a plan for banks’ toxic assets; in March, the Fed announced it would start buying Treasurys; and in April, the Fed said it was seeing signs the recession is easing.

In corporate news, software maker Oracle Corp.’s results late Tuesday for its most recent quarter exceeded analysts’ average forecast. Oracle shares gained $1.72, or 8.7 percent, to $21.59.

Stocks held their gains after a successful Treasury Department auction of $37 billion in five-year notes. Demand was stronger than at recent auctions.

Auctions have been going smoothly this year, but both bond and stock investors are looking for signs that demand for new Treasury supply might be waning. If demand trails off, the government will have to raise yields sharply to attract buyers. Treasury yields are closely tied to borrowing rates for consumers on loans such as mortgages.

Bond prices were little changed after the auction. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 3.63 percent.

Crude oil fell 77 cents to $67.47 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

About five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 463.1 million shares, compared with 561.1 million traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 9.31, or 1.9 percent, to 499.08.

Overseas stock prices advanced. Japan’s Nikkei stock average rose 0.4 percent, and in afternoon trading in Europe, Britain’s FTSE 100 rose 1.2 percent, Germany’s DAX index rose 2.7 percent, and France’s CAC-40 rose 2.2 percent.

Investors, many of whom have placed bets over the past several months on a late-year economic recovery, are on edge as the second half of 2009 approaches. The Dow is up 27.1 percent from the 12-year lows reached March 9, but the index has fallen about 5 percent since June 12.

Bloggers,

Port of Bremerton commissioners last night unanimously approved a $89,000 contract to a Port Gamble firm to replace 10 of 16 pilings holding up the restrooms, office and laundry at the Port Orchard Marina. Expect the work in August; it should last three weeks.

Rachel Pritchett, 475-3783

Bloggers,

Cary Bozeman, the Port of Bremerton’s new CEO, last night gave port commissioners a tease of what could be included in a new three-year plan for the port. He meets next Tuesday in a marathon 4-hour session with them to develop the plan. I’ll be there.

The port’s going to be selling itself more, he said. That includes courting prospective companies set stakes down at the port. It also includes better communication with the public. A communications plan is in the works; I’m wondering whether Bozeman will push for a new communications position.

Also, Bozeman said, expect an effort by the port to gather up all the many economic-development groups under one economic-development umbrella. Most of the many entities out there are underfunded, he said.

Be prepared to find ways to lease up the Bremerton Marina at a faster pace, he said, to make it less of a drain on taxpayers and more self-supporting.

Think about improving the stretch of land the port is buying above the Bremerton Marina. That would include a new stairs and ramp system and a new sewer pipe.

As for the airport property, Bozeman spoke of a makeover, with upgraded offices, less scruffy grounds and maybe a boutique hotel.

Commissioners also should look at the adjacent Bremerton Motorsports Speedway and consider its future.

SEED’s a good idea, at least the portion promoting green industry, but the business side of it can’t be a drain on the port, he said.

More to come. Big change of direction in store, certainly.

Rachel Pritchett, 475-3783

Bloggers,

State transportation planners discussed the pending Bremerton Economic Development Study with Port of Bremerton commissioners last night. The study plots out projects over the next three decades for Highway 3 to Shelton, as well as the Bremerton end of Highway 16. 

The study originated with the port some time back, to explore options that might improve access to the port’s emerging South Kitsap Industrial Area. 

Among the things it calls for — long-term, remember — is a massive widening and reconfiguration of the stretch through Gorst, as well as a widening of Highway 3 to Belfair.

Port Commissioner Bill Mahan was bitterly disappointed the study failed to address a bridge across the water off Gorst, and that it didn’t directly address improved access to SKIA.

As for the widening of Highway 3, the state transportation planners said the portion of Highway 3 between the airport and Shelton is a dangerous stretch, and has had many fatalities on it. It is on a par with the infamous Highway 2 across the water, they said.

I’ll be writing more on this soon as my schedule permits, but I wanted to give you this heads up now.

Rachel Pritchett, 475-3783

Bloggers, 

The Lord’s Neighborhood Diner, the only organization serving the hungry in the greater Kitsap area on the weekends, soon will close to do some organizational reworking. Organizers say they will reopen in September. Call me anyone. I am working on the story now.

Rachel Pritchett, 475-3783

The Associated Press

Boeing Co. has again delayed the first test flight of its long-awaited 787 jetliner in the latest setback for an aircraft that has bolstered the company’s order book and redefined the way it builds planes.

The Chicago-based aerospace giant said Tuesday it needs to reinforce small areas of the plane before conducting the test flight, which Boeing had insisted would occur before July.

Boeing said a revised schedule for the flight, as well as first deliveries to customers, will not be announced for several weeks.

Shares of Boeing tumbled $4.09, or 8.7 percent, to $42.81 in midday trading.

The announcement comes as Boeing, the world’s second-largest commercial airplane maker, and European archrival Airbus SA grapple with slumping orders for their jets as the recession dampens demand for air travel and cargo services. Tight credit markets also have muted orders for new planes.

The test flight of the 787, a next-generation aircraft built for fuel efficiency with lightweight carbon composite parts, originally was planned for late 2007. But Boeing postponed it repeatedly because of production glitches and a strike that forced the company to shut down its commercial aircraft factories for eight weeks last fall.

Deliveries of the long-range widebody, meanwhile, have been delayed four times already. Customers had expected to get the first of the new jets in the first quarter of 2010 — nearly two years behind schedule. The delays have cost Boeing credibility and billions of dollars in anticipated expenses and penalties.

Boeing said it discovered an area in the side-of-body section of the aircraft that needs to be reinforced during recent tests on the first of the airplanes.

Scott Fancher, Boeing’s 787 program manager, said 18 areas measuring about 1 to 2 square inches near the place where each wing meets the fuselage need to be reinforced, for a total of 36 areas that need reinforcement.

“We are already moving toward a solution,” he said in a conference call.

During a test late last month that involved bending the 787’s wings, workers discovered greater-than-expected stress in the plane’s side-of-body structure, according to Pat Shanahan, vice president and general manager of airplane programs for Boeing’s commercial airplane division.

Preliminary analysis indicated Boeing could go ahead with the test flight, but “after further testing and analysis, which we finished late last week, our team concluded that a productive flight test program could not take place without structural reinforcement in limited areas,” he said.

“This is a structural reinforcement issue, not an issue of materials or workmanship,” Shanahan said. “Composites are the right choice for airplane structure.”

He added: “We will correct this situation and do so with both care and urgency.”

The 787 is the first commercial jet made mostly of light, sturdy carbon-fiber composites instead of aluminum. Large parts of the plane, such as the fuselage sections and wings, are made in a number of factories around the world and flown in a huge modified 747 to Boeing’s widebody plant in the Seattle area, where they are essentially snapped together.

The 787 production team will continue testing the airplane, performing tests such as low-speed taxiing, Boeing said. Work also will continue on five other test planes and other 787s in the production system, it said.

The 787 is Boeing’s first new aircraft since the 777, which was introduced more than a decade ago.

Boeing said its financial guidance will be updated to reflect any impact from the changes when the company issues its second quarter 2009 earnings report in July.

Paul Nisbet, an analyst at JSA Research, said the announcement was “not good news,” and that Boeing had said in recent days at the Paris Air Show that the plane was ready to fly.

“I don’t think it means much overall, but it certainly is a disappointment short-term,” he said.

Now at 8,313

NEW YORK (AP) — A rise in existing home sales couldn’t stoke the stock market ahead of the Federal Reserve’s decision on interest rates.

Stocks traded mixed by the afternoon Tuesday after the National Association of Realtors said May sales of existing homes rose 2.4 percent. The increase was smaller than economists’ forecast for 2.8 percent, and not enough to alleviate investors’ anxiety about economic reports later in the week on durable goods orders, new home sales and personal spending.

“There’s not a lot of conviction on behalf of buyers,” said Jim Herrick, manager of equity trading at Baird & Co.

“The market has priced in good second-quarter earnings, and priced in the economy moving out of recession by the fourth quarter,” Herrick said. “If you see any data that refutes that, the market will head lower.”

This week brings two more reasons to be tentative: the Fed’s monetary policy meeting, and Treasury auctions.

The central bank is widely expected to keep its key rate near zero after its two-day meeting concludes Wednesday, but investors are unsure how optimistic the policymakers will be in their economic assessment — and whether the central bank will consider raising rates later this year to curb inflation.

Meanwhile, the Treasury Department plans to auction $104 billion in government debt this week. The Treasury sold $40 billion in debt Tuesday afternoon and demand was strong. Investors have been on edge around auctions because any signs that demand for government debt is waning could hit the market.

Treasury demand needs to stay strong for the government to finance its bailout and stimulus programs without significantly raising yields. Bond yields affect borrowing rates for consumers.

In midafternoon trading, the Dow Jones industrial average fell 14.44, or 0.2 percent, to 8,324.57. The Standard & Poor’s 500 index rose 1.01, or 0.1 percent, to 894.05, and the Nasdaq composite index fell 1.16, or 0.1 percent, to 1,765.03.

The biggest loser among the 30 Dow stocks was Boeing Co., which fell $3.59, or 7.7 percent, to $43.31 after again delaying the first test flight of its long-awaited 787 jetliner. The company said it needed to reinforce part of the aircraft.

The stock market rallied sharply between early March and early June, and has given up some ground over the past several days. The Dow on Monday shed 201 points, the worst daily drop in more than two months.

The recent selloff, however, has brought very little volatility, and that’s a positive sign, said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.

“The fact is, you can’t keep going straight up,” Fullman said. “There’s a chance we’ll still see some downward movement in the next week or two — the market really needs a correction.”

Government bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, edged down to 3.64 percent from 3.69 percent late Monday.

Declining stocks narrowly outnumbered those that rose on New York Stock Exchange, where volume came to 672.3 million shares, down from 685.4 million shares at the same time Monday.

The Russell 2000 index of smaller companies fell 2.31, or 0.5 percent, to 490.50.

After tumbling on Monday, the price of crude oil rose $1.62 to $69.12 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 fell 0.2 percent. Japan’s Nikkei stock average sank 2.8 percent.