Economists provide positive outlook for state/local economy

With economic charts and graphs of all colors and shapes covering many sectors of the national, state, local and Canadian economies, four recognized economists were on hand to explain what it all meant for local businesses at US Bank’s annual economic forecast breakfast in Bellingham.
What it boiled down to was this: the state’s economy is on the rebound and that’s likely to mean a brisk year for business owners throughout Skagit, Island and Whatcom counties.
The Dec. 8 event, held at the Best Western Lakeway Inn, drew approximately 300 business leaders.
John Mitchell, chief economist for the Western Region of US Bank was joined on the panel by Hart Hodges of Western Washington University’s College of Business and Economics. Panel members also included Christopher Lawless, chief economist of British Columbia Investment Management Corporation and Michael Parks, journalist and publisher of Marples Pacific Northwest Letter, a biweekly economic newsletter.
Parks forecasted a rosy future for the Washington state economy.
“I’m more optimistic about our economic outlook now than I’ve been in the past five years,” Parks said
Parks predicted a continued positive growth rate for the state, which was hit hard by the nosedive the national economy took four years ago.
Current employment figures place Washington as sixth in the nation for job growth. A weak U.S. dollar has also helped the Pacific Northwest, a region that depends on robust international trade to fuel the economy.
“In a trade-dependent state like Washington, winners from the weak dollar greatly outnumber losers,” Parks said.
He pointed to aerospace giant Boeing as a prime example.
“Aircraft are purchased and sold in U.S. dollars,” Parks explained, “and while Boeing’s costs are in dollars, Airbus pays in Euros, which gives Boeing a great advantage.”
Meanwhile a relatively strong Canadian currency (which posted 83 cents for every U.S. dollar in December) will likely make for robust retail sales in Skagit, Island and Whatcom counties.
Canadian shoppers are much more likely to head south of the border to do a little shopping these days because their dollar stretches further than ever, according to Lawless.
At the same time, Canada’s strengthened currency has the potential to hurt its overall trade position with U.S. consumers, because the country’s exports now cost more to American buyers than before.
Hodges agrees that more Canadian shoppers will be taking advantage of America’s weak dollar and heading south to snap up the bargains. He predicts this influx of Canadian customers will create jobs and accelerate retail trade up and down the I-5 corridor in 2005.
Mitchell emphasized that business spending has bounced back in a big way. Such spending underpins much of the demand for things such as airplanes and software. He noted that companies that spent heavily on technology and telecommunications in the late 1990s, and then stopped after the tech bubble burst, are finally adding or upgrading equipment again.
All the panel members agreed that the energy shock, caused by oil prices that hit a record high $50 per barrel in November 2004, is hindering an otherwise strong recovery from the recession that officially ended in November 2001.
Overall, however, things appear brighter in Washington and other parts of the Northwest, than the nation as a whole.
Indeed, the U.S. economy appears to be slowing slightly even as Washington’s economy picks up the pace.
This is reflected by the substantial job growth the state posted last year.
Indeed, the state Economic and Revenue Forecast Council predicts that Washington will have added 45,500 payroll jobs by the end of 2004 and another 53,300 by the end of 2005, according to a report in The Seattle Times.
That would amount to the most significant job creation since 2000 and would be a welcome reversal from the past three years when the state recorded a loss of 53,600 payroll jobs.
At the same time, the paper reported, per capita income (adjusted for inflation) is expected to increase by 1 percent in 2004 and by more than 2 percent in 2005.
However, unemployment figures will likely rise as more people resume their job searches and are tallied as part of the work force.
This was the 15th year US Bank has sponsored the Economic Forecast breakfast. “The most successful businesses are those that have solid, timely economic information that can help them develop business strategies based on the economic climate,” said Scott Wallace, Northwest Region President for US Bank. “Our goal at U.S. Bank is to provide the best financial service and guidance available to our business and consumer customers, and these economic forecasting sessions are a good example of that commitment,” he added.

Business confidence survey of those attending
1) Capital Spending plans.
56% higher
11% lower
33% same

2) Revisited ethical Standards.
37% Yes
63% No

3) Expected Sales in 2005
51% Up 10% or more
30% Up less than 10%
13% Same
5% Down Less than 10%
1% Down more than 10%

4) Hiring Plans in 2005
21% Up more than 10%
23% Up less than 10%
52% Same
3% Down less than 10%
1% Down more than 10%

Washington minimum wage becomes highest in nation
Starting January 1, Washington state employers must boost what they pay their minimum-wage workers. The state’s minimum wage has become the highest in the nation at $7.35 per hour.
That’s an increase of 19 cents an hour over hourly wages paid in 2004.
Washington’s Department of Labor and Industries adjusts the minimum wage rates each year based on changes to the federal Consumer Price Index (CPI). For the 12 months ending August 2004 the nationwide index increased by 2.6 percent, according to the state’s L&I department.
In 2005, 37 of 50 states will use the federal minimum wage, which is set at $5.15 an hour. The second and third highest minimum wage rates in the country are Oregon which increases in 2005 from $7.05 to $7.25 an hour and Alaska at $7.15 an hour. Critics argue that increasing the minimum wage can cause a loss in entry-level jobs. They point to Oregon and Alaska whose unemployment rates in October led the nation at 7.2% respectively and to Washington State, whose unemployment rate was third highest in the country until a recent economic recovery led to a turnaround that lowered it’s rate to 5.6 percent as of October 2004.
Washington’s minimum-wage rate has been on the rise since an initiative passed in 1998 tying minimum wage increases to the rate of inflation.

Frontier Bank buys shares of Skagit State Bank Frontier Financial Corp, the Everett-based parent company of Frontier Bank, has announced plans to purchase 11.3 percent of Skagit State Bank stock.
The three-stage transaction began in December with Frontier’s purchase of 4.95 percent of Skagit State Bank’s shares. Pending regulatory approval, additional purchases of 3.2 percent this month and 3.2 percent in July are scheduled. In each installment, Frontier will pay cash -- $142 per share -- for 50 percent of the stock. For the remaining shares, Frontier will exchange 4.25 shares of its own publicly traded stock for each Skagit State Bank share. By the end of the third purchase, Skagit State Bank will have received $5.7 million and 170,000 shares of Frontier Financial Corp. in exchange for 80,000 Skagit shares.
Frontier isn’t seeking a seat on Skagit State Bank’s board nor involvement in its management. “We’re making an investment,” said Mike Clementz, president and chief executive officer of Frontier Financial Corp.
Skagit State Bank, with headquarters in Burlington, has 13 full-service banking offices in Skagit, Whatcom and Snohomish counties. The bank had $488.3 million in total assets and $367.2 million in total loans as of Sept. 30. Its year-to-date income as of Sept. 30 was $4.35 million, up 16 percent from the previous year.

Port gains city support for acquiring G-P land
The Bellingham City Council has agreed to enter a partnership with the Port of Bellingham for the redevelopment of 137 acres currently owned by Georgia-Pacific West, Inc. The Port of Bellingham proposes to acquire the property, located along Bellingham’s waterfront, in exchange for covering $41.5 million in environmental cleanup costs associated with the land. G-P has agreed to pay for a $4 million insurance policy to cover any costs beyond $41.5 million. The transaction is expected to be presented this month to port commissioners for their final approval.
The City Council agreed in December to:
• Provide streets, utility lines, parks, trails, parking and traffic controls as the site is redeveloped for a mix of residences, shops, and offices.
• Contribute $280,000, which will be matched by the port, to pay for a project manager, a consultant, marketing, and efforts to gain grants.
• Work with the port on completing master planning for the property by the end of 2005.
• Create a 10-member Waterfront Advisory Group to provide guidance in executing recommendations of the Waterfront Futures Group as redevelopment occurs.
Home sale prices continue to increase
Home sales in Whatcom County were strong as they approached the end of 2004, aided by a significant drop in inventory.
The average price of homes sold in the county during the first 11 months of 2004 was $242,283, up 18.2 percent from the first 11 months of 2003, according to statistics compiled by the Whatcom County Multiple Listing Service. Also, the number of houses listed by the MLS that were sold through November totaled 2,987, an increase of 4.9 percent from 2003.
Declining inventory is a significant factor in the county’s rising real-estate prices, according to Lylene Johnson of The Muljat Group South office in Fairhaven, who analyzed and distributed the MLS statistics. Only 750 houses were listed for sale this November, down 38.6 percent from 1,222 on the market in November 2003.
“While fewer houses are for sale, demand for them by people who want to live in Whatcom County remains strong,” Johnson said.

Lummi Nation plans hotel at Silver Reef Casino
The Lummi Nation and Merit Management Group have announced plans for a major addition to the Silver Reef Casino, including a six-story hotel and spa.
The Ferndale casino will break ground this winter for the $24 million expansion project, expected to be completed by the end of this year.
The hotel will include more than 100 rooms and four deluxe suites. The penthouse level will feature restricted access, a private lounge and upgraded amenities. A spa offering massage rooms, indoor pool, sauna and fitness center also will be built. The casino also is adding a third full-service restaurant that will feature Asian food, plus an executive boardroom, a 1,000-square-foot meeting room and more gaming.
When this expansion project is completed, the Silver Reef Casino will cover 135,000 square feet and offer 675 slot machines and 18 table games. The number of employees will increase by 75 to 475.

K&K is on the move
Kinnebrew & Keathley Industries is a new and growing laser cutting service. Ben Kinnebrew opened the company last May as a subcontractor working out of his house. Last August, he purchased a laser and opened a shop.
Companies hire K&K Industries to cut and etch metal parts although the machine can cut wood and plastic. Since July, K&K has been the only locally owned laser cutter in Whatcom County. Since opening, the company has worked for Walton Tool, Ershigs, Andgar, Lynden Tank, and Korvan.

Haggen honors Barkley Village store
Haggen, Inc., announced that its store at Barkley Village in Bellingham has been named the company’s Haggen Store of the Year. Fourteen of the company’s 32 supermarkets operate under the Haggen Food & Pharmacy brand.
The company also named managers of the year for various departments. Award-winning managers from the Barkley Village store were: Michelle Biles, seafood/chef; Kimberly McGlenn, floral; Leslie Evans, Market Street; Art Allbery, perishables; Michael Karb, dairy/deli/frozen foods; Lori Boland, variety; Aubrey Snay, bulk foods; Shelly Thomas, wine specialist; Brain Moore, pharmacy; and Jim Vanrijswijck, center store. James Johnson of the Meridian store in Bellingham was named produce manager of the year. The Sehome Village store in Bellingham had two managers honored: John Muljat, Orient head cook, and Tracie Lee, guest services.

Knob Shop purchased, moved downtown
Peggy Fowle has purchased The Knob Shop and moved it to 1204 Railroad Ave., Suite 102, in downtown Bellingham.
Fowle was an employee of the business when it was located on Northwest Avenue as a division of DreamMaker Bath & Kitchen. She said the new location has more showroom space. The Knob Shop offers door, cabinet, and bath hardware, plus interior and exterior paint.

Bramble Berry acquires Labcolors
Bramble Berry Inc. of Bellingham, a provider of soap-making ingredients, has purchased Labcolors. Labcolors carries a complete line of colors for use in all types of soaps and toiletries.
“It will dovetail well with our extensive line of soap and toiletry-making supplies,” said Anne-Marie Faiola, who launched Bramble Berry in 1998.
Bramble Berry’s soapmaking kits were featured in November on “The View,” an ABC morning show.

Networking group begins meeting
The Prosperity Professional Network, touting a new concept in business networking, has been launched in Bellingham.
Members will study books by authors such as Deepak Chopra, Wayne Dyers, Catherine Ponder and Lynn Grabhorn and discuss how to apply principles of prosperity, abundance and the power of positive thinking.
The group is open to all business professionals with no limit in each category. It meets from 7:30 to 8:45 a.m. the first and third Fridays of the month. For more information, call Meridith Murray, 312-5877 or 738-4071.

Financial services company started
Kimbler & Thomas Financial Group, Inc., a financial services company, has opened in Bellingham, according to partners David Kimbler and David Thomas. They are located in Pacific Meridian Plaza at 4164 Meridian St. Kimbler, formerly with Prudential Financial, has 28 years of experience in insurance and investments. Thomas, previously with Wachovia Securities, has eight years of experience in financial planning for people in or near retirement.

VECO achieves safety milestone
VECO’s Bellingham Team recently surpassed four million hours worked by its employees without a single lost-time accident.
The exceptional safety record represents more than nine years of effort by employees in VECO’s local office and in industrial facilities of clients throughout the Pacific Northwest. VECO specializes in engineering, construction, and operations support.

Mary Kay directors launch training center
Eleven independent sales directors with Mary Kay Cosmetics Inc., one of the largest direct sellers of skin care and color cosmetics, have launched a training center in Bellingham. The center will be used for training independent Mary Kay beauty consultants, as well as customer events and meetings of local executives. The 2,700-square-foot meeting room, with a capacity of 175 people, also will be available for rent to businesses and civic organizations. The training center is located at 4340 Pacific Highway, one mile north of West Bakerview Road.
They are inviting the public to grand-opening events from 7:30-9:30 p.m. Jan. 28 and 3-5 p.m. Jan. 29. National Sales Director Rebbecca Evans will speak both days. Attendees will learn about her path to success, the company’s marketing plan, and product promotions. Members of the Bellingham Training Center group sold an estimated $2 million in products in 2004.

Hotel Bellwether featured on cover
Hotel Bellwether in Bellingham was selected for the cover of the 19th-annual edition of “Elegant Small Hotels.”
The guide highlights elite small hotels throughout the world. Each hotel must meet strict criteria to be considered for inclusion and then pass a rigorous judging process to be chosen for the cover.

Serendipity Studios opens on James Street
Serendipity Studios, presenting the work of local and regional artisans, has opened at 2122 James St., across from Les Schwab Tires in Bellingham.
Owner Becky Martin, who worked as a bank teller just several blocks away for four years, said the area has many talented artists and craftspeople, but few outlets for their products.

Town & Country Jewelers awarded Navy contract
Town & Country Jewelers owner Gary Deitz recently had a contract renewed by the Navy to provide goldsmith, jewelry repair, and custom design services for personnel at Naval Air Station Whidbey Island and Naval Station Everett.
Deitz has 30 years of experience as a jeweler.

Boundary Bay Brewery wins medals at competition
Boundary Bay Brewery of Bellingham earned gold and silver medals at the 23rd-annual Great American Beer Festival competition in Denver.
Boundary Bay Brewery won a gold medal for its Dunkles Bock and a silver medal for its Old Bounder Barley Wine.
The competition drew 2,016 entries from 398 breweries nationwide. Only three entries in each of 67 categories were honored.
Boundary Bay Brewery is located at 1107 Railroad Ave.

Common Ground Environmental opens
Analiese Burns has opened Common Ground Environmental, a consulting firm serving public and private clients, in Bellingham.
The firm specializes in balancing human and environmental needs from site feasibility to construction. Burns has experience in native landscape design, naturalized storm-water plantings, wetland and stream assessments, mitigation design, Endangered Species Act compliance, and park master planning.

Bellingham restaurant cited by guidebook
Coppa, a Mediterranean bistro in Bellingham, has been included in “2005 Best Places Northwest.”
The book sends food and travel experts to review establishments for possible inclusion. According to the book, Coppa’s “delicious mix of Mediterranean foods – dishes from Spain, Italy, Turkey, Portugal and Morocco – is generous and well priced.”
Coppa owner Fahri Ugurlu opened the Fairhaven restaurant at 1224 Harris Ave. in late 2003.

Employers must cooperate with state L&I audits
The Washington State Supreme Court ruled that employers they must cooperate with Department of Labor and Industries when it seeks to audit their records or risk paying what the agency estimates they owe in workers’ compensation premiums.
The court denied a Petition of Review sought by Diamond Driving School, which contended its instructors were independent contractors and didn’t have to be covered by the state’s workers’ compensation system. When L&I auditors investigated the company to determine if that claim was true, Diamond refused to provided canceled checks and other documents supporting its position. L&I subsequently assessed the company more than $68,000 in estimated unpaid premiums, penalties and interest.
Diamond then provided additional information supporting its claim in various appeals. However, the state Court of Appeals found the company had violated state regulations by failing to produce “business records (L&I) properly and repeatedly requested” and the court refused to consider those records on appeal.

Washington employers to see changes in unemployment taxes under new law
Many Washington employers will see changes in the amount of unemployment tax they will pay next year as a result of 2003 legislation now taking effect.
The Washington State Employment Security Department began mailing 2005 tax rate notices to employers in December. The first tax payments using the new rates are due April 30, 2005.
Unemployment taxes will shrink an average of 1.35 percent, and tax payments per employee will decrease more than three percent from an average of $600 in 2004 to an average of $578 in 2005. However, the amounts vary widely among individual employers based on several criteria including how often they lay off workers.
“Employers are now seeing the result of the most substantial change in unemployment tax laws in Washington history,” said Employment Security Commissioner Sylvia P. Mundy. “The overhaul of the state’s unemployment system resulted in numerous changes to tax calculations and benefit payments. Some employers will pay lower taxes in 2005, but others will see their taxes increase.”

Whidbey Island Bank receives award
Whidbey Island Bank was recognized as Lender of the Year for 2004 by the Northwest Business Development Association.
The bank, by utilizing the U.S. Small Business Association’s 504 Loan Program, provided small businesses the means to start or expand through the purchase of real estate for ground-up construction or through the purchase of an existing building.
Whidbey Island Bank, which has two Bellingham branches, and NWBDA provided financing for 11 small businesses totaling $8.3 million in 2004.

New calculation rates for taxes
Effective Jan. 1, 2005, tax rate contributions will be calculated based on a single tax rate schedule based on an employer’s history of laying off or retaining workers.
The new schedule will range from 0 percent to 5.4 percent of taxable wages for established businesses. It replaces the previous system that used seven schedules.
There will be a social cost added, which is designed to recoup payments from the unemployment trust fund that are not charged to a specific employer. Employers will also continue to pay an additional tax denoted as the Employment Administration Fund that pays for special work search assistance and training for the unemployed.
When all these rates are combined, employers will pay taxes between 0.83 percent to 6.52 percent of taxable wages in 2005.

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