Saturday, November 25, 2006
Tuesday, November 21, 2006
Last Week in the News
Led by big declines in auto and gasoline costs, producer prices fell 1.6% in October, tying the record decline set in October 2001, the Labor Department reported November 14. Core producer prices -- excluding energy and food -- fell 0.9%, the largest retreat in 13 years. Economists expected producer prices to fall 0.5% and the core rate to rise 0.1%.
Consumer prices fell a bigger-than-expected 0.5% in October, following a similar decline in September. Analysts had predicted a 0.3% decrease. Core consumer prices -- minus energy and food -- rose 0.1%, the slowest pace in eight months. The Consumer Price Index is up 1.3% in the past year, the slowest rate of inflation since June 2002.
Retail sales slid 0.2% in October, largely due to plunging prices at the gasoline pump, the Commerce Department said November 14. Excluding gasoline sales, retail sales would have been up 0.4% in October.
Construction of new, single-family homes and apartments fell 14.6% in October to an annual rate of 1.486 million units, the lowest level in more than six years, the Commerce Department reported November 17. Applications for new building permits declined 6.3% to a seasonally adjusted rate of 1.535 million, the lowest level in nine years.
Sparked by falling interest rates, mortgage applications increased 4.3% in the week ending November 10, the best showing since January of this year, the Mortgage Bankers Association reported November 15.
Initial jobless claims decreased by 2,000 in the week ending November 11, suggesting the labor market remains favorable, the Labor Department said November 16.
This week look for updates on leading economic indicators on November 20.
Consumer prices fell a bigger-than-expected 0.5% in October, following a similar decline in September. Analysts had predicted a 0.3% decrease. Core consumer prices -- minus energy and food -- rose 0.1%, the slowest pace in eight months. The Consumer Price Index is up 1.3% in the past year, the slowest rate of inflation since June 2002.
Retail sales slid 0.2% in October, largely due to plunging prices at the gasoline pump, the Commerce Department said November 14. Excluding gasoline sales, retail sales would have been up 0.4% in October.
Construction of new, single-family homes and apartments fell 14.6% in October to an annual rate of 1.486 million units, the lowest level in more than six years, the Commerce Department reported November 17. Applications for new building permits declined 6.3% to a seasonally adjusted rate of 1.535 million, the lowest level in nine years.
Sparked by falling interest rates, mortgage applications increased 4.3% in the week ending November 10, the best showing since January of this year, the Mortgage Bankers Association reported November 15.
Initial jobless claims decreased by 2,000 in the week ending November 11, suggesting the labor market remains favorable, the Labor Department said November 16.
This week look for updates on leading economic indicators on November 20.
Monday, November 06, 2006
Ruling Out Nothing
Although fixed mortgage rates dropped by a dozen basis points this week to land at 6.38%, you shouldn't expect them to wait there for long, according to the latest data from the nation's leading survey of mortgage pricing. Hybrid 5-1 ARMS tripped lower, too, easing 13 basis points to close the survey period at 6.16%. Both figures are close to their year's low.
Rates wended their way down this week in a fairly steady fashion, as each piece of soft economic data seemed to make it more likely that the next Fed move would be to cut interest rates amid a slowing economy. The low point for yields came Wednesday, when the benchmark 10-year Treasury hit 4.57% on news that the Institute for Supply Management (ISM) missed meeting expectations by a fair margin. The ISM index tracks manufacturing activity and denotes a reading of 50 as the breakeven level, so it was little wonder that the markets took notice that October's ISM index fell to 51.2 for the month, the lowest since June 2003. One bright spot in the report was that for the first time in quite a while, the number of companies reporting lower input prices was greater than those reporting higher input prices. While we know that many commodity costs have eased off their highs, this suggests that steady-to-lower inflation has begun to work its way into the production stream.
This should be good news; according to Economics 101, easing growth lowers demand for resources and lower demand for resources cools price pressures, at least for commodities and energy costs. Easing growth should also serve to lower demand for labor, a different kind of resource, but commodities and human capital demands don't necessarily have arcs which start at the same time or progress in the same way. The Fed has expressed concerns about "resource utilization" which obviously includes human capital, and news this week suggests that they should remain concerned.
For example, one question is whether the arc of prior inflation is working its way into wages. It is, according to the quarterly Employment Cost Index, at least to the largest degree since the second quarter of 2004. The ECI for 3Q06 rose by 1.0%, a little above expectations, with the complete cost of having an employee on the books pressed higher by benefit costs. The ECI has risen by 3.3% over the past year; while still mild by most measurements, the direction continues upward.
Buttressing concerns over labor growth and costs was the monthly Employment Report for November. The 92,000 new hires were a little weaker than forecasts, but since layoffs have been slow, hiring should be expected to be as well. However, the markets were unprepared for sizable revisions to both September and, especially, to August payroll growth. September was revised up to 148,000 new hires, which August was pushed up to 230,000. Both revisions point to a much healthier job market than was originally reported, as witness that the nation's unemployment rate slipped to 4.4% -- the lowest reading since 2001. Perhaps hiring is weak not because the economy is weak, but because there are few qualified people available to hire? This would also dovetail nicely with the muted levels of layoffs; it stands to reason that you won't fire someone unless you believe that can replace them.
Layoffs are low, according to the latest Challenger, Gray and Christmas survey which found only 69,177 workers slated to lose their jobs in workforce reductions announced in October. That's down from 100,315 in September, and comparable with the lowest levels of the year. However, during the week ending October 28, there was a slight uptick in applications for new unemployment benefits, with 327,000 new filings, up from 309,000 the week before. Some of those filings are probably related to the fall in homebuilding activity. Construction Spending of all types fell by 0.3% in September, but spending for residential projects fell by 1.1% and has now been posting negative numbers for six months.
There's nothing economically wrong with a strong employment base, provided there are at least some offsets for higher wage and benefit costs. Provided worker productivity is rising, workers can be paid more in wages and benefits without businesses needing to raise prices of goods and services in order to afford them. That said, all-important productivity growth vanished in the third quarter of 2006, where no gain was reported; forecasts hoped for an increase in productivity to 1.3% for the period. The cost of labor per unit produced rose by 3.8% for the quarter, somewhat above the hoped-for level. Less productive workers and rising labor costs are not what the Fed has been hoping to see as they work to contain not only inflation today, but expectations of inflation in the near and not-so-near future. It is because labor costs remain an issue that additional rate increases by the Fed cannot yet be ruled out.
Wage growth helped to move Personal Income growth higher by 0.5% in September, up from August's 0.4% lift. Spending, though, rose by just 0.1% for the month, and the combination of the two helped move the nation's savings rate to -0.2% -- the closest to zero it has been all year. The inflation component of the report revealed a 'core' Personal Consumption Expenditure (PCE) index of 2.4% for the month, still above the range believed to be the Fed's preferred mark.
Having a job amid falling gasoline costs is a recipe for a sunny mood, and according to the weekly ABC News/Washington post survey of Consumer Comfort, consumers are happier than they've been in about three years: the Consumer Comfort index stormed higher to close the week of October 29 at -3. That expansive happiness didn't seem to infect those surveyed by the Conference Board during October, as their reading of Consumer Confidence mostly held steady, sporting a reading of 105.4, about the same as September.
Businesswise, while the ISM manufacturing survey was weaker, the ISM series which follows service-related industries noted a pickup in activity, with the ISM services index climbing to 57.1 in October from 52.9 in September. September's reading was a pretty substantial plummet from August, and the October number recovered all of that decline. As with the manufacturing series, input prices reflected here were on the downside, as well.
It's not unusual for bond and stock markets to get caught leaning the wrong way, but this week was a little unusual. Yields finished the week just a little above where they began, but it's a reasonable expectation that investors are at least a little chagrined for the moment. Hard bets that the economy is heading to free fall keep being dashed, and wagers on a more-docile Fed seem likely to suffer the same fate for at least a while longer. The period of slow growth necessary to fully overwhelm inflation pressures which took several years to build has been with us for only perhaps a quarter, and we are likely to see several more with weak growth but still-tough inflation ahead. Until that weak growth serves to trim payrolls back to produce some human "resource slack" the Fed does remain "in play" to increase rates.
Not next week, though. It's election week, when all manner of confusing messages about the economy will be blathered forth. Next week's a considerably quieter week in terms of new data, but like the ISM service numbers above, will probably see mortgage rates take back all of this week's decline, so we'll probably end up back near 6.5% as a result.
Get out and vote!
Rates wended their way down this week in a fairly steady fashion, as each piece of soft economic data seemed to make it more likely that the next Fed move would be to cut interest rates amid a slowing economy. The low point for yields came Wednesday, when the benchmark 10-year Treasury hit 4.57% on news that the Institute for Supply Management (ISM) missed meeting expectations by a fair margin. The ISM index tracks manufacturing activity and denotes a reading of 50 as the breakeven level, so it was little wonder that the markets took notice that October's ISM index fell to 51.2 for the month, the lowest since June 2003. One bright spot in the report was that for the first time in quite a while, the number of companies reporting lower input prices was greater than those reporting higher input prices. While we know that many commodity costs have eased off their highs, this suggests that steady-to-lower inflation has begun to work its way into the production stream.
This should be good news; according to Economics 101, easing growth lowers demand for resources and lower demand for resources cools price pressures, at least for commodities and energy costs. Easing growth should also serve to lower demand for labor, a different kind of resource, but commodities and human capital demands don't necessarily have arcs which start at the same time or progress in the same way. The Fed has expressed concerns about "resource utilization" which obviously includes human capital, and news this week suggests that they should remain concerned.
For example, one question is whether the arc of prior inflation is working its way into wages. It is, according to the quarterly Employment Cost Index, at least to the largest degree since the second quarter of 2004. The ECI for 3Q06 rose by 1.0%, a little above expectations, with the complete cost of having an employee on the books pressed higher by benefit costs. The ECI has risen by 3.3% over the past year; while still mild by most measurements, the direction continues upward.
Buttressing concerns over labor growth and costs was the monthly Employment Report for November. The 92,000 new hires were a little weaker than forecasts, but since layoffs have been slow, hiring should be expected to be as well. However, the markets were unprepared for sizable revisions to both September and, especially, to August payroll growth. September was revised up to 148,000 new hires, which August was pushed up to 230,000. Both revisions point to a much healthier job market than was originally reported, as witness that the nation's unemployment rate slipped to 4.4% -- the lowest reading since 2001. Perhaps hiring is weak not because the economy is weak, but because there are few qualified people available to hire? This would also dovetail nicely with the muted levels of layoffs; it stands to reason that you won't fire someone unless you believe that can replace them.
Layoffs are low, according to the latest Challenger, Gray and Christmas survey which found only 69,177 workers slated to lose their jobs in workforce reductions announced in October. That's down from 100,315 in September, and comparable with the lowest levels of the year. However, during the week ending October 28, there was a slight uptick in applications for new unemployment benefits, with 327,000 new filings, up from 309,000 the week before. Some of those filings are probably related to the fall in homebuilding activity. Construction Spending of all types fell by 0.3% in September, but spending for residential projects fell by 1.1% and has now been posting negative numbers for six months.
There's nothing economically wrong with a strong employment base, provided there are at least some offsets for higher wage and benefit costs. Provided worker productivity is rising, workers can be paid more in wages and benefits without businesses needing to raise prices of goods and services in order to afford them. That said, all-important productivity growth vanished in the third quarter of 2006, where no gain was reported; forecasts hoped for an increase in productivity to 1.3% for the period. The cost of labor per unit produced rose by 3.8% for the quarter, somewhat above the hoped-for level. Less productive workers and rising labor costs are not what the Fed has been hoping to see as they work to contain not only inflation today, but expectations of inflation in the near and not-so-near future. It is because labor costs remain an issue that additional rate increases by the Fed cannot yet be ruled out.
Wage growth helped to move Personal Income growth higher by 0.5% in September, up from August's 0.4% lift. Spending, though, rose by just 0.1% for the month, and the combination of the two helped move the nation's savings rate to -0.2% -- the closest to zero it has been all year. The inflation component of the report revealed a 'core' Personal Consumption Expenditure (PCE) index of 2.4% for the month, still above the range believed to be the Fed's preferred mark.
Having a job amid falling gasoline costs is a recipe for a sunny mood, and according to the weekly ABC News/Washington post survey of Consumer Comfort, consumers are happier than they've been in about three years: the Consumer Comfort index stormed higher to close the week of October 29 at -3. That expansive happiness didn't seem to infect those surveyed by the Conference Board during October, as their reading of Consumer Confidence mostly held steady, sporting a reading of 105.4, about the same as September.
Businesswise, while the ISM manufacturing survey was weaker, the ISM series which follows service-related industries noted a pickup in activity, with the ISM services index climbing to 57.1 in October from 52.9 in September. September's reading was a pretty substantial plummet from August, and the October number recovered all of that decline. As with the manufacturing series, input prices reflected here were on the downside, as well.
It's not unusual for bond and stock markets to get caught leaning the wrong way, but this week was a little unusual. Yields finished the week just a little above where they began, but it's a reasonable expectation that investors are at least a little chagrined for the moment. Hard bets that the economy is heading to free fall keep being dashed, and wagers on a more-docile Fed seem likely to suffer the same fate for at least a while longer. The period of slow growth necessary to fully overwhelm inflation pressures which took several years to build has been with us for only perhaps a quarter, and we are likely to see several more with weak growth but still-tough inflation ahead. Until that weak growth serves to trim payrolls back to produce some human "resource slack" the Fed does remain "in play" to increase rates.
Not next week, though. It's election week, when all manner of confusing messages about the economy will be blathered forth. Next week's a considerably quieter week in terms of new data, but like the ISM service numbers above, will probably see mortgage rates take back all of this week's decline, so we'll probably end up back near 6.5% as a result.
Get out and vote!
Quarter Disorder
Fixed mortgage interest rates barely budged this week as the average 30-year fixed-rate mortgage (FRM) increased by two basis points to close the nation's leading survey of mortgage prices at 6.50%. Five-one Hybrid ARMs also moved up by two basis points, finishing the week at 6.29%.
As expected, the Federal Reserve left interest rates untouched at the close of Wednesday's meeting of the Open Market Committee. The Federal Funds and Discount Rates remained unchanged for the third consecutive meeting, and -- provided the economy holds near present levels -- the Fed may be done moving interest rates for 2006. While the vote to hold rates steady found a majority, there was again a lone dissent among the voting Fed governors. Although the statement which accompanies the end of the affair can reveal some of the Fed's thoughts, this particular memo didn't shed any new light, but did have a notable omission or two.
Concerns about inflation pressures related to energy and commodities prices were absent, but the Fed reiterated that "high levels of resource utilization" could still contribute to price pressures going forward. This presumably refers to the high levels of employment the economy is enjoying at the moment, and the potential for a rise in wage pressures.
New to the October statement was an outlook for growth. While "economic growth has slowed over the course of the year," said the Fed, "going forward, the economy seems likely to expand at a moderate pace." Previous statements about the economy lacked a forecast, so perhaps the Fed is trying to keep the market from expecting a sharper slowdown which could presage a Fed aggressively cutting rates sometime soon. That doesn't appear to be likely at the moment.
Economic growth is notably slower, too. The "advance" estimate for Gross Domestic Product in the third quarter of 2006 came in at a paltry 1.6%, well below forecasts and a fair drop from the second quarter's moderate 2.6% clip. It appears that the hard slump in homebuilding and related activity trimmed about a full percentage point from the growth tally, but there has been at least some pickup in activity in the early fourth quarter. New Home Sales were 5.3% higher in September than in August, ringing in at 1.075 million annualized units sold, and inventory levels of unsold homes continue to move lower. There are only 6.4 months of inventory available at the present sales pace, down from 7.2 months in July and 6.8 in August. Those homes were moved at a discount, though, as selling prices declined by 8% in September when compared to August, and now stand about 10% below year-ago levels. While the housing rout is probably far from over, small steps in the right direction are encouraging.
Also contained in the GDP report were reflections of inflation for the period. The slower growth and decline in energy costs over the July-September period is starting to have a beneficial effect on price pressures. While there are several measures of prices found in the report, the Fed's favorite is thought to be the 'core' Personal Consumption Expenditures (PCE) index, which edged down to 2.3% during the quarter from 2.7% in the second. 'Core' typically reveals costs exclusive of energy, food and volatile components and is thought to be more indicative of the true level of inflation. Regardless of the measure, though, inflation seems to be easing toward the Fed's comfort zone.
While new homes can be priced to move, existing homes suffer from different market conditions. Unlike new homes, it's harder for a homeowner to cut prices since the underlying mortgage and sales costs must be paid, and adding in premiums and such is more challenging and expensive for a potential home seller. Because prices are more intractable, existing home sales continue to slow, slipping by 1.9% during September and landing at a 6.19 million annualized rate of sale. Prices have only fallen about 2% below year-ago levels, and there was actually a slight uptick from August to September. Inventory levels here remain plentiful, too, with 7.3 months of stock available at present sales levels, the same as seen in each of the last four months.
Economically, this week's news paints a mixed picture. Local manufacturing surveys conducted by the Kansas City and Richmond Federal Reserve Banks in their respective districts were a bit at odds. The Richmond Fed noted a distinct softening of activity in their region, with their gauge falling to a reading of -2 in October from a +9 in September. In Kansas City, though, a minor uptick in business was seen, and their indicator rose to +9 in October from +6 in September.
Manufacturing in at least some districts should have kicked higher, as orders for Durable Goods -- items intended to last three years or longer -- jumped by 7.8% during September, largely due to orders for planes and other transportation-related items. Excluding those, there was just a 0.1% lift on spending on durable goods, with most of that boost coming from business investment.
A bigger survey of economic activity conducted by the Chicago Federal Reserve which reveals national trends in growth pointed to slower growth for the third consecutive month. The National Activity Index decreased to -0.51 in September and suggests that the economy grew more slowly than its 'potential' during the month, and posits that the trend for growth is a bit on the weak side at the moment.
The Fed's mention of "high levels of resource utilization" has been reflected in the trends for weekly jobless claims. While hiring has been in a muted pattern for months as the economy has held near what is considered to be "full employment", layoffs have been steady as well. During the week ending October 21, 308,000 new applications for unemployment insurance benefits were filed, still wobbling within a well-defined range which began in late spring/early summer. The employment report covering October is due out next Friday, but if the level of "help wanted" advertising found by the Conference Board is any indication, muted levels of hiring and a steady unemployment rate are the most likely outcome.
Along with steady employment, a rising stock market and falling oil and gasoline costs continue to put a smile on consumer faces. The University of Michigan survey of Consumer Sentiment rose a stout 8.2 points in October, rising to a pre-hurricane Katrina level of 93.6 for the month. On a higher-frequency note, the weekly ABC News/Washington Post poll of Consumer Comfort held at a year's high of -7 during the week of October 22. However, a topping of the stock market and steadying gas prices suggest that optimism may have peaked for the moment.
The steady Fed and slower growth had a reasonable effect on bond markets this week, as market interest rates largely declined. Mortgage rates will follow, as yields have moved a sufficient amount as to drag rates down with them. The 10-year Treasury yield (a fair proxy for fixed-rate mortgages) declined better than an eighth-percentage point between Tuesday and Friday, so rates should head lower as we turn into next week. There are a few indicators aside from the employment report which could spook investors from Halloween though week's end: The Employment Cost Index may show spiking wages, productivity and per-unit labor costs may have turned in a poor showing during the last month, manufacturing or service business may be beginning to kick higher. If the economy really is picking up after the third quarter's 1.6%, now's the time it will start to show.
Mortgage rates should be a bit lower next week, but at least some uncertainty related to the above keeps it a modest move downward of a handful of basis points, at best. It's too soon for even weak numbers to tilt the Fed's hand in favor of an easing, so the downside remains limited.
As expected, the Federal Reserve left interest rates untouched at the close of Wednesday's meeting of the Open Market Committee. The Federal Funds and Discount Rates remained unchanged for the third consecutive meeting, and -- provided the economy holds near present levels -- the Fed may be done moving interest rates for 2006. While the vote to hold rates steady found a majority, there was again a lone dissent among the voting Fed governors. Although the statement which accompanies the end of the affair can reveal some of the Fed's thoughts, this particular memo didn't shed any new light, but did have a notable omission or two.
Concerns about inflation pressures related to energy and commodities prices were absent, but the Fed reiterated that "high levels of resource utilization" could still contribute to price pressures going forward. This presumably refers to the high levels of employment the economy is enjoying at the moment, and the potential for a rise in wage pressures.
New to the October statement was an outlook for growth. While "economic growth has slowed over the course of the year," said the Fed, "going forward, the economy seems likely to expand at a moderate pace." Previous statements about the economy lacked a forecast, so perhaps the Fed is trying to keep the market from expecting a sharper slowdown which could presage a Fed aggressively cutting rates sometime soon. That doesn't appear to be likely at the moment.
Economic growth is notably slower, too. The "advance" estimate for Gross Domestic Product in the third quarter of 2006 came in at a paltry 1.6%, well below forecasts and a fair drop from the second quarter's moderate 2.6% clip. It appears that the hard slump in homebuilding and related activity trimmed about a full percentage point from the growth tally, but there has been at least some pickup in activity in the early fourth quarter. New Home Sales were 5.3% higher in September than in August, ringing in at 1.075 million annualized units sold, and inventory levels of unsold homes continue to move lower. There are only 6.4 months of inventory available at the present sales pace, down from 7.2 months in July and 6.8 in August. Those homes were moved at a discount, though, as selling prices declined by 8% in September when compared to August, and now stand about 10% below year-ago levels. While the housing rout is probably far from over, small steps in the right direction are encouraging.
Also contained in the GDP report were reflections of inflation for the period. The slower growth and decline in energy costs over the July-September period is starting to have a beneficial effect on price pressures. While there are several measures of prices found in the report, the Fed's favorite is thought to be the 'core' Personal Consumption Expenditures (PCE) index, which edged down to 2.3% during the quarter from 2.7% in the second. 'Core' typically reveals costs exclusive of energy, food and volatile components and is thought to be more indicative of the true level of inflation. Regardless of the measure, though, inflation seems to be easing toward the Fed's comfort zone.
While new homes can be priced to move, existing homes suffer from different market conditions. Unlike new homes, it's harder for a homeowner to cut prices since the underlying mortgage and sales costs must be paid, and adding in premiums and such is more challenging and expensive for a potential home seller. Because prices are more intractable, existing home sales continue to slow, slipping by 1.9% during September and landing at a 6.19 million annualized rate of sale. Prices have only fallen about 2% below year-ago levels, and there was actually a slight uptick from August to September. Inventory levels here remain plentiful, too, with 7.3 months of stock available at present sales levels, the same as seen in each of the last four months.
Economically, this week's news paints a mixed picture. Local manufacturing surveys conducted by the Kansas City and Richmond Federal Reserve Banks in their respective districts were a bit at odds. The Richmond Fed noted a distinct softening of activity in their region, with their gauge falling to a reading of -2 in October from a +9 in September. In Kansas City, though, a minor uptick in business was seen, and their indicator rose to +9 in October from +6 in September.
Manufacturing in at least some districts should have kicked higher, as orders for Durable Goods -- items intended to last three years or longer -- jumped by 7.8% during September, largely due to orders for planes and other transportation-related items. Excluding those, there was just a 0.1% lift on spending on durable goods, with most of that boost coming from business investment.
A bigger survey of economic activity conducted by the Chicago Federal Reserve which reveals national trends in growth pointed to slower growth for the third consecutive month. The National Activity Index decreased to -0.51 in September and suggests that the economy grew more slowly than its 'potential' during the month, and posits that the trend for growth is a bit on the weak side at the moment.
The Fed's mention of "high levels of resource utilization" has been reflected in the trends for weekly jobless claims. While hiring has been in a muted pattern for months as the economy has held near what is considered to be "full employment", layoffs have been steady as well. During the week ending October 21, 308,000 new applications for unemployment insurance benefits were filed, still wobbling within a well-defined range which began in late spring/early summer. The employment report covering October is due out next Friday, but if the level of "help wanted" advertising found by the Conference Board is any indication, muted levels of hiring and a steady unemployment rate are the most likely outcome.
Along with steady employment, a rising stock market and falling oil and gasoline costs continue to put a smile on consumer faces. The University of Michigan survey of Consumer Sentiment rose a stout 8.2 points in October, rising to a pre-hurricane Katrina level of 93.6 for the month. On a higher-frequency note, the weekly ABC News/Washington Post poll of Consumer Comfort held at a year's high of -7 during the week of October 22. However, a topping of the stock market and steadying gas prices suggest that optimism may have peaked for the moment.
The steady Fed and slower growth had a reasonable effect on bond markets this week, as market interest rates largely declined. Mortgage rates will follow, as yields have moved a sufficient amount as to drag rates down with them. The 10-year Treasury yield (a fair proxy for fixed-rate mortgages) declined better than an eighth-percentage point between Tuesday and Friday, so rates should head lower as we turn into next week. There are a few indicators aside from the employment report which could spook investors from Halloween though week's end: The Employment Cost Index may show spiking wages, productivity and per-unit labor costs may have turned in a poor showing during the last month, manufacturing or service business may be beginning to kick higher. If the economy really is picking up after the third quarter's 1.6%, now's the time it will start to show.
Mortgage rates should be a bit lower next week, but at least some uncertainty related to the above keeps it a modest move downward of a handful of basis points, at best. It's too soon for even weak numbers to tilt the Fed's hand in favor of an easing, so the downside remains limited.
Thursday, October 19, 2006
Cost of living dips as gas prices fall
by Joe Estrella @ Idaho Statesman
October 19, 2006
Treasure Valley consumer prices fell 1 percent in September, thanks to an almost 6 percent drop in area gasoline costs, according to the monthly Wells Fargo Boise Area Cost of Living Report. It was the second consecutive month that area inflation has declined.
But area gasoline costs remain 25 cents above the national average, AAA Idaho reported Wednesday.
"Boise saw a welcome 5.6-percent decrease in transportation costs during September, and utility expenses also went down, more than offsetting gains in grocery, restaurant and health-care costs," said Sterling K. Jenson, regional managing director of Wells Capital Management."
The report showed increases in the price of health care and clothing last month, while utility costs were down more than 1.3 percent.
Even with last month’s decline in pump prices, area gas costs have risen 6.4 percent in the last six months, the report said.
AAA Idaho reported Wednesday that the cost of self-service regular unleaded in the Valley now averages $2.47 a gallon, down 51 cents in the last month, but still 25 cents higher than the U.S. average.
"Assuming that gas prices mirror what’s happening with crude oil and gasoline futures markets, we think Idaho’s gasoline prices should be significantly lower than they are right now," AAA spokesman Dave Carlson said in a statement.
Nationally, the Labor Department reported that its closely-watched Consumer Price Index fell 0.5 percent last month, the biggest decline in U.S. consumer costs since a 0.7 percent fall in November of last year. Core inflation, which excludes energy and food, edged up by 0.2 percent, the third straight month of modest gains following higher readings earlier in the year. Wells Fargo does not measure core inflation in the Treasure Valley.
Analysts believe the bigger-than-expected decline in consumer prices should help reassure investors that a slowing economy is helping to reduce inflation pressures according to the script written by the Federal Reserve.
October 19, 2006
Treasure Valley consumer prices fell 1 percent in September, thanks to an almost 6 percent drop in area gasoline costs, according to the monthly Wells Fargo Boise Area Cost of Living Report. It was the second consecutive month that area inflation has declined.
But area gasoline costs remain 25 cents above the national average, AAA Idaho reported Wednesday.
"Boise saw a welcome 5.6-percent decrease in transportation costs during September, and utility expenses also went down, more than offsetting gains in grocery, restaurant and health-care costs," said Sterling K. Jenson, regional managing director of Wells Capital Management."
The report showed increases in the price of health care and clothing last month, while utility costs were down more than 1.3 percent.
Even with last month’s decline in pump prices, area gas costs have risen 6.4 percent in the last six months, the report said.
AAA Idaho reported Wednesday that the cost of self-service regular unleaded in the Valley now averages $2.47 a gallon, down 51 cents in the last month, but still 25 cents higher than the U.S. average.
"Assuming that gas prices mirror what’s happening with crude oil and gasoline futures markets, we think Idaho’s gasoline prices should be significantly lower than they are right now," AAA spokesman Dave Carlson said in a statement.
Nationally, the Labor Department reported that its closely-watched Consumer Price Index fell 0.5 percent last month, the biggest decline in U.S. consumer costs since a 0.7 percent fall in November of last year. Core inflation, which excludes energy and food, edged up by 0.2 percent, the third straight month of modest gains following higher readings earlier in the year. Wells Fargo does not measure core inflation in the Treasure Valley.
Analysts believe the bigger-than-expected decline in consumer prices should help reassure investors that a slowing economy is helping to reduce inflation pressures according to the script written by the Federal Reserve.
Wednesday, October 18, 2006
Microsoft Boise emerges
by Ken Dey @ Idaho Statesman
October 18, 2006
ProClarity officially became Microsoft Boise on Tuesday.
Six months after the Redmond, Wash. software giant announced it had purchased the Boise business-software firm, most of the transition to Microsoft is complete.
“Everyone has been pretty heads down and working on getting the team integrated,” said Bob Lokken, ProClarity’s former CEO and now senior director of Microsoft’s office business applications. “We’ve designated today (Tuesday) as the official launching of Microsoft Boise.”
A new Microsoft sign now adorns the former ProClarity location at 500 S. 10th Street in Downtown Boise.
By next June, the first Microsoft-labeled business-software product will be introduced.
Before the acquisition, ProClarity had long had a relationship with Microsoft, which uses ProClarity’s software.
That software helps businesses analyze large amount of data in conjunction with Microsoft applications like Excel and Sharepoint.
When Microsoft purchased the company, it could have moved operations to Redmond, but choose to keep them in Boise. Lokken said Microsoft appreciated the quality of life in the Boise area.
The two cities are only an hour away by plane, making it easy for executives and employees to travel to Redmond when needed, he said.
Lokken says this is just the start of what he predicts will be a bright future for Microsoft in Boise.
“We’re pretty excited about future growth prospects in the city,” Lokken said. “It’s a great location for Microsoft.”
The company has already added a few new positions to its Boise work force of about 100 people.
Although it’s too early to put any number on the potential new jobs in Boise, Lokken said, expansion in Boise likely will be discussed next spring when Microsoft starts its planning for the next fiscal year.
“Hopefully, we’ll be able to fill out the operation in Boise,” he said.
Russ Whitney, principal development manager for Microsoft Boise, said a number Redmond-based Microsoft employees with ties to Idaho have applied for the open positions the company does have because they want to return to Boise.
Whitney said he’s also been working closely with Boise State University’s engineering and computer science departments to build a relationship that will help the company when Microsoft goes into a more-aggressive hiring mode.
Lokken said Microsoft also has started discussions with state and local officials about Microsoft’s plans for the area.
“We’ve had discussions on how we can work together to make Boise a better place for Microsoft employees and a desirable place for Microsoft to continue expanding,” Lokken said. “Microsoft has grown so much in Redmond that it’s consistently running out of room, and we think there are good prospects to continue building this site as we go forward.”
Lokken and Whitney said there have been some adjustments going from a small company to part of the world’s largest software company, but for the most part the changes have been positive.
Whitney said employees now have access to better benefits and the advantages of working for a larger company. Some employees also received raises.
But the biggest change is how the Microsoft name has elevated the profile of the company’s products.
“Our product strategy has changed significantly,” Whitney said. “We used to be a mouse in a field of elephants. Now we’re an elephant. It’s pretty exciting to be in that position.”
October 18, 2006
ProClarity officially became Microsoft Boise on Tuesday.
Six months after the Redmond, Wash. software giant announced it had purchased the Boise business-software firm, most of the transition to Microsoft is complete.
“Everyone has been pretty heads down and working on getting the team integrated,” said Bob Lokken, ProClarity’s former CEO and now senior director of Microsoft’s office business applications. “We’ve designated today (Tuesday) as the official launching of Microsoft Boise.”
A new Microsoft sign now adorns the former ProClarity location at 500 S. 10th Street in Downtown Boise.
By next June, the first Microsoft-labeled business-software product will be introduced.
Before the acquisition, ProClarity had long had a relationship with Microsoft, which uses ProClarity’s software.
That software helps businesses analyze large amount of data in conjunction with Microsoft applications like Excel and Sharepoint.
When Microsoft purchased the company, it could have moved operations to Redmond, but choose to keep them in Boise. Lokken said Microsoft appreciated the quality of life in the Boise area.
The two cities are only an hour away by plane, making it easy for executives and employees to travel to Redmond when needed, he said.
Lokken says this is just the start of what he predicts will be a bright future for Microsoft in Boise.
“We’re pretty excited about future growth prospects in the city,” Lokken said. “It’s a great location for Microsoft.”
The company has already added a few new positions to its Boise work force of about 100 people.
Although it’s too early to put any number on the potential new jobs in Boise, Lokken said, expansion in Boise likely will be discussed next spring when Microsoft starts its planning for the next fiscal year.
“Hopefully, we’ll be able to fill out the operation in Boise,” he said.
Russ Whitney, principal development manager for Microsoft Boise, said a number Redmond-based Microsoft employees with ties to Idaho have applied for the open positions the company does have because they want to return to Boise.
Whitney said he’s also been working closely with Boise State University’s engineering and computer science departments to build a relationship that will help the company when Microsoft goes into a more-aggressive hiring mode.
Lokken said Microsoft also has started discussions with state and local officials about Microsoft’s plans for the area.
“We’ve had discussions on how we can work together to make Boise a better place for Microsoft employees and a desirable place for Microsoft to continue expanding,” Lokken said. “Microsoft has grown so much in Redmond that it’s consistently running out of room, and we think there are good prospects to continue building this site as we go forward.”
Lokken and Whitney said there have been some adjustments going from a small company to part of the world’s largest software company, but for the most part the changes have been positive.
Whitney said employees now have access to better benefits and the advantages of working for a larger company. Some employees also received raises.
But the biggest change is how the Microsoft name has elevated the profile of the company’s products.
“Our product strategy has changed significantly,” Whitney said. “We used to be a mouse in a field of elephants. Now we’re an elephant. It’s pretty exciting to be in that position.”
New option emerges for Downtown convention center
by Joe Estrella @ Idaho Statesman
October 18, 2006
Boise’s largest Downtown landlord and a national hotelier have come up with a plan that could give the city its new Downtown convention center.
Oppenheimer Development Corp. of Boise and John Q. Hammons Hotels Management LLC — whose properties include Hilton, Courtyard by Marriott and Embassy Suites — will present a proposal to the Greater Boise Auditorium District board of directors today for a hotel/convention center on a 220,000-square-foot piece of land the district owns between 11th and 13th streets.
The meeting is scheduled for 10 a.m. today at the Boise Centre on The Grove.
Coonce declined to offer details about the joint venture’s proposal.
Jack Coonce, Oppenheimer Development vice president, confirmed that the two companies have created a joint venture, Hammons/Oppenheimer Associates, to explore the project.
City and local real estate experts believe a new convention center would breath life into a mostly barren stretch of former Union Pacific Railroad right-of-way between 9th and 15th, and set the stage for future downtown development.
Oppenheimer Development owns and manages 1 million square feet of real estate in Idaho and Wyoming, including two sites in Boise: the 200,000-square-foot Wells Fargo Center at 9th and Main streets, and the 220,000-square-foot One Capital Center, 720 W. Idaho St.
John Q. Hammons Hotels manages 63 hotels across the continental United States. Some of its other properties include the Mariott, Homewood Suites, Radisson, Renaissance, Residence Inn and Sheraton hotels.
Pat Rice, general manager of the Boise Centre on The Grove, said Coonce first brought up the issue a few months ago when he asked if the auditorium district “was still looking for a developer” for its proposed convention.
“Then he called me in Denver last Friday and wanted to know when they could make a presentation to the the board,” Rice said.
After two failed attempts to get voter approval for a new convention center, the auditorium district has been proceeding with a controversial plan calling for phased construction of a new facility using an additional $750,000 a year produced by a newly approved 1 percent increase in the city’s hotel room tax to 5 percent.
Rice said that whatever the plan proposed at today’s meeting, construction will have to be on the site owned by the auditorium district between 11th and 13th streets.
“That’s the only piece of land we control,” Rice said.
October 18, 2006
Boise’s largest Downtown landlord and a national hotelier have come up with a plan that could give the city its new Downtown convention center.
Oppenheimer Development Corp. of Boise and John Q. Hammons Hotels Management LLC — whose properties include Hilton, Courtyard by Marriott and Embassy Suites — will present a proposal to the Greater Boise Auditorium District board of directors today for a hotel/convention center on a 220,000-square-foot piece of land the district owns between 11th and 13th streets.
The meeting is scheduled for 10 a.m. today at the Boise Centre on The Grove.
Coonce declined to offer details about the joint venture’s proposal.
Jack Coonce, Oppenheimer Development vice president, confirmed that the two companies have created a joint venture, Hammons/Oppenheimer Associates, to explore the project.
City and local real estate experts believe a new convention center would breath life into a mostly barren stretch of former Union Pacific Railroad right-of-way between 9th and 15th, and set the stage for future downtown development.
Oppenheimer Development owns and manages 1 million square feet of real estate in Idaho and Wyoming, including two sites in Boise: the 200,000-square-foot Wells Fargo Center at 9th and Main streets, and the 220,000-square-foot One Capital Center, 720 W. Idaho St.
John Q. Hammons Hotels manages 63 hotels across the continental United States. Some of its other properties include the Mariott, Homewood Suites, Radisson, Renaissance, Residence Inn and Sheraton hotels.
Pat Rice, general manager of the Boise Centre on The Grove, said Coonce first brought up the issue a few months ago when he asked if the auditorium district “was still looking for a developer” for its proposed convention.
“Then he called me in Denver last Friday and wanted to know when they could make a presentation to the the board,” Rice said.
After two failed attempts to get voter approval for a new convention center, the auditorium district has been proceeding with a controversial plan calling for phased construction of a new facility using an additional $750,000 a year produced by a newly approved 1 percent increase in the city’s hotel room tax to 5 percent.
Rice said that whatever the plan proposed at today’s meeting, construction will have to be on the site owned by the auditorium district between 11th and 13th streets.
“That’s the only piece of land we control,” Rice said.
New plan for Downtown convention center unveiled
by Joe Estrella @ Idaho Stateman
October 18, 2006
The Greater Boise Auditorium District entered into an agreement today that could bring the city a new 130,000 square feet Downtown convention center and an 11-story, 286-room Embassy Suites Hotel by 2009.
The auditorium district board voted unanimously today to enter into exclusive negotiations on the estimated $80 million project with Hammons/Oppenheimer Associates, a joint venture between Oppenheimer Development Corp. of Boise and hotelier John Q. Hammons Hotel Management LLC.
Hammons, founder of some of the nation’s premier hotel chains, said the joint venture would raise the money to build the convention center and then lease it back to the auditorium district on a year-to -year basis. Pending a final agreement with the auditorium district, Hammons said construction could begin within 12 months, with an expected completion date 18 months later.
Auditorium District Chairman Stephenson Youngerman said he thought it would not take six months to negotiate a final agreement.
“The auditorium district will not be a drag on these negotiations,” he said. “We go along as rapidly as other people want to go.”
Hammons said the joint venture is talking to Capital City Development Corp. on a deal under which the city’s urban renewal agency would assist with financing on the convention center’s underground parking area.
October 18, 2006
The Greater Boise Auditorium District entered into an agreement today that could bring the city a new 130,000 square feet Downtown convention center and an 11-story, 286-room Embassy Suites Hotel by 2009.
The auditorium district board voted unanimously today to enter into exclusive negotiations on the estimated $80 million project with Hammons/Oppenheimer Associates, a joint venture between Oppenheimer Development Corp. of Boise and hotelier John Q. Hammons Hotel Management LLC.
Hammons, founder of some of the nation’s premier hotel chains, said the joint venture would raise the money to build the convention center and then lease it back to the auditorium district on a year-to -year basis. Pending a final agreement with the auditorium district, Hammons said construction could begin within 12 months, with an expected completion date 18 months later.
Auditorium District Chairman Stephenson Youngerman said he thought it would not take six months to negotiate a final agreement.
“The auditorium district will not be a drag on these negotiations,” he said. “We go along as rapidly as other people want to go.”
Hammons said the joint venture is talking to Capital City Development Corp. on a deal under which the city’s urban renewal agency would assist with financing on the convention center’s underground parking area.
Tuesday, October 17, 2006
Supervalue reports strong earnings
by IDAHO BUSINESS REVIEW
10/16/2006
Supervalu, which owns Idaho Albertsons stores and reported strong quarterly earnings last week, doesn’t appear to be impacting vendors — yet.
“We haven’t seen any big changes yet,” said Jerome Eberharter, founder and CEO of White Cloud Coffee, based in Garden City. “No doubt there will be some down the road. I think they’re still trying to get their arms around the communities they’re in.
“It’s a big deal to undertake,” he said. “As long as we can keep our sales strong and keep supporting them like with did with the old Albertsons, we should be OK.”
Eberharter said changes impacting Albertsons vendors could vary based on whether the vendor is dealing with stores owned by Supervalu or the Cerberus-led Albertons LLC — which doesn’t own Idaho stores but is based in Boise.
Scott Schoenherr of Rafanelli & Nahas hasn’t heard of any changes in the works among Albertsons vendors. His company’s River Quarry complex on ParkCenter Boulevard in southeast Boise houses Storecast Merchandising, Procter & Gamble and an Albertsons information technology group.
“They have not contacted us about downsizing,” he said. “We don’t see any scaling back.”
Calls to Albertsons vendors Dannon Yogurt, Procter & Gamble and Sara Lee weren’t returned immediately. All field Boise-area offices.
Supervalu reported its earnings nearly quadrupled in its second quarter because of its newly purchased Albertsons grocery stores, the Associated Press reported.
Chairman and CEO Jeff Noddle said the Albertsons purchase added to profit right away, not counting one-time costs from the acquisition, according to Associated Press.
Minnesota-based Supervalu said it earned $132 million, or 61 cents per share, in the three months ended Sept. 9, up from $34 million, or 24 cents per share, during the same period last year.
Sales more than doubled to $10.67 billion, up from $4.56 billion a year ago.
Analysts surveyed by Thomson Financial had expected earnings of 53 cents per share on revenue of $10.64 billion.
10/16/2006
Supervalu, which owns Idaho Albertsons stores and reported strong quarterly earnings last week, doesn’t appear to be impacting vendors — yet.
“We haven’t seen any big changes yet,” said Jerome Eberharter, founder and CEO of White Cloud Coffee, based in Garden City. “No doubt there will be some down the road. I think they’re still trying to get their arms around the communities they’re in.
“It’s a big deal to undertake,” he said. “As long as we can keep our sales strong and keep supporting them like with did with the old Albertsons, we should be OK.”
Eberharter said changes impacting Albertsons vendors could vary based on whether the vendor is dealing with stores owned by Supervalu or the Cerberus-led Albertons LLC — which doesn’t own Idaho stores but is based in Boise.
Scott Schoenherr of Rafanelli & Nahas hasn’t heard of any changes in the works among Albertsons vendors. His company’s River Quarry complex on ParkCenter Boulevard in southeast Boise houses Storecast Merchandising, Procter & Gamble and an Albertsons information technology group.
“They have not contacted us about downsizing,” he said. “We don’t see any scaling back.”
Calls to Albertsons vendors Dannon Yogurt, Procter & Gamble and Sara Lee weren’t returned immediately. All field Boise-area offices.
Supervalu reported its earnings nearly quadrupled in its second quarter because of its newly purchased Albertsons grocery stores, the Associated Press reported.
Chairman and CEO Jeff Noddle said the Albertsons purchase added to profit right away, not counting one-time costs from the acquisition, according to Associated Press.
Minnesota-based Supervalu said it earned $132 million, or 61 cents per share, in the three months ended Sept. 9, up from $34 million, or 24 cents per share, during the same period last year.
Sales more than doubled to $10.67 billion, up from $4.56 billion a year ago.
Analysts surveyed by Thomson Financial had expected earnings of 53 cents per share on revenue of $10.64 billion.
Some Idaho property taxes may not go down as much as owners might expect
by Lora Volkert @ Idaho Business Review
10/16/2006
Boise residents and business owners may not see their property taxes fall as much as expected.
The Property Tax Relief Act of 2006, passed in August by a special session of the Legislature, means most school maintenance and operations budgets will come out of the general fund rather than being paid with property taxes.
That essentially eliminated a 0.3 percent property tax levied by school districts. The money will be replaced with an additional 1 percent sales tax and $50 million from the budget surplus.
But the Boise School District will still levy property taxes for its maintenance and operations budget, Commissioner Tom Katsilometes said at a recent meeting of the Idaho State Tax Commission.
Boise School District started with a higher levy rate than other school districts — 0.66 percent. Katsilometes said that, after the reduction, taxpayers in the Boise School District will still pay 0.36 percent.
The Boise School District won’t be the only one that still levies property taxes, Katsilometes said. The Blaine, Swan Valley, Avery and McCall-Donnelly school districts will be able to levy property taxes for their budget stabilization funds.
Those funds insure that the school districts receive the same amount of money per child that they did in prior years, regardless of what happens to their school populations or the economy, Katsilometes said.
The Property Tax Relief Act dealt with about $260 million in school maintenance and operations funds, equating to 19 percent of property taxes levied in the state. But Katsilometes said the actual amount of the school maintenance and operations budget is about $346 million.
The Boise, Blaine, Swan Valley, Avery and McCall-Donnelly school districts would still levy the remainder, he said. About 60 percent of the remaining $87 million goes to the Boise School District.
The school maintenance and operations budget was projected to increase by 16 percent before the Property Tax Relief Act went into effect.
Another change to the school district taxing structure that hasn’t been discussed much is that the schools will now be more subject to the legislative appropriations process, said Gary Houde, senior research analyst for the State Tax Commission.
Most people he talks to seem to be under the impression that the extra penny per dollar in sales tax will be automatically earmarked for schools every year, but it is not, he said.
$260 million
School maintenance and operations budget to be paid from the general fund instead of property taxes.
$87 million
Property taxes that would still be levied by school districts.
$52 million
Property taxes that would be levied by Boise School District alone.
10/16/2006
Boise residents and business owners may not see their property taxes fall as much as expected.
The Property Tax Relief Act of 2006, passed in August by a special session of the Legislature, means most school maintenance and operations budgets will come out of the general fund rather than being paid with property taxes.
That essentially eliminated a 0.3 percent property tax levied by school districts. The money will be replaced with an additional 1 percent sales tax and $50 million from the budget surplus.
But the Boise School District will still levy property taxes for its maintenance and operations budget, Commissioner Tom Katsilometes said at a recent meeting of the Idaho State Tax Commission.
Boise School District started with a higher levy rate than other school districts — 0.66 percent. Katsilometes said that, after the reduction, taxpayers in the Boise School District will still pay 0.36 percent.
The Boise School District won’t be the only one that still levies property taxes, Katsilometes said. The Blaine, Swan Valley, Avery and McCall-Donnelly school districts will be able to levy property taxes for their budget stabilization funds.
Those funds insure that the school districts receive the same amount of money per child that they did in prior years, regardless of what happens to their school populations or the economy, Katsilometes said.
The Property Tax Relief Act dealt with about $260 million in school maintenance and operations funds, equating to 19 percent of property taxes levied in the state. But Katsilometes said the actual amount of the school maintenance and operations budget is about $346 million.
The Boise, Blaine, Swan Valley, Avery and McCall-Donnelly school districts would still levy the remainder, he said. About 60 percent of the remaining $87 million goes to the Boise School District.
The school maintenance and operations budget was projected to increase by 16 percent before the Property Tax Relief Act went into effect.
Another change to the school district taxing structure that hasn’t been discussed much is that the schools will now be more subject to the legislative appropriations process, said Gary Houde, senior research analyst for the State Tax Commission.
Most people he talks to seem to be under the impression that the extra penny per dollar in sales tax will be automatically earmarked for schools every year, but it is not, he said.
$260 million
School maintenance and operations budget to be paid from the general fund instead of property taxes.
$87 million
Property taxes that would still be levied by school districts.
$52 million
Property taxes that would be levied by Boise School District alone.
No burst bubbles in Caldwell building boom
by Lora Volkert @ Idaho Business Review
10/16/2006
Caldwell is defying the construction slowdown that’s hit other parts of the Treasure Valley.
Most cities had construction levels equal to or less than the abnormally high levels of 2005. However, Caldwell issued over 1,000 more building permits through September than were issued for the same period in 2005.
Higher real estate prices elsewhere in the Valley seem to be driving development in Caldwell, where land and housing are consistently cheaper, Caldwell Building Official Brett Clark said.
“Caldwell’s the place to be right now. Everybody else has had their turn,” Clark said. “With the cost of housing going up, it’s Caldwell’s turn.”
Things are likely to speed up again next year, he said. Some subdivisions are on hold as streets, fire hydrants and other infrastructure are built.
On the other end of the spectrum, Meridian’s downward trend in construction is becoming more pronounced. In 2005 the city issued almost three times as many building permits for the first three quarters of the year as were issued for the same period in 2006.
The Meridian Building Department has had to downsize its staff by four inspectors, according to building official Daunt Whitman.
The city issued 76 residential building permits in September, up from 52 in August, though the number is down from the triple digits of the last three Septembers.
The most recent permits are being used to build less expensive homes. The average residential permit value for September 2006 was $222,602, down from $248,934 in August and $292,438 in July.
Construction stayed almost flat in Boise and Nampa this year compared to the first three quarters of last year.
Other cities may be down, but not for long.
Kuna issued fewer than 400 building permits in the first nine months of the year for the first time since the turn of the century. The Kuna downturn is apparently in response to last year’s rapid pace. In 2005, the city issued nearly 700 permits in the first three quarters of 2005, compared to 400 to 450 in most recent years.
But this is just the calm before the storm, said Interim Planning and Zoning Director Diana Sanders. Five new subdivisions have recently been approved or are under review by Ada County, she said.
Though Eagle’s permit numbers are down from 2005, the city is still on track compared to prior years.
Eagle issued 765 permits in the first three quarters of 2006, compared to 744 for the same period in 2004.
Permits for first three quarters
Caldwell
2006 — 6,732
2005 — 5,620
Boise
2006 — 12,691
2005 — 12,632
Eagle
2006 — 765
2005 — 982
Fruitland
2006 — 94
2005 — 78
Kuna
2006 — 386
2005 — 693
Meridian
2006 — 2,188
2005 — 6,202
Nampa
2006 — 1,694
2005 — 1,653
Twin Falls
2006 — 871
2005 — 863
10/16/2006
Caldwell is defying the construction slowdown that’s hit other parts of the Treasure Valley.
Most cities had construction levels equal to or less than the abnormally high levels of 2005. However, Caldwell issued over 1,000 more building permits through September than were issued for the same period in 2005.
Higher real estate prices elsewhere in the Valley seem to be driving development in Caldwell, where land and housing are consistently cheaper, Caldwell Building Official Brett Clark said.
“Caldwell’s the place to be right now. Everybody else has had their turn,” Clark said. “With the cost of housing going up, it’s Caldwell’s turn.”
Things are likely to speed up again next year, he said. Some subdivisions are on hold as streets, fire hydrants and other infrastructure are built.
On the other end of the spectrum, Meridian’s downward trend in construction is becoming more pronounced. In 2005 the city issued almost three times as many building permits for the first three quarters of the year as were issued for the same period in 2006.
The Meridian Building Department has had to downsize its staff by four inspectors, according to building official Daunt Whitman.
The city issued 76 residential building permits in September, up from 52 in August, though the number is down from the triple digits of the last three Septembers.
The most recent permits are being used to build less expensive homes. The average residential permit value for September 2006 was $222,602, down from $248,934 in August and $292,438 in July.
Construction stayed almost flat in Boise and Nampa this year compared to the first three quarters of last year.
Other cities may be down, but not for long.
Kuna issued fewer than 400 building permits in the first nine months of the year for the first time since the turn of the century. The Kuna downturn is apparently in response to last year’s rapid pace. In 2005, the city issued nearly 700 permits in the first three quarters of 2005, compared to 400 to 450 in most recent years.
But this is just the calm before the storm, said Interim Planning and Zoning Director Diana Sanders. Five new subdivisions have recently been approved or are under review by Ada County, she said.
Though Eagle’s permit numbers are down from 2005, the city is still on track compared to prior years.
Eagle issued 765 permits in the first three quarters of 2006, compared to 744 for the same period in 2004.
Permits for first three quarters
Caldwell
2006 — 6,732
2005 — 5,620
Boise
2006 — 12,691
2005 — 12,632
Eagle
2006 — 765
2005 — 982
Fruitland
2006 — 94
2005 — 78
Kuna
2006 — 386
2005 — 693
Meridian
2006 — 2,188
2005 — 6,202
Nampa
2006 — 1,694
2005 — 1,653
Twin Falls
2006 — 871
2005 — 863
Housing boom forces mayors to grapple with affordability
by Lora Volkert @ Idaho Business Review
10/16/2006
Rising real estate prices and low wage growth have prompted Idaho mayors to look for ways to increase the amount of affordable housing in their cities.
Mayors from three cities shared their methods at this month’s Idaho Conference on Housing.
The city of Boise is considering inclusionary zoning, which would require developers to either dedicate for affordable housing a percentage of the housing units they build or pay into an affordable housing fund, Boise Mayor David Bieter said.
The Building Contractors Association opposes the idea, he said. But Beiter believes the city needs to consider the plan as a way to increase housing opportunities and supplement the city’s other homelessness initiatives, such as rental assistance programs the city is starting with the help of churches and civic organizations.
Inclusionary zoning isn’t the only Boise housing initiative to spark controversy. Neighborhood groups have opposed another of Bieter’s housing priorities, infill development.
Most citizens understand the need to fight urban sprawl, so the battles over infill projects are paradoxical, Bieter said.
“The only thing we dislike worse than sprawl is density,” he said.
The city has tried to promote dense infill by tweaking building codes to make multi-family housing more affordable to build and own, he said.
Boise changed its codes to allow up to five stories of wood-framed construction on top of a concrete and steel building of up to three stories. Downtown residential projects have boomed as a result, he said.
Likewise, the city doesn’t require fire sprinkler systems in four-plexes because such systems would significantly increase construction costs without appreciably increasing safety, he said.
“The future of Boise is to bring infill projects to the city,” Bieter said.
He believes infill can help the city sustain its growth because it uses existing infrastructure, unlike the many planned communities proposed outside town.
Other mayors have been encouraging infill in their own ways. Caldwell Mayor Garret Nancolas spoke at the conference about his efforts to encourage private industry to redevelop downtown with mixed-use development around Indian Creek. Within 10 years the city expects 300 to 400 units of urban housing in downtown, he said. The city broke ground on the Indian Creek project last month.
Pocatello Mayor Roger Chase said his city had the dubious distinction of having the oldest housing stock in the state. A quarter of the city’s housing was built before 1940.
The city acquired a community development block grant to rehabilitate 232 houses and build new second-story housing in old commercial developments in the center of town.
* * *
10/16/2006
Rising real estate prices and low wage growth have prompted Idaho mayors to look for ways to increase the amount of affordable housing in their cities.
Mayors from three cities shared their methods at this month’s Idaho Conference on Housing.
The city of Boise is considering inclusionary zoning, which would require developers to either dedicate for affordable housing a percentage of the housing units they build or pay into an affordable housing fund, Boise Mayor David Bieter said.
The Building Contractors Association opposes the idea, he said. But Beiter believes the city needs to consider the plan as a way to increase housing opportunities and supplement the city’s other homelessness initiatives, such as rental assistance programs the city is starting with the help of churches and civic organizations.
Inclusionary zoning isn’t the only Boise housing initiative to spark controversy. Neighborhood groups have opposed another of Bieter’s housing priorities, infill development.
Most citizens understand the need to fight urban sprawl, so the battles over infill projects are paradoxical, Bieter said.
“The only thing we dislike worse than sprawl is density,” he said.
The city has tried to promote dense infill by tweaking building codes to make multi-family housing more affordable to build and own, he said.
Boise changed its codes to allow up to five stories of wood-framed construction on top of a concrete and steel building of up to three stories. Downtown residential projects have boomed as a result, he said.
Likewise, the city doesn’t require fire sprinkler systems in four-plexes because such systems would significantly increase construction costs without appreciably increasing safety, he said.
“The future of Boise is to bring infill projects to the city,” Bieter said.
He believes infill can help the city sustain its growth because it uses existing infrastructure, unlike the many planned communities proposed outside town.
Other mayors have been encouraging infill in their own ways. Caldwell Mayor Garret Nancolas spoke at the conference about his efforts to encourage private industry to redevelop downtown with mixed-use development around Indian Creek. Within 10 years the city expects 300 to 400 units of urban housing in downtown, he said. The city broke ground on the Indian Creek project last month.
Pocatello Mayor Roger Chase said his city had the dubious distinction of having the oldest housing stock in the state. A quarter of the city’s housing was built before 1940.
The city acquired a community development block grant to rehabilitate 232 houses and build new second-story housing in old commercial developments in the center of town.
* * *
Developer confident of financing
by Lora Volkert @ Idaho Business Review
10/16/2006
Boise Place developer Gary Rogers said last week he still hasn’t signed a deal to finance the proposed high-rise, but he hopes to do so by the project’s Nov. 8 Boise Design Review hearing.
Boise Place is planned as a 31-story building on the site where the Boise Tower was started.
“The good news is we know it’s there,” he said of the financing. Rogers said he is still working with two potential financial partners.
The developer for the Boise Tower, Rick Peterson, was never able to obtain financing for the project, although he said several financial institutions were interested.
Boise Place doesn’t warrant comparisons to the Boise Tower, said Rogers, the manager of Charterhouse Boise Downtown Development, and Boiseans don’t need to worry about financing for Boise Place.
“This is not the old project. This is the new project. It happens to be on the same site. But we’ve got new people and new money and everything else,” he said.
Boise Place would be 400 feet tall, cost $126 million to build, and include ground-floor retail, parking on floors two through six, a spa and fitness center on floor seven, hotel rooms and condos on floors eight through 21, more condos on floors 22 through 30, and a rooftop terrace.
***
10/16/2006
Boise Place developer Gary Rogers said last week he still hasn’t signed a deal to finance the proposed high-rise, but he hopes to do so by the project’s Nov. 8 Boise Design Review hearing.
Boise Place is planned as a 31-story building on the site where the Boise Tower was started.
“The good news is we know it’s there,” he said of the financing. Rogers said he is still working with two potential financial partners.
The developer for the Boise Tower, Rick Peterson, was never able to obtain financing for the project, although he said several financial institutions were interested.
Boise Place doesn’t warrant comparisons to the Boise Tower, said Rogers, the manager of Charterhouse Boise Downtown Development, and Boiseans don’t need to worry about financing for Boise Place.
“This is not the old project. This is the new project. It happens to be on the same site. But we’ve got new people and new money and everything else,” he said.
Boise Place would be 400 feet tall, cost $126 million to build, and include ground-floor retail, parking on floors two through six, a spa and fitness center on floor seven, hotel rooms and condos on floors eight through 21, more condos on floors 22 through 30, and a rooftop terrace.
***
Natural-fodds groceries eye Boise market
by Brad Carlson @ Idaho Business Review
10/16/2006
Whole Foods Market officials have made at least one visit to Boise to check out a downtown-area site for potential store development.
The Austin, Texas-based grocery chain sells natural and organic foods. Although the company has no announcement regarding a Boise location, a spokeswoman said, Whole Foods continues to open stores and seek sites for future stores.
“We are growing, and we’re always looking for great new store sites,” Whole Foods spokeswoman Amy Schaefer said last week. “Some of the most important elements we seek include high foot or vehicle traffic, a 40,000- to 75,000-square-foot location, abundant parking, and 200,000 or more people within a 20-minute drive time.”
Boise City Planning Director Hal Simmons said a local architect, a real estate agent and Whole Foods store-development officials came to Boise about four months ago.
“They came in and asked us for a meeting to show us their concept for a Whole Foods and a hotel on the old University Place site” at Front, Myrtle and Broadway, he said. “They didn’t give a timeline.”
City planners suggested the group meet with Capital City Development Corp., Boise’s urban-renewal agency, Simmons said.
The group has not filed a project application or held a pre-application meeting with Boise city planners, he said. Before an application is filed, a developer first holds a preliminary meeting with Boise planners and a neighborhood meeting, he said.
The city of Boise has the vacant University Place site zoned for residential-office, with design-review approval required, Simmons said. As presented last summer, the Whole Foods store and hotel project would require a conditional-use permit, and probably a height exception for a seven- or eight-story hotel, he said.
White Cloud Coffee founder and CEO Jerome Eberharter, whose company is a supplier to several grocery chains, visited a Whole Foods store in Santa Fe, N.M., early this month. He said a store manager didn’t know of a store planned in Boise, but said the company is aggressively moving toward the Northwest and Intermountain areas.
“I think the market is dynamic enough and also upscale enough to attract that kind of chain,” Eberharter said. “I don’t think it’s a matter of ‘if’ — it’s a matter of ‘when.’”
Wild Oats/
Trader Joe’s
Another sizable retailer of organic and natural foods, Wild Oats Markets, is also seeking a Boise site.
“We have no signed lease in Boise, although it’s a very appealing market to us and we are actively looking for a potential location,” said Sonja Tuitele, spokeswoman for the Boulder, Colo., company. Wild Oats hasn’t confirmed a location or timetable, she said.
Trader Joe’s is a chain of neighborhood grocery stores that stock specialty and private-label items. One rumor had the Monrovia, Calif., company seeking a site in the Treasure Valley.
However:
“Boise isn’t in our two-year plan at this time,” company spokeswoman Alison Mochizuki said.
***
10/16/2006
Whole Foods Market officials have made at least one visit to Boise to check out a downtown-area site for potential store development.
The Austin, Texas-based grocery chain sells natural and organic foods. Although the company has no announcement regarding a Boise location, a spokeswoman said, Whole Foods continues to open stores and seek sites for future stores.
“We are growing, and we’re always looking for great new store sites,” Whole Foods spokeswoman Amy Schaefer said last week. “Some of the most important elements we seek include high foot or vehicle traffic, a 40,000- to 75,000-square-foot location, abundant parking, and 200,000 or more people within a 20-minute drive time.”
Boise City Planning Director Hal Simmons said a local architect, a real estate agent and Whole Foods store-development officials came to Boise about four months ago.
“They came in and asked us for a meeting to show us their concept for a Whole Foods and a hotel on the old University Place site” at Front, Myrtle and Broadway, he said. “They didn’t give a timeline.”
City planners suggested the group meet with Capital City Development Corp., Boise’s urban-renewal agency, Simmons said.
The group has not filed a project application or held a pre-application meeting with Boise city planners, he said. Before an application is filed, a developer first holds a preliminary meeting with Boise planners and a neighborhood meeting, he said.
The city of Boise has the vacant University Place site zoned for residential-office, with design-review approval required, Simmons said. As presented last summer, the Whole Foods store and hotel project would require a conditional-use permit, and probably a height exception for a seven- or eight-story hotel, he said.
White Cloud Coffee founder and CEO Jerome Eberharter, whose company is a supplier to several grocery chains, visited a Whole Foods store in Santa Fe, N.M., early this month. He said a store manager didn’t know of a store planned in Boise, but said the company is aggressively moving toward the Northwest and Intermountain areas.
“I think the market is dynamic enough and also upscale enough to attract that kind of chain,” Eberharter said. “I don’t think it’s a matter of ‘if’ — it’s a matter of ‘when.’”
Wild Oats/
Trader Joe’s
Another sizable retailer of organic and natural foods, Wild Oats Markets, is also seeking a Boise site.
“We have no signed lease in Boise, although it’s a very appealing market to us and we are actively looking for a potential location,” said Sonja Tuitele, spokeswoman for the Boulder, Colo., company. Wild Oats hasn’t confirmed a location or timetable, she said.
Trader Joe’s is a chain of neighborhood grocery stores that stock specialty and private-label items. One rumor had the Monrovia, Calif., company seeking a site in the Treasure Valley.
However:
“Boise isn’t in our two-year plan at this time,” company spokeswoman Alison Mochizuki said.
***
Idaho building materials company opens new plant in Boise
by Melissa McGrath @ Idaho Statesman
A local company that manufactures building materials opened a 37,000-square-foot manufacturing plant in Boise.
Idaho Truss and Component Co., based in Meridian, had to expand into the plant located off Federal Way in Boise because its prefabricated wall panel business has taken off in recent years, said Kendall Hoyd, president of Idaho Truss.
The company has grown from selling about $25,000 worth of wall panels in a month in 2001 to selling between $400,000 and $500,000 a month this year.
“One of the things we did in 2005 was the Tamarack members’ lodge. That was our first major project,” Hoyd said. “Since then, we’ve been very successful in pursuing that kind of work. We were awarded the next six buildings in the Tamarack development.”
The company also is helping to build a lodge in Sun Valley, a condominium project in Sun Valley and a hotel in Seattle.
Idaho Truss can design the frame for a building, manufacture the wall panels and install them.
Sixty people currently work at the Idaho Truss plant in Boise. The company plans to add another 30 or 40 workers in the next year, Hoyd said.
A local company that manufactures building materials opened a 37,000-square-foot manufacturing plant in Boise.
Idaho Truss and Component Co., based in Meridian, had to expand into the plant located off Federal Way in Boise because its prefabricated wall panel business has taken off in recent years, said Kendall Hoyd, president of Idaho Truss.
The company has grown from selling about $25,000 worth of wall panels in a month in 2001 to selling between $400,000 and $500,000 a month this year.
“One of the things we did in 2005 was the Tamarack members’ lodge. That was our first major project,” Hoyd said. “Since then, we’ve been very successful in pursuing that kind of work. We were awarded the next six buildings in the Tamarack development.”
The company also is helping to build a lodge in Sun Valley, a condominium project in Sun Valley and a hotel in Seattle.
Idaho Truss can design the frame for a building, manufacture the wall panels and install them.
Sixty people currently work at the Idaho Truss plant in Boise. The company plans to add another 30 or 40 workers in the next year, Hoyd said.
Nampa Defines Areas as 'deteriorating'
by Sandra Forester @ Idaho Statesman
October 17, 2006
Nampa City Council agreed by split vote Monday to move toward creating an urban renewal district that would put about $44.1 million into new buildings and other improvements, with a new downtown library as the top priority.
Also on the council agenda was a proposal to revamp the city’s auto reimbursement policy in response to concerns about a recent doubling of the mayor’s auto allowance.
That issue had not been addressed by press time Monday, and the meeting was expected to run late into the night.
Further discussion of the proposed urban renewal district also was expected late Monday, with council members adjourning their meeting to reconvene as the board of the Nampa Development Council, the city’s newly renamed urban renewal agency. As the development board, council members were expected to decide whether to approve the proposed boundaries and other aspects of the district.
The council split 2-2 on a resolution to declare downtown Nampa and other key commercial and industrial areas as “deteriorating” — the first step in creating an urban renewal district. Stephen Kren and Bob Schmidt voted against the resolution, and Lynda Clark and Martin Thorne voted for it. Mayor Tom Dale broke the tie, approving the resolution.
A draft plan presented to the City Council Monday listed the projects and costs by priority: additional library, $15.5 million; sewer and water lines for North Nampa, $4 million; a public safety building, $14.6 million; Garrity Boulevard right-of-way improvements, $1 million; Nampa-Caldwell Boulevard improvements, $5 million; Franklin Boulevard right-of-way, $3 million; Interstate 84 interchange improvements, $1 million.
A “pay as you go” plan would allow the library construction to begin in 2012, and other projects would be paid as tax-district revenues are collected through 2017, officials said.
Another option is to pay for the projects through bonds that would be paid off by urban renewal district revenues. This would allow library construction to begin in 2009.
The district would cover hundreds of industrial and commercial acres north of Interstate 84, land on both sides of Nampa-Caldwell Boulevard, and most of Nampa’s downtown.
The council also considered a written policy for reimbursement of mileage expenses that eliminates taxable auto allowances for employees hired in the future.
The new policy would require direct reimbursement at the state rate for employees who use their personal vehicles on city business.
The issue of reimbursement versus auto allowance came up after council members discovered in August that the mayor’s allowance doubled to $800 in June without council approval.
Dale said last week his accountant recommended he be paid based on the net auto allowance he receives after taxes instead of the gross before taxes.
Dale asked finance director Debbie Mammone to figure out a way he could be justly compensated for driving his car more than 1,000 miles a month. The result was the increase to $800.
To offer story ideas or comments, contact reporter Sandra Forester at sforester@idahostatesman.com or 377-6464.
October 17, 2006
Nampa City Council agreed by split vote Monday to move toward creating an urban renewal district that would put about $44.1 million into new buildings and other improvements, with a new downtown library as the top priority.
Also on the council agenda was a proposal to revamp the city’s auto reimbursement policy in response to concerns about a recent doubling of the mayor’s auto allowance.
That issue had not been addressed by press time Monday, and the meeting was expected to run late into the night.
Further discussion of the proposed urban renewal district also was expected late Monday, with council members adjourning their meeting to reconvene as the board of the Nampa Development Council, the city’s newly renamed urban renewal agency. As the development board, council members were expected to decide whether to approve the proposed boundaries and other aspects of the district.
The council split 2-2 on a resolution to declare downtown Nampa and other key commercial and industrial areas as “deteriorating” — the first step in creating an urban renewal district. Stephen Kren and Bob Schmidt voted against the resolution, and Lynda Clark and Martin Thorne voted for it. Mayor Tom Dale broke the tie, approving the resolution.
A draft plan presented to the City Council Monday listed the projects and costs by priority: additional library, $15.5 million; sewer and water lines for North Nampa, $4 million; a public safety building, $14.6 million; Garrity Boulevard right-of-way improvements, $1 million; Nampa-Caldwell Boulevard improvements, $5 million; Franklin Boulevard right-of-way, $3 million; Interstate 84 interchange improvements, $1 million.
A “pay as you go” plan would allow the library construction to begin in 2012, and other projects would be paid as tax-district revenues are collected through 2017, officials said.
Another option is to pay for the projects through bonds that would be paid off by urban renewal district revenues. This would allow library construction to begin in 2009.
The district would cover hundreds of industrial and commercial acres north of Interstate 84, land on both sides of Nampa-Caldwell Boulevard, and most of Nampa’s downtown.
The council also considered a written policy for reimbursement of mileage expenses that eliminates taxable auto allowances for employees hired in the future.
The new policy would require direct reimbursement at the state rate for employees who use their personal vehicles on city business.
The issue of reimbursement versus auto allowance came up after council members discovered in August that the mayor’s allowance doubled to $800 in June without council approval.
Dale said last week his accountant recommended he be paid based on the net auto allowance he receives after taxes instead of the gross before taxes.
Dale asked finance director Debbie Mammone to figure out a way he could be justly compensated for driving his car more than 1,000 miles a month. The result was the increase to $800.
To offer story ideas or comments, contact reporter Sandra Forester at sforester@idahostatesman.com or 377-6464.
Wednesday, October 11, 2006
Businesses benefit from exemptions to sales tax
by Brad Carlson @ Idaho Business Review
10/09/2006
On Oct. 1, most Idaho consumers and businesses began paying another penny in sales tax for every dollar spent.
The tax increase was approved by the Idaho Legislature Aug. 25 as part of Gov. Jim Risch’s proposal to ease property taxes. According to state Division of Financial Management estimates, the hike from 5 to 6 percent will generate about $219 million for the state over a full fiscal year.
However, at least half-a-billion dollars in potential revenue won’t be collected because dozens of goods, services and entities are exempt from paying sales tax.
And the list of exemptions keeps growing. The Legislature last winter approved several new areas of spending now free of sales tax, including movie production, museum admissions and a special kit used on wrecked trucks.
A 2002 interim legislative committee on sales taxes studied each exemption and its fiscal impact, Associated Taxpayers of Idaho President Randy Nelson said. However, no exemptions were removed.
Some are sacred cows.
The so-called “production exemption” means companies don’t pay sales tax on equipment and supplies used in manufacturing, farming and mining, said Jim Husted, with the Idaho State Tax Commission.
“It has a fairly large impact, and also is (an exemption) that manufacturers very much feel is necessary,” he said.”
Don Reading, an economist with Ben Johnson Associates, said it’s unlikely the Legislature would ever curtail or suspend the production exemption.
“That, to the Idaho business community, is like Social Security is to the AARP,” he said.
Division of Financial Management Administrator Brad Foltman said equipment sales that fall under the production exemption would generate $78 million in fiscal 2007 — if the sales tax were collected. Sales of supplies would generate $59.1 million, he said.
Some of the exemptions, were they removed, would have an even larger impact to Idaho’s tax revenues.
Explosive growth in recent years led to a statewide building boom. However, while builder-developers pay sales taxes on construction materials, construction services are not taxed.
A Division of Financial Management estimate puts the impact of that exemption at $123,169,000 for the current fiscal year.
Micron and media
Micron Technology, the state’s largest company, spent about $2.2 billion on capital expenditures for the fiscal year that ended Aug. 31.
Not all of the company’s capital expenditures will be on production equipment and thus exempt from sales tax. However, company spokesman Dan Francisco said that, historically, about 70 percent of the capital-expenditure total has been “fab-related” — spent on semiconductor wafer fabrication equipment, tool sets and the like.
Equipment and supply purchases for publishing and broadcasting are also exempt from sales tax.
KTVB General Manager Doug Armstrong said each television station in the Boise area installed digital broadcasting equipment a few years ago to meet a Federal Communications Commission requirement.
He wouldn’t disclose KTVB expenditures, but said each station in the Boise area probably spent more than $1 million.
“We are a regulated industry and are required to provide that service to our channels, so (the exemption) does have some foundation in common sense,” Armstrong said.
Roughly half of KTVB’s expenditures are exempt from sales tax, he said. Purchases not directly related to broadcasting and transmitting — for items such as vehicles and computers — are charged sales tax.
Armstrong said that if broadcast-specific expenditures were subject to sales tax, KTVB would make fewer taxable and non-taxable purchases overall.
The financial impact of each sales-tax exemption can be found in the General Fund Revenue Book, which the Division of Financial Management publishes each January.
Mike Ferguson, chief economist at the Division of Financial Management, said the Legislature typically grants sales-tax exemptions because it deems a particular entity or activity worthy.
“It could be hardship, promoting the economy or any number of reasons, and it’s going to vary case by case,” he said.
The line-item dollar amounts in the Revenue Book don’t represent exact totals lost to each exemption, he said. State budget estimators assume spending totals would differ without the exemptions.
Even with the exemptions, Idaho sales tax collections have grown consistently over the years, Nelson said.
“How much stronger they might have been (without the exemptions) is hard to say,” he said of sales-tax revenues. “A lot of the reason is to incent more economic activity. To put a number on that gets really difficult.”
Become exempt
Husted said the exemptions are the result of someone requesting, and receiving, approval from the Idaho Legislature.
“It does not cause a problem administratively as long as the exemption is well defined,” he said. “Sometimes if the language is not clear, then generally we will have an argument with the taxpayer, who feels the exemption is broader than the commission’s interpretation. Some of them, we almost never disagree on.”
Disagreements usually come to light through audits of taxpayers that produce Tax Commission rulings, Husted said. However, some taxpayers request a ruling before doing business. (See related story on Cabela’s on next page.) And in some cases the Legislature takes care of it.
In the 2006 session, lawmakers aimed to encourage film and media productions when they passed House Bill 497, Nelson said.
The new law gives a sales-tax rebate to film and media productions making at least $200,000 in qualifying expenditures over three years. The exemption is scheduled to end in 2013.
“You may see more and more of that — investment, then the rebate,” Nelson said. “You want the jobs to come with it.”
The 2006 Legislature also approved House Bill 475, which exempts museum admissions. Other exemptions to the sales tax approved this year included “glider kit” replacements for wrecked trucks, free dental clinics, heating pellet manufacturers, domestic violence support groups, fees at nonprofit shooting ranges and competitions, dues at nonprofit hunting and shooting organizations, and a clarification to the exemption for pollution control equipment.
Nelson said it could be hard for lawmakers to refuse a new exemption similar to one already on the books.
“They’ve got to be careful it doesn’t open up to applying to a whole bunch of unintended folks,” Nelson said. “They just have to be very careful, and narrow. The folks bringing the requests understand that and want to keep the fiscal impact as minimal as possible.”
***
10/09/2006
On Oct. 1, most Idaho consumers and businesses began paying another penny in sales tax for every dollar spent.
The tax increase was approved by the Idaho Legislature Aug. 25 as part of Gov. Jim Risch’s proposal to ease property taxes. According to state Division of Financial Management estimates, the hike from 5 to 6 percent will generate about $219 million for the state over a full fiscal year.
However, at least half-a-billion dollars in potential revenue won’t be collected because dozens of goods, services and entities are exempt from paying sales tax.
And the list of exemptions keeps growing. The Legislature last winter approved several new areas of spending now free of sales tax, including movie production, museum admissions and a special kit used on wrecked trucks.
A 2002 interim legislative committee on sales taxes studied each exemption and its fiscal impact, Associated Taxpayers of Idaho President Randy Nelson said. However, no exemptions were removed.
Some are sacred cows.
The so-called “production exemption” means companies don’t pay sales tax on equipment and supplies used in manufacturing, farming and mining, said Jim Husted, with the Idaho State Tax Commission.
“It has a fairly large impact, and also is (an exemption) that manufacturers very much feel is necessary,” he said.”
Don Reading, an economist with Ben Johnson Associates, said it’s unlikely the Legislature would ever curtail or suspend the production exemption.
“That, to the Idaho business community, is like Social Security is to the AARP,” he said.
Division of Financial Management Administrator Brad Foltman said equipment sales that fall under the production exemption would generate $78 million in fiscal 2007 — if the sales tax were collected. Sales of supplies would generate $59.1 million, he said.
Some of the exemptions, were they removed, would have an even larger impact to Idaho’s tax revenues.
Explosive growth in recent years led to a statewide building boom. However, while builder-developers pay sales taxes on construction materials, construction services are not taxed.
A Division of Financial Management estimate puts the impact of that exemption at $123,169,000 for the current fiscal year.
Micron and media
Micron Technology, the state’s largest company, spent about $2.2 billion on capital expenditures for the fiscal year that ended Aug. 31.
Not all of the company’s capital expenditures will be on production equipment and thus exempt from sales tax. However, company spokesman Dan Francisco said that, historically, about 70 percent of the capital-expenditure total has been “fab-related” — spent on semiconductor wafer fabrication equipment, tool sets and the like.
Equipment and supply purchases for publishing and broadcasting are also exempt from sales tax.
KTVB General Manager Doug Armstrong said each television station in the Boise area installed digital broadcasting equipment a few years ago to meet a Federal Communications Commission requirement.
He wouldn’t disclose KTVB expenditures, but said each station in the Boise area probably spent more than $1 million.
“We are a regulated industry and are required to provide that service to our channels, so (the exemption) does have some foundation in common sense,” Armstrong said.
Roughly half of KTVB’s expenditures are exempt from sales tax, he said. Purchases not directly related to broadcasting and transmitting — for items such as vehicles and computers — are charged sales tax.
Armstrong said that if broadcast-specific expenditures were subject to sales tax, KTVB would make fewer taxable and non-taxable purchases overall.
The financial impact of each sales-tax exemption can be found in the General Fund Revenue Book, which the Division of Financial Management publishes each January.
Mike Ferguson, chief economist at the Division of Financial Management, said the Legislature typically grants sales-tax exemptions because it deems a particular entity or activity worthy.
“It could be hardship, promoting the economy or any number of reasons, and it’s going to vary case by case,” he said.
The line-item dollar amounts in the Revenue Book don’t represent exact totals lost to each exemption, he said. State budget estimators assume spending totals would differ without the exemptions.
Even with the exemptions, Idaho sales tax collections have grown consistently over the years, Nelson said.
“How much stronger they might have been (without the exemptions) is hard to say,” he said of sales-tax revenues. “A lot of the reason is to incent more economic activity. To put a number on that gets really difficult.”
Become exempt
Husted said the exemptions are the result of someone requesting, and receiving, approval from the Idaho Legislature.
“It does not cause a problem administratively as long as the exemption is well defined,” he said. “Sometimes if the language is not clear, then generally we will have an argument with the taxpayer, who feels the exemption is broader than the commission’s interpretation. Some of them, we almost never disagree on.”
Disagreements usually come to light through audits of taxpayers that produce Tax Commission rulings, Husted said. However, some taxpayers request a ruling before doing business. (See related story on Cabela’s on next page.) And in some cases the Legislature takes care of it.
In the 2006 session, lawmakers aimed to encourage film and media productions when they passed House Bill 497, Nelson said.
The new law gives a sales-tax rebate to film and media productions making at least $200,000 in qualifying expenditures over three years. The exemption is scheduled to end in 2013.
“You may see more and more of that — investment, then the rebate,” Nelson said. “You want the jobs to come with it.”
The 2006 Legislature also approved House Bill 475, which exempts museum admissions. Other exemptions to the sales tax approved this year included “glider kit” replacements for wrecked trucks, free dental clinics, heating pellet manufacturers, domestic violence support groups, fees at nonprofit shooting ranges and competitions, dues at nonprofit hunting and shooting organizations, and a clarification to the exemption for pollution control equipment.
Nelson said it could be hard for lawmakers to refuse a new exemption similar to one already on the books.
“They’ve got to be careful it doesn’t open up to applying to a whole bunch of unintended folks,” Nelson said. “They just have to be very careful, and narrow. The folks bringing the requests understand that and want to keep the fiscal impact as minimal as possible.”
***
Run-down shopping centers could get help from city of Boise
by Lora Volkert @ Idaho Business Review
10/09/2006
Capital City Development Corp. is considering the creation of urban renewal districts to improve blighted and largely vacant shopping centers outside downtown Boise.
Sites under consideration include the Hillcrest Shopping Center at Orchard Street and Overland Road, a shopping center on Collister Drive, and another at Orchard and Emerald streets, CCDC Executive Director Phil Kushlan said.
“Orchard and Emerald is an area that could use some love,” Boise Mayor David Bieter said at a housing conference last week.
The city expects to have more specific plans in four to five months, Bieter said.
CCDC, the redevelopment agency for the city of Boise, builds parking garages and pays for street improvements, landscaping and public art within its districts. The agency also enters into public-private partnerships to assist developers with projects that revitalize undeveloped or underdeveloped areas.
Too late
A renovation of Vista Village shopping center should be finished by spring, said Donna Jacobs, a property manager for Day Realty.
It’s part of a large revitalization on Vista Avenue, driven by local businesses.
“I think the whole neighborhood seems to be going through a Renaissance,” she said.
However, Day Realty could have used help from the city on the $5 million Vista Village project, she said.
“Sadly enough, we are doing things all on our own,” she said.
The area could use some public art or funding to improve the streetscape, she said. A parking garage and landscaping would have been great, said David Day, of Day Realty.
Although Vista serves as the main artery between the airport and downtown, CCDC has until recently always focused its redevelopment efforts downtown.
“I don’t want to take anything away from downtown,” Jacobs said. “But the city needs to make sure the Vista neighborhood looks good. It’s often visitors’ first impression as they come to Boise.”
For Day, the prospect of the city helping other ailing shopping centers raises questions about competition.
“It’s kind of a problem when government gets involved in competition,” he said. “When somebody builds you a parking garage…” he said.
However, he made it clear that the Vista Village renovation would have happened regardless.
Bieter said Vista Village is a great example of how the private sector can redevelop areas without government assistance. The shopping center has spurred a revitalization movement that includes the Farmers & Merchants and Wells Fargo bank buildings on Vista, he said.
Other areas
Kushlan didn’t rule out extending urban renewal assistance to Vista, but other areas seem to be a higher priority for the city, he said.
Fowler Property Acquisitions, which bought the Hillcrest Shopping Center, started demolition work two months ago on a $4 million rehabilitation project. The company plans to rebuild taller stucco facades to increase visibility and match the upgrades made to the nearby Albertsons, said Chad Eisenbud, vice president of Fowler’s commercial division. The project should be finished by the end of the year, he said.
“It’s probably bad timing for us,” he said of the CCDC proposal. “Obviously it’s great for other centers around the city. If they want to contact us, we’ll definitely talk to them. But it’s not going to slow up our process.”
* * *
10/09/2006
Capital City Development Corp. is considering the creation of urban renewal districts to improve blighted and largely vacant shopping centers outside downtown Boise.
Sites under consideration include the Hillcrest Shopping Center at Orchard Street and Overland Road, a shopping center on Collister Drive, and another at Orchard and Emerald streets, CCDC Executive Director Phil Kushlan said.
“Orchard and Emerald is an area that could use some love,” Boise Mayor David Bieter said at a housing conference last week.
The city expects to have more specific plans in four to five months, Bieter said.
CCDC, the redevelopment agency for the city of Boise, builds parking garages and pays for street improvements, landscaping and public art within its districts. The agency also enters into public-private partnerships to assist developers with projects that revitalize undeveloped or underdeveloped areas.
Too late
A renovation of Vista Village shopping center should be finished by spring, said Donna Jacobs, a property manager for Day Realty.
It’s part of a large revitalization on Vista Avenue, driven by local businesses.
“I think the whole neighborhood seems to be going through a Renaissance,” she said.
However, Day Realty could have used help from the city on the $5 million Vista Village project, she said.
“Sadly enough, we are doing things all on our own,” she said.
The area could use some public art or funding to improve the streetscape, she said. A parking garage and landscaping would have been great, said David Day, of Day Realty.
Although Vista serves as the main artery between the airport and downtown, CCDC has until recently always focused its redevelopment efforts downtown.
“I don’t want to take anything away from downtown,” Jacobs said. “But the city needs to make sure the Vista neighborhood looks good. It’s often visitors’ first impression as they come to Boise.”
For Day, the prospect of the city helping other ailing shopping centers raises questions about competition.
“It’s kind of a problem when government gets involved in competition,” he said. “When somebody builds you a parking garage…” he said.
However, he made it clear that the Vista Village renovation would have happened regardless.
Bieter said Vista Village is a great example of how the private sector can redevelop areas without government assistance. The shopping center has spurred a revitalization movement that includes the Farmers & Merchants and Wells Fargo bank buildings on Vista, he said.
Other areas
Kushlan didn’t rule out extending urban renewal assistance to Vista, but other areas seem to be a higher priority for the city, he said.
Fowler Property Acquisitions, which bought the Hillcrest Shopping Center, started demolition work two months ago on a $4 million rehabilitation project. The company plans to rebuild taller stucco facades to increase visibility and match the upgrades made to the nearby Albertsons, said Chad Eisenbud, vice president of Fowler’s commercial division. The project should be finished by the end of the year, he said.
“It’s probably bad timing for us,” he said of the CCDC proposal. “Obviously it’s great for other centers around the city. If they want to contact us, we’ll definitely talk to them. But it’s not going to slow up our process.”
* * *
Banner Bank Building part of expansion plan
by By Brad Carlson @ Idaho Business Review
10/09/2006
A full-service branch in a downtown Boise building that bears its name is the latest expansion for Banner Bank.
The bank, based in Walla Walla, Wash., plans more offices.
“Right now our growth is focused on the Pacific Northwest — southern Idaho, Portland and the Seattle area,” Southern Idaho Regional Retail Manager Tammy Wheeler said. “We can’t build them fast enough.”
The new branch anchors downtown Boise’s new Banner Bank Building, an 11-story, 180,000-square-foot structure at 950 W. Bannock St.
Boise-based development firm Christensen Corp. earned a Platinum certification for the building from the U.S. Green Building Council.
The bank occupies all of the first floor and part of the second floor. The new building includes drive-through banking facilities.
Five people work in the retail branch, which Rene Kidwill manages. Willis Robinette, Banner Bank’s regional commercial manager, recently moved nine employees to the new building from 1161 W. River St. The bank also employs information technology specialists and a residential real estate lending team in the new building.
Banner operates four retail branches and two commercial banking centers in southern Idaho. The bank also fields a residential construction lending office.
Wheeler said Banner aims to have a total of 10 to 15 offices open in the southern Idaho region in the next five years.
“We are continually looking for good spots in the Treasure Valley,” she said.
In the BlackEagle development at Overland and Maple Grove roads in southwest Boise, construction has started on a 3,500-square-foot retail branch. Wheeler expects it to open in December or January. Mary Frazer will manage the branch, to employ five.
Also at BlackEagle, Banner plans to move an existing residential construction lending office, employing seven, to a larger space in a new two-story building at the corner of Overland and Maple Grove, Wheeler said.
In Nampa’s new Treasure Valley Marketplace development, off the Karcher Road interchange with Interstate 84, Banner plans a two-story, 6,500-square-foot building for a retail branch and commercial banking center, Wheeler said. She expects construction to start early next year northwest of the Target store, as weather allows, and conclude in June or July.
The bank recently signed a letter of intent to buy property for branch-office construction near the southwest corner of Glenwood and State streets in Garden City in the River’s Edge development, Wheeler said. She anticipates a mid-2007 opening.
Project cost estimates weren’t released.
CSDI Construction is building the BlackEagle branch and completed tenant improvements downtown. Petra Inc. is working on tenant improvements for the larger residential lending office at BlackEagle.
***
10/09/2006
A full-service branch in a downtown Boise building that bears its name is the latest expansion for Banner Bank.
The bank, based in Walla Walla, Wash., plans more offices.
“Right now our growth is focused on the Pacific Northwest — southern Idaho, Portland and the Seattle area,” Southern Idaho Regional Retail Manager Tammy Wheeler said. “We can’t build them fast enough.”
The new branch anchors downtown Boise’s new Banner Bank Building, an 11-story, 180,000-square-foot structure at 950 W. Bannock St.
Boise-based development firm Christensen Corp. earned a Platinum certification for the building from the U.S. Green Building Council.
The bank occupies all of the first floor and part of the second floor. The new building includes drive-through banking facilities.
Five people work in the retail branch, which Rene Kidwill manages. Willis Robinette, Banner Bank’s regional commercial manager, recently moved nine employees to the new building from 1161 W. River St. The bank also employs information technology specialists and a residential real estate lending team in the new building.
Banner operates four retail branches and two commercial banking centers in southern Idaho. The bank also fields a residential construction lending office.
Wheeler said Banner aims to have a total of 10 to 15 offices open in the southern Idaho region in the next five years.
“We are continually looking for good spots in the Treasure Valley,” she said.
In the BlackEagle development at Overland and Maple Grove roads in southwest Boise, construction has started on a 3,500-square-foot retail branch. Wheeler expects it to open in December or January. Mary Frazer will manage the branch, to employ five.
Also at BlackEagle, Banner plans to move an existing residential construction lending office, employing seven, to a larger space in a new two-story building at the corner of Overland and Maple Grove, Wheeler said.
In Nampa’s new Treasure Valley Marketplace development, off the Karcher Road interchange with Interstate 84, Banner plans a two-story, 6,500-square-foot building for a retail branch and commercial banking center, Wheeler said. She expects construction to start early next year northwest of the Target store, as weather allows, and conclude in June or July.
The bank recently signed a letter of intent to buy property for branch-office construction near the southwest corner of Glenwood and State streets in Garden City in the River’s Edge development, Wheeler said. She anticipates a mid-2007 opening.
Project cost estimates weren’t released.
CSDI Construction is building the BlackEagle branch and completed tenant improvements downtown. Petra Inc. is working on tenant improvements for the larger residential lending office at BlackEagle.
***
P&Z recommends annexing 601 acres south of Boise
Article published Oct 11, 2006
by Kate Brusse @ Idaho Statesman
P&Z recommends annexing 601 acres south of Boise
Commissioners OK higher density than Boise Airport officials had wanted
Construction may start next fall on The Reserve planned community south of Boise if the City Council follows the Planning and Zoning Commission's recommendation to annex 601 acres.
The commission voted unanimously late Monday night to recommend approval of Pleasant Valley South LLC's request to annex one of the last places Boise has left to grow.
Commissioners recommended a gross density of five dwelling units per acre for the property south of the planned Lake Hazel Extension — a move that would add 400 more homes that Boise Airport officials did not want.
The Boise Airport asked for density of four units per acre to limit the number of homes out of concern about airport and overflight noise.
"The airport preferred low density, as the more people in the area, the more complaints the airport will likely receive," city planner Angie Brosious said.
The developer had requested six units per acre to provide diverse housing and price points, said Larry Sale, project manager with The Hellhake Co.
Activity on an assault strip south of Gowen Road, also known as the airport's third runway, will pick up in 2010 or 2011, airport spokeswoman Larissa Stouffer said.
The military uses the assault strip for C-130 training. Private helicopters also use the strip.
In four to five years, uses may expand to include cargo planes and private aircraft, Stouffer said.
At that time, the area will be subject to average sound levels of 60 to 65 decibels, or about the sound level of a normal conversation, and aircraft traffic patterns below 1,000 feet, according to a letter from Matt Petaja, deputy director of the airport.
Sound would be painful at 130 decibels, which is about the sound level of a jackhammer or power drill.
Jerry Heimbuch, a retired civil engineer who lives on South Cole Road near the proposed development, supported the increase in density on the property.
"It's the lower densities that really do cause urban sprawl," he said.
Commissioner Andy Brunelle said overhead noise from flights is "just a fact of life here in Boise."
The airport also recommended that the developer provide a notice to each lot buyer disclosing proximity to the airport, potential aircraft noise and future airport development — a request developer Pleasant Valley South plans to follow.
Pleasant Valley South also plans to pay for a half-mile, two-lane extension of Orchard Street, which will provide the main access to and from the development.
The developer also will provide right-of-way for the road to be expanded to five lanes through property owned by the city and state and through The Reserve.
In making the motion to recommend approval of the annexation, commission member Tony Orman said The Reserve is the city's chance to be on the front end of a planned community. Ada County has approved similar communities outside the city limits.
"It's going to happen, so we might as well take the bull by the horns and do something about it," Orman said.
Sale said he expects the City Council will hear the request in December.
Commissioner Doug Cooper did not deliberate or vote on the proposal because his firm McKibben & Cooper Architects is working on the development.
by Kate Brusse @ Idaho Statesman
P&Z recommends annexing 601 acres south of Boise
Commissioners OK higher density than Boise Airport officials had wanted
Construction may start next fall on The Reserve planned community south of Boise if the City Council follows the Planning and Zoning Commission's recommendation to annex 601 acres.
The commission voted unanimously late Monday night to recommend approval of Pleasant Valley South LLC's request to annex one of the last places Boise has left to grow.
Commissioners recommended a gross density of five dwelling units per acre for the property south of the planned Lake Hazel Extension — a move that would add 400 more homes that Boise Airport officials did not want.
The Boise Airport asked for density of four units per acre to limit the number of homes out of concern about airport and overflight noise.
"The airport preferred low density, as the more people in the area, the more complaints the airport will likely receive," city planner Angie Brosious said.
The developer had requested six units per acre to provide diverse housing and price points, said Larry Sale, project manager with The Hellhake Co.
Activity on an assault strip south of Gowen Road, also known as the airport's third runway, will pick up in 2010 or 2011, airport spokeswoman Larissa Stouffer said.
The military uses the assault strip for C-130 training. Private helicopters also use the strip.
In four to five years, uses may expand to include cargo planes and private aircraft, Stouffer said.
At that time, the area will be subject to average sound levels of 60 to 65 decibels, or about the sound level of a normal conversation, and aircraft traffic patterns below 1,000 feet, according to a letter from Matt Petaja, deputy director of the airport.
Sound would be painful at 130 decibels, which is about the sound level of a jackhammer or power drill.
Jerry Heimbuch, a retired civil engineer who lives on South Cole Road near the proposed development, supported the increase in density on the property.
"It's the lower densities that really do cause urban sprawl," he said.
Commissioner Andy Brunelle said overhead noise from flights is "just a fact of life here in Boise."
The airport also recommended that the developer provide a notice to each lot buyer disclosing proximity to the airport, potential aircraft noise and future airport development — a request developer Pleasant Valley South plans to follow.
Pleasant Valley South also plans to pay for a half-mile, two-lane extension of Orchard Street, which will provide the main access to and from the development.
The developer also will provide right-of-way for the road to be expanded to five lanes through property owned by the city and state and through The Reserve.
In making the motion to recommend approval of the annexation, commission member Tony Orman said The Reserve is the city's chance to be on the front end of a planned community. Ada County has approved similar communities outside the city limits.
"It's going to happen, so we might as well take the bull by the horns and do something about it," Orman said.
Sale said he expects the City Council will hear the request in December.
Commissioner Doug Cooper did not deliberate or vote on the proposal because his firm McKibben & Cooper Architects is working on the development.
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