BELLINGHAM - Whatcom County Council will settle a legal dispute with Bellingham and Futurewise by repealing a law that would have allowed denser residential development north of the city limits.

The three parties and Caitac USA Corp. appear to have reached a compromise over Caitac's plans to build a resort hotel near North Bellingham Golf Course and to cluster homes on 12,500-square-foot lots around the golf course.

The housing development would have come after a zoning change on 552 acres from one house per 10 acres to one house per five acres.

The settlement approved by the Bellingham City Council on Monday, Sept. 24, and by the County Council on Tuesday leaves intact the rezone for the hotel but repeals the other rezone and keeps the residential density at one house per 10 acres.

No party to the agreement would be allowed to change the 552 acres to five-acre zoning for the next five years.

As part of the deal, the city and Futurewise agreed to drop appeals of the rezones they had filed with Skagit County Superior Court and the state's Growth Management Hearings Board.

Caitac, not a direct party to the appeal, formally intervened to support the county's case. Attorneys representing Caitac didn't respond to requests for comment.

The county would repeal the ordinance establishing the residential rezone no later than Nov. 6, according to the settlement.

Tim Trohimovich, Futurewise's director of planning and law, said the focus of the group's appeal had been the residential zoning change.

"The justification the county used for it was that there was (five-acre) zoning abutting near it, and therefore it made sense to rezone it," he said. "If that's the standard the county's going to use for those kind of rezones, the whole (rural) county is going to be rezoned to (five acres)."

The anti-sprawl group was also pleased with the settlement's better protection of wetlands on the hotel property, Trohimovich said.

City Councilman Seth Fleetwood said Bellingham wanted to limit development north of the city limits so there would be more space for smart urban planning when the city grows in that direction. However, the City Council is not ready to see the city expand in that direction yet, he said.

"The emphasis has been on infill to reduce the pressure to expand our boundaries," he said. "We want to avoid urbanizing the county."

Reach RALPH SCHWARTZ at ralph.schwartz@bellinghamherald.com or call 360-715-2289. Read the Politics Blog at blogs.bellinghamherald.com/politics.