Hawaii bankruptcies decline
Officials credit a surge
in tourism, real estate
and construction
Statewide bankruptcies fell 20.4 percent in the third quarter to their lowest level since 1996 as tourism continued to rebound and the real estate and construction markets remained strong.
The 906 filings for the quarter that ended yesterday was down from 1,138 in the same period a year ago and marked the fewest filings in a three-month period since 810 were filed in the third quarter of 1996.
Total filings also fell 13.4 percent in September to 304 from 351 a year ago and filings for the first nine months are down 16.8 percent to 2,899 from 3,485 a year ago.
Paul Brewbaker, chief economist for Bank of Hawaii, said the state has shown its resiliency in recovering from such shocks as Sept. 11, 2001, the Iraq war and the SARS outbreak.
"Tourism keeps coming back and, meanwhile, the rest of the Hawaii economy has steadily moved forward," Brewbaker said. "So these bankruptcy filings confirm this forward progress in spite of the dramatic global shocks to the local economy."
Although visitor arrivals through the first eight months of this year were down 1.3 percent, they increased 1.3 percent in August from a year earlier. More telling, though, is that the Department of Business, Economic Development & Tourism expects visitors will spend $10.6 billion in Hawaii this year, up about 6 percent from nearly $10 billion last year.
Sales of single-family homes and condominiums continue to surge, with the total dollar sales volume rising 35.5 percent through the first eight months of 2003 to $2.2 billion from $1.6 billion a year ago, according to the Honolulu Board of Realtors.
And, in construction, the value of residential building permit authorizations was up 40.5 percent statewide for the second quarter from a year ago, according to DBEDT.
"Bankruptcy filings, like other measures of national distress such as business failures and foreclosures, all tend to be lagging indicators," Brewbaker said. "They serve as a confirmation of being in decline and where the local economy has progressed to over the last year or two. In that sense, the bankruptcy filings are confirming a pattern of rising income, rising jobs and rising performance indicators -- more recently in tourism and probably more consistently over the last couple of years in construction and real estate investments. It fits the picture and serves as confirmation (of an improving economy)."
Chapter 7 filings, which are the most common in Hawaii, dropped 24.8 percent last quarter to 778 from 1,035 and through the first nine months are down 19.2 percent to 2,524 from 3,124. They fell 15.6 percent in September to 266 from 315. Chapter 7 filings involve liquidating the assets of a business or consumer.
Chapter 13 filings rose 21.2 percent last quarter to 120 from 99 a year ago but year-to-date are up just 0.6 percent at 347 from 345 in the same period of 2002. The 35 filings last month matched the total of the same period a year ago. Chapter 13 filings have debt limits and allow a wage earner to pay creditors over a three-year period.
There were eight Chapter 11 filings in the third quarter, doubling the total from the same period a year ago. That raised the year-to-date total to 28, a 75 percent increase from 16 during the comparable period in 2002. In September, there was just three filings compared with one a year ago. Chapter 11 filings mostly cover business reorganizations, the most prominent in Hawaii this year being that of Hawaiian Airlines.
Brewbaker said he expects the economy to continue improving before the present cycle runs its course.
"Bankruptcy filings run about two years behind the cycle," Brewbaker said. "The worst for the Hawaii economy was about 1996, 1997. Somewhere just past the halfway point of the decade Hawaii hit bottom and, two years later, you see those bankruptcy statistics reaching that peak (to an all-time high of 5,813 in 1998). It's been in decline for five straight years and, in a sense, the economy has been moving along for at least five years and maybe has a couple of years to go in this steady upswing."
