State bankruptcies
off 16% in 2003
Statewide bankruptcy filings declined about 16 percent in 2003, the lowest level since 1997, as the economy improved due to increases in offshore and local investing, military spending and tourism.
The total number of Hawaii bankruptcy filings fell to 3,780 from 4,476 filings last year, and Bank of Hawaii economist Paul Brewbaker expects numbers will continue dropping as the state completes its recovery from the terrorist attacks of Sept. 11, 2001 and the technology recession of that same year.
"The basic direction is downward because of improvement and the continuing growth of Hawaii's economy," Brewbaker said. "The drop would have probably occurred in 2001 if not for Sept. 11."
Bankruptcy filings are falling in Hawaii due to an improved economy, while nationwide numbers are at a record high. Last fiscal year, there were 7.4 percent more bankruptcies filed in the United States, with 1.67 million bankruptcies filed in 2003 as compared to 1.54 million in 2002.
Bankruptcy filings in Hawaii, which fell for the seventh straight quarter to 863 during the last three months, have shown a clear downward trend since the first-quarter 2002 high of 1,234.
In the just-concluded year, filings for Chapter 7, which involve the liquidation of business or personal assets, were down 17.56 percent to 3,292 from 3,993 a year ago. Chapter 13 filings, which allow an individual to work out a repayment plan to creditors, declined .86 percent to 459 from 463 in 2002. Filings for Chapter 11, which is for business reorganization, increased 45 percent to 29 from 20 a year ago, with Hawaiian Airlines one of the more prominent filings.
Brewbaker attributed the 2003 increase in Chapter 11 filings to Sept.11 and the tech recession.
Having a company, like Hawaiian Airlines, going through Chapter 11 reorganization is, in a sense, a reflection of what Sept. 11 did to commercial aviation," he said. "It's taken a year for the aftereffects to force this particular company to this point."
Hawaii, like the rest of the nation, saw many young companies started in the late 1990s ride the tech wave only to get burned up quickly on the backhand of the bubble, Brewbaker said.
"But it appears the dust has finally settled," he said.
Hawaii bankruptcies peaked in 1998 at 5,811 just as the state economy was beginning its recovery. They fell to 5,409 in 1999 and 4,525 in 2000 before jumping 11.2 percent to 5,033 in 2001.
The numbers confirm that the Hawaii economy is booming and that it can survive geopolitical risks such as SARS and the conflict with Iraq, Brewbaker said.
Tourism, military spending and construction are rising, he said.
Offshore and Hawaii-based investors are also pouring more money into the state's economy, Brewbaker said.
"The decrease in the numbers is a lagging indicator that Hawaii's economy is on an upswing," he said. "They serve as confirmation that things have been getting better during the last several years."
First Hawaiian Bank Chief Economist Leroy Laney, speaking at the bank's annual business outlook, said economic indicators in Hawaii were much stronger than the nation as a whole and forecasted growth will stay strong
Growth in tourism and construction should increase the number of available jobs in Hawaii by 2 percent next year, with more jobs being created if the Japanese tourist market improves, Laney said. "The divergence is striking -- loss of jobs nationwide, gains here in Hawaii. That's the main reason Hawaii's economy is doing so much better than the nation at this point," he said.
Hawaii also will see increasing tourism for 2004, Laney said, predicting visitor arrivals will increase by 3 percent, driven by time-share and cruise ships.
"Next year is going to be the best year ever for tourism," Brewbaker said, adding that as the economy continues to improve, the number of bankruptcy filings should drop.
