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This page contains a single entry from the blog posted on April 4, 2010 12:52 PM. The previous post in this blog was Another gushing travel guide to Portland. The next post in this blog is Saint Godwin, pray for us. Many more can be found on the main index page or by looking through the archives.

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Sunday, April 4, 2010

Dead zone

Here's some sad news about Portland from the other day: Our metropolitan area is no. 6 in the country in commercial bankruptcies. No wonder the city's about to report yet another $20 million budget shortfall -- there's hardly anybody left to pay taxes. It appears that pretty soon we'll have more bike boulevards than employers.

Comments (16)

There is something off in that- 117K filings in 2009 for Portland/Vancouver with a total population around 2.1M. Carve out 20% under 18 and you have a 2009 bankruptcy for every 14 adults. Doesn't seem plausible.

Whatever statistic it is, it confirms that Portland has little economy left except for government work.

Since one person can have multiple businesses, and a person with one bankruptcy is likely to have several bankruptcies, not sure there's anything unreasonable about 117k filings in a metro area like Portland's.

"Equifax said it analyzed Chapter 7, 11 and 13 filings for its analysis."

It appears to include personal bankruptcies of self-employed individuals.

Chapter 13 is for wage-earner bankruptcies.

"Whatever statistic it is, it confirms that Portland has little economy left except for government work."
===

That is the best economy to have. Government work is the most resilient in a bad economy, especially when you have an electorate that can raise more taxes ala M66/67. The Portland planners knew what they were doing when they went for a government based economy. If Portland could just do more of that, they would wipe out the unemployment, and have lots of high wage, high benefits jobs, where the workers could all go by streetcar or bicycle.

Whatever statistic it is, it confirms that Portland has little economy left except for government work.

Unless the statistic itself is invalid, in which case it confirms diddly.

If the "business" is a holding company or a financial instrument that existed as a legal entity but had no employees, for instance, its real effect on the local economy is nil. All of the CDOs and credit default swaps that went bankrupt in the subprime meltdown were separate corporations. But they didn't employ anyone.

"All of the CDOs and credit default swaps that went bankrupt in the subprime meltdown were separate corporations."

CDOs and swaps are securities and contracts, "financial instruments", but not legal entities or "separate corporations." Of course they don't employ anyone; when they go into default, the instruments themselves do not 'go bankrupt' - but their holders might.

Unless the statistic itself is invalid, in which case it confirms diddly.

You're right. Maybe the whole story is wrong. Maybe everything is fine in the Portland economy. Maybe all the vacant storefronts are a mirage. Maybe we should listen to Sam Adams's toy boy staff instead of invalid statistics like bankruptcy filings.

Portland has a lot more retail square footage in the metro area relative to our population base than other comparable size metro areas - I'm going by memory of old numbers here, but I recall at one time in was 50% more. I believe the reason is that we have no sales tax here, and we can therefore draw consumers from other areas who see us as a bargain. But this situation can hit us harder in a retail/housing downturn, which is what this has turned out to be.

"Atlanta-based Equifax (NYSE: EFX) said total commercial bankruptcies rose from 77,638 in 2008 to 117,659 in 2009, and the numbers reflect a consistent increase from the all-time low of 32,293 filings in 2006."

Sounds to me like the 117k is the total nationwide, not in Portland.

The official summary from Equifax is here. A detailed press release (but alas, not the underlying data) is here.

Well even if you doubt the bankruptcy statistics posted in this story; according to the NY Times, March had the highest number of bankruptcy filings since the Bankruptcy Laws were changed in 2005.

"Portland has a lot more retail square footage in the metro area relative to our population base than other comparable size metro arEA."

I'd disagree, the guy who was going ot develop the dump next to the OC Home Depot thought we didn't have enough retail in the area. Besides, I don't see WashSq or Clack TC hurting for customers, their parking lots are full.

However, I'll say downtown has waaay too much retail space since it is really not a shopping area (since Macy's scaled down, Saks moved out and about 1/2 of Pioneer Place is empty.)

I think Mr Bog's figures, though, are pretty representative of the collective acumen of our local pol's ability to attract business.

I mean the hubris to start saying stuff like we only want certain business types when they can't pull any business here?

Commercial bankruptcy, if equifax is using the term correctly, is a term of art used to describe bankrupt debtors whose debts are primarily non-consumer debt. I think the general rule is over 50%.

The breakdown by chapter would be interesting. Most individuals, whether small business owners or not, file either a chapter 7 or chapter 13 and most are characterized as consumer cases (if you have a small business owner with business debt of $300k, but carrying a home mortgage of $350k, then techincally that isn't a commercial bankruptcy). If an individual owns a corporation, more often than not, the corporation won't even bother to file a bankruptcy, it will just dissolve (and hey, if your a creditor of one of these small business who fail, good luck collecting on the debt - the owner will just start up a new company that does the same business at the same location using the same assets - hey, its the entrepreneurial spirit at its best).

I would suspect that the bump in commercial filings was due to an uptick in chapter 11 filings (larger entities seeking to reorganize). That doesn't bode well if true.

Morbius says: CDOs and swaps are securities and contracts, "financial instruments", but not legal entities or "separate corporations."

A CDO is a security made up of a portfolio of fixed-income assets like subprime mortgage bonds. A CDS is a contract similarly based on assets like bonds.

From Michael Lewis's current book out on the subprime mortgage scemes of the past decade (The Big Short: Inside the Doomsday Machine, p.27):

Every mortgage bond came with its own mind-numbingly tedious 130-page prospectus. If you read the fine print, you saw that each was its own little corporation. [Michael] Burry spent the end of 2004 and early 2005 scanning hundreds and actually reading dozens of them, certain he was the only one apart from the lawyers who drafter them to do so — even though you could get them all for $100 a year from 10K Wizard.com.

Michael Burry, by the way, had an op-ed yesterday in The New York Times ripping into Alan Greenspan.

Jack Bog says: You're right. Maybe the whole story is wrong. Maybe everything is fine in the Portland economy.

I was laid off from my last job in 2007. I took that job in 2005 because my freelance business had started to dry up after the dot-com bust. So far as I'm concerned, the whole last decade's been crappy. But unless you know what kind of commercial operations those bankruptcies represent, Jack — unless you know that they're actual businesses — then the number is meaningless.

For instance, how do you get 117,000 bankruptcy filings in the metro area when (according to the census) the total number of firms in the entire state of Oregon in 2002 was just under 300,000? The total number of firms in Multnomah County in 2002 was 63,758, according to the same source. Has every company in the county filed twice? Or do some of those bankruptcies represent something other than regular businesses?


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