Business leaders back efforts to avoid bankruptcy

Business leaders support city officials in their attempts to avoid having to file for bankruptcy, according to the results of a live survey last week during the annual economic-outlook breakfast hosted by the Greater Providence Chamber of Commerce and Sovereign Bank.
Sixty-two percent of those among the more than 400 people in attendance March 6 who responded felt it would not be in the best interest of the city to file for bankruptcy.
Mayor Angel Taveras, a member of a panel discussion held during the breakfast, was pleased by the agreement of the crowd with his position, that bankruptcy is not an option. “I was happy to see the number of people who believe as I do that we should not follow Central Falls here in Providence.”
Taveras was surprised to find that the vast majority of business leaders in attendance, 72 percent, would not let a bankruptcy filing by the city impact decision-making within their own businesses. Taveras, however, still feels that filing for bankruptcy would ultimately be a disincentive for businesses to invest in Providence.
“I don’t want Providence to be known nationally as the first capital city to file for bankruptcy, I don’t think that’s the type of attention we want to draw to our state,” he said. “I don’t think it’s positive and so I think it’s important to try and do whatever we can to avoid it.”
Taveras says negotiations continue with the city’s major nonprofit entities, including Brown University, over the amount of financial support they should be giving to the city. He expects a resolution within a few months. He placed a similar time frame on a decision, either agreed upon, or unilateral, with regard to local pension and retiree health care reforms, but he estimated that the ensuing legal action that would almost certainly follow could take the rest of the year to be resolved.
Despite the concerns about the capital city’s financial situation, overall there appeared to be some guarded optimism by business leaders and the event hosts over the possibility of improvements in the economy in the year to come.
Sixty-four percent of attendees feel the national economy will get either somewhat better, or much better, during 2012, while 29 percent feel it will stay about the same. Locally, however, the improvement numbers were much more modest; only 25 percent feel things are in better shape, while 54 percent feel it will stay about the same. When it comes to their own businesses, the survey respondents were optimistic about the chances of improvement. Sixty-two percent feel their business will be in either somewhat better or much better shape, while 33 percent feel things will stay about the same.
The optimism is leading many of those businesses to consider more hiring or spending over the next year. Forty-five percent are expecting to hire more staff while 40 percent expect to spend more. Forty-six percent feel there will be no change in their hiring and 42 percent no change in their spending.
“That’s a big shift from where we were a few years ago,” said Laurie White, president of the Greater Providence Chamber of Commerce. “People were really feeling fearful that things were not going to turn around for them so the fact that people feel the worst is over, that they are going to start spending again and perhaps begin some modest hiring is very, very positive.”
Presenting the economic outlook for 2012 for both Rhode Island and the nation, Sovereign Bank Senior Vice President of Global Banking and Markets Steven Andrews noted that things are generally moving in a positive direction.
Andrews’ review of economic indicators found that nationally consumer confidence has started to pick up a bit, GDP is up as well and unemployment, while still having a ways to go to get to its prerecession levels, is down. Andrews also found that the financial shape of households has been much healthier.
A research study of the impact of the current economic environment on households found that 46 percent decreased spending, 33 percent saved less, 30 percent postponed vacation and 27 decreased credit usage.
“These steps along with similar belt-tightening efforts by businesses have resulted in delinquency rates as low as they’ve been since 1994,” said Andrews. “People have put their credit cards away and gotten their financial houses in order.”
Rhode Island, however, continues to struggle with its unemployment rate and is not seeing improvement come as quickly as the nation is as a whole. The housing market is another point of concern outlined by Andrews for Rhode Island.
“I wish we had better news on this but we’re still seeing some price erosion here,” he said. “Prices remain weak, down about 5 percent from their high point, while condos have taken the brunt of the lost value in the housing market, their prices are down 19 percent.” •

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