Local economy didn’t escape the downturn
The economy cast a long shadow over everything in 2009. The recession and efforts at recovery set the scene for top business news in the Inland Northwest, from the shaky ground some banks found themselves on to the gloomy real estate and development environment to the worst jobless rates in a quarter of a century.
Here is a summary of the major business stories in the region this year:
Banks under pressure
Sterling Savings Bank and AmericanWest Bank were looking for new investment as the year ended, and other Inland Northwest banks were also contending with the aftereffects of plunging real estate values and bankrupted developers.
Federal and Washington state regulators issued cease-and-desist orders to Sterling and AmericanWest, requiring both to raise additional capital and make other changes to improve their balance sheets.
Sterling was supposed to raise $300 million by Dec. 15 but was granted an extension. The Spokane bank, the largest headquartered in the Northwest, also owes the U.S. Treasury Department $300 million obtained under the Troubled Assets Relief Program.
Sterling Chairwoman Heidi Stanley and Harold Gilkey, co-founder and chairman of Sterling Financial Corp., the parent holding company, left the bank.
AmericanWest was looking for an unspecified amount of new capital.
Walla Walla-based Banner Corp., which bought F&M Bank in 2007, cancelled a $75 million stock offering Dec. 18 because of unfavorable market conditions.
Several other, smaller banks were reporting quarterly and year-to-date losses.
One analyst estimated Northwest banks may need as much as $1.5 billion to be considered well-capitalized by regulators.
A changing landscape for health care
Though medical providers and insurance companies were closely following federal health care reform legislation, it is the sharpened business climate between Spokane’s two large hospital systems that is having the largest effect on patients and jobs in this region.
Rockwood Clinic’s decision last week to join Deaconess Medical Center is a big development that could help Deaconess recapture market share lost to rival Providence Sacred Heart Medical Center during a decade of financial problems and cutbacks.
Deaconess owner Community Health Systems Inc. has made many moves during its first full year in Spokane. Some have delighted physicians and patients, such as millions spent on new beds and equipment upgrades. Many doctors are pleased that Community Health has reinvigorated competition and ensured Spokane has two viable hospital systems.
Other Community Health decisions have sparked unrest, including an ongoing contract dispute with its unions; successfully fighting a $176 million expansion plan by Sacred Heart during a recession; closing a popular clinic that treated more than 800 people with Parkinson’s disease and other debilitating movement disorders; and getting sued by Inland Northwest Health Services regarding ownership of an electronic medical records license.
The year ahead will be bring more changes, including the first actions by a new multimillion-dollar health care foundation created with the proceeds of the Deaconess sale to Community Health.
Large-scale building grinds to a halt
Developers, contractors and almost everyone else associated with real estate had a dismal 2009, perhaps no one more so than Marshall Chesrown, who was forced to sell Kendall Yards, where he envisioned a $1 billion mixed-use project that would transform the north bank of the Spokane River west of Monroe Street.
With foreclosure looming, Chesrown in November turned Kendall Yards over to Greenstone Corp., which picked up the $20 million note on the 78-acre property. The Liberty Lake developer announced scaled-down plans for the project, with the expectation that construction could start in late 2010.
Chesrown also turned a Liberty Lake project over to AmericanWest Bank, and foreclosure actions were filed against some of his North Idaho holdings.
Although high-end projects like Chesrown’s were particularly hard hit by the real estate bust, home sales lagged in Spokane and Kootenai counties, where year-over-year price declines were in the double digits. Sales improved in the fall as federal income tax credits brought new buyers into the market.
Foreclosures were declining in Spokane County, but the rate in Kootenai County was about double that of 2008.
Through November, according to McGraw-Hill Construction, residential building contracts in Spokane County had declined 26 percent in 2009. Commercial construction contracts fell 40 percent.
Job losses mount
Even as most economists say the recession has ended and the nation has embarked on a slow recovery, the jobs scene continued to worsen well into the year.
Unemployment rates rose to around 9 percent in Washington and Idaho this fall, giving the region some of the highest rates since the recession of the early 1980s and nearly doubling the low unemployment rates of 2008. Joblessness hit 8.7 percent in Spokane and 11 percent in Coeur d’Alene in November.
Some of the most severe job cuts were in the manufacturing, construction and retail sectors, as housing starts and commercial development slowed and consumer spending dropped sharply.
Washington lost 125,600 jobs between November 2008 and November 2009. In Idaho, job losses totaled 33,400 in the same period.
Health care and education hiring were among the bright spots this year, along with growth in “green jobs” – those that increase energy efficiency or reduce pollution – and jobs funded through the federal stimulus.
Joblessness soared into the double digits in rural counties. In the Idaho Panhandle, unemployment in October ballooned to nearly 20 percent in Benewah County, where many jobs are seasonal. Boundary and Shoshone counties reported rates of about 16 percent that same month.
In late October, Washington’s top economic forecaster said the recession was over. But Arun Raha, executive director of the Washington state Economic and Revenue Forecast Council, said a potential second “dip” is possible if consumers remain cautious and regional banks burdened with real estate and development debt cannot provide enough credit to support renewed economic growth.
Raha said he does not expect Washington’s general-fund revenues to return to 2008 levels until 2012. Depressed retail, auto and home sales have significantly reduced sales tax and excise tax proceeds, he said, and property tax collections are growing at less than half the pace of 2005.
Raha sees more losses ahead for commercial construction, though he thinks hiring for residential building may start to recover by mid-2010.
Employers probably will not start hiring until the spring, he said. But some positive signs were reported in recent months.
Spokane took a giant leap backward last month, and that was a good thing. After months of sagging employment figures, Spokane County registered 3,000 new jobs in October – enough to offset losses going back to February.
The chief economist for Idaho said earlier this month that a slowing pace of job loss is encouraging. “We may have abruptly hit the bottom,” Mike Ferguson told the City Club of Boise.
Ferguson said Idaho is well-positioned for a rebound. “The things that have made Idaho an attractive location for economic development still exist.”
Staff writers Bert Caldwell, John Stucke and Scott Maben contributed to this report.