Wells Fargo looks for positives, and a budget plan from Juneau

  • A worker passes some framing during the renovation of Service High School in Anchorage. Government contracting is the source of much of construction spending, according to a Wells Fargo commercial real estate manager. (Photo/Courtesy/Cornerstone General Contractors Inc.)

Talk to three Alaska business leaders and you’ll probably get three different takes on the state’s recession.

Still, Wells Fargo leadership echoed other economists and industry spokespersons in a Jan. 30 meeting with the Journal: an uncertain fiscal future is in ways worse than a decisive hit.

Yet even without any pending solutions from legislators in Juneau, the current Alaska recession doesn’t deserve the “Great” description applied to the national housing crisis in 2008 or the oil-related state contraction in the mid-1980s.

It’s bad, they say, but not bad enough yet to blot out glimmers of hope in healthcare growth, military spending, President Donald Trump’s resource policies, oil discoveries and the resilience of Alaskans.

Overall, Wells Fargo’s new business loans have shrunk from $500 million in the last few years to $400 million in 2016. Consumer deposits have meanwhile only grown by 0.5 percent to 1 percent, a relative slowdown.

Wells Fargo is the largest bank in the state, with 50 percent of deposits totaling just more than $6 billion.

“By and large (business loans) are performing very well,” said Darren Franz, Wells Fargo Alaska regional business banking manager. “We’ve certainly not seen any increase in delinquencies, knock on wood. We definitely have seen a little bit of an uptick on watch listed, accounts we pay a little more attention to, primarily in the smaller contractor area, but we certainly expected to see that.”

Alaskans have as much entrepreneurial drive as normal, but not the same amount of capital, Franz said.

“In terms of the number of loans, they continue to go up, they’re just smaller,” said Franz. “That continues to be a strong point for us. The number of loans we’ve done has increased, but the dollar amount has decreased.”

Franz said he believes there are indeed more people in Alaska opening businesses, despite the state’s economic climate. This runs into a larger theme of an older population than what was Alaska in 1986, when the oil boom brought the young, adventurous and flighty to the state.

In 2017, the population is older and more rooted, with families and schools and more investment in the state’s infrastructure, he said, along with bigger stores of personal wealth.

Though loans are continuing, some of the concrete and job-creating effects of private business openings aren’t crystallizing. Residential building in the Municipality of Anchorage the lowest since 2000, according to city records.

Wells Fargo Alaska Commercial Real Estate Manager Patti Bozzo said the same trend exists in the commercial side as private projects have all but stopped.

“Most of the activity on the commercial side has been government work,” she said. “It’s been that way for the last year or two and it’s kind of going to go that way looking forward as well. There is some expansion going on in military, there are still some bonds going on … commercial permitting in terms of non-governmental work is definitely going down.”

Some small businesses are suffering more than others.

With the Alaska commercial fishing fleet at the oldest it’s ever been and a clutch of bad salmons years and poor international pricing, Franz said Wells Fargo’s commercial fishing loan portfolio has been dropping.

However, agreeing with other state industry and policy leaders, he points to healthcare, military and tourism businesses as bright spots in an otherwise dimming economic outlook.

Providence Medical Center expansions and the Yukon-Kuskokwim Health Corp.’s new $287 million clinic and hospital in Bethel are some of the largest projects, but Wells Fargo Alaska President Greg Deal also said the Mat-Su Valley has a large amount of private satellite hospital facilities being built.

Like many of the state’s policymakers and industry leaders, Wells Fargo looks to the oil discoveries on the North Slope as Alaska’s distant hope on the horizon.

Discoveries by ConocoPhillips announced in early 2017 and Caelus Energy in late 2016 have offered some hope for the Trans-Alaska Pipeline System operating at three-quarters capacity.

Wells Fargo points to both discoveries and to the pro-resource policies of President Trump as cause for a breather in industry conversation, if not yet champagne.

Trump’s Republican-dominated Washington could open up the coastal plain of the Arctic National Wildlife Refuge to drilling, set sights to reverse President Barack Obama’s signature Environmental Protection Agency regulations, the Clean Power Plan and Waters of the U.S., or WOTUS, rule.

“I’m feeling a sense of optimism based on (Trump’s policies),” said Deal. “There’s more planning. ConocoPhillips is starting to think about and plan for future development. A lot of it will depend on how the state handles itself. Uncuffing the oil industry is surely playing in people’s minds.”

Nothing is certain, however. Businesses and banks are still waiting on the Legislature to plug the state budget gap, undoable without both a range of revenue such as taxes or Permanent Fund earnings and deep spending cuts.

Not knowing the future, they said, is worse for Alaska’s business environment.

“Uncertainty in our business is certainly death row,” said Darren Franz, Wells Fargo Alaska’s business manager. “We’d like them to balance the damn budget and move on and quit the bickering and the in fighting and everything like that and actually come up with something.

“At this point I don’t care what kind of plan they come up with. Our future would be a lot more secure with just some kind of plan.”

Franz and Deal see a silver lining to the economic mess of Alaska — people know more about their governmental spending process than ever before.

Hard hits teach hard lessons, and whether or not the state emerges from the recession smaller and poorer as predicted by Northern Economics, it will be a “stronger and smarter Alaska.”

“We’re opening for business, we’re taking loans, we’re not tuck-tailing and running,” said Darren Franz, president of Wells Fargo Alaska Region.

“We’ll get through this and the state will be stronger as a result of the darker, trying times.”

DJ Summers can be reached at [email protected].

02/03/2017 - 2:19pm