Some places close, but a lot of places do open.

I only know this because I'll be visiting Portland for the first time on July 4th of this year, but there is a Blues Festival at the Tom McCall waterfront park. They also have a fireworks show that evening.

http://www.waterfrontbluesfest.com/

The closet hotel to the waterfront park is the Marriott, but it was already booked up when I checked it. I'm sure someone will have another recommendation for you. You might want to elaborate on what sort of hotel you prefer and your budget.

Thanks for the tip on the Blues Festival! Would be happy with a hotel around $US200 or so, maybe a bit more if special.
It appears there is a fireworks display but can't find any details of any other celebrations so far?

The 2013 schedule for the musical artists isn't out yet. I'm not sure what other happenings might be going on.

I live here, and the shops are open that day. The only things really closed are banks, government offices, etc.

The Blues Festival is a lot of fun. It gets very busy though, so expect lots of crowds. The fireworks show is from barges on the river, so anywhere along there from the park on down to the Riverplace area has good views.

If you have a car and want an old fashioned fireworks show that is truly amazing, head over to the gorge to Corbett. It is a small town but puts on one heck of a show! Most Portlander's don't venture out thinking that the show in downtown is best, but they are missing out, IMO.

Hotel rates will be high for during the festival. What is your budget and what style do you like, and will you have a car?

Thank you mms. We will have ditched the car the day before I think so may have to miss Corbett. I have been looking at the Hotel Monaco? Not waterfront but looks to be not too far away and good reviews.
Do you know what else is happening on July 4?