How Are We Doing?

A quarterly review of County Finances by County Auditor F. Milene Henley
First quarter 2016

If you’ve ever wanted to be a plumber, now’s the time. Judging from the number of radio ads I’ve heard recently for plumbers, HVAC technicians, and other tradesmen, business is booming.

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That’s good news, and it’s evident in retail sales activity in San Juan County. In the construction sector, sales in the county dropped 21% in 2009, and another 12% over the next two years. Recovery since has been slow and uneven, but has shown marked improvement in the last couple of years.

Similarly, both general retail sales and retail sales of food and lodging dropped in 2008 and 2009, though not nearly so deeply as construction dropped. Recovery in those two sectors has also been more consistent than in construction, with steady increases in the last two years.

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These improvements in the economy benefit County government in two ways: permitting and planning fees, and sales tax revenue. Permitting and planning are precursors to building. Like construction sales, they fell sharply in 2008 and 2009, and their recovery has followed the same pattern: uneven, but with a definite upward trend. 2016 is looking especially good, with an estimated increase of about 9% over 2015.

Sales and lodging tax revenues have grown more consistently, and continue to exceed expectations. Early projections show sales tax revenue to the County increasing about 6% in 2016, and lodging tax revenues by as much as 30%, over the previous year.

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Outside the general fund, an active real estate market has resulted in significant increases in real estate excise tax (REET) to the Land Bank and to the County’s Capital Improvement Fund, both of which are funded almost exclusively by REET. Real estate sales dropped by almost two-thirds between 2007 and 2011. While not yet recovered to the 2007 point, REET revenues surpassed the 2008 level in 2014 and continue to climb.

There’s a downside to the uptick in the economy, and in real estate in particular. More activity puts more pressure on the County and on private business. Community Development has received 220 building permit applications this year to date, as compared to 179 for the same period last year, and has issued 181 permits this year, compared to 114 last year. Because of both workload and staffing issues, permit processing time has crept up.

But the biggest problem is in the availability of housing. Employers, including the County, have a hard time recruiting, because people can’t move here for jobs if they can’t find housing. The reasons for the shortage are many. The growth in the economy has created more jobs and more demand for housing. Some homeowners converted homes to rentals while they were unable to sell them; when the market picked up and the homes sold, those rentals were often removed from the rental market. And some of the decrease in year-round rentals may be caused by the conversion of year-round rentals to more profitable vacation rentals. An effort is underway, led by Health & Community Services Mark Tompkins, to consider alternative ways to solve this critical problem.

Whatever the cause, no housing means no plumbers and no HVAC repairpersons. Which, looking on the bright side, creates an opportunity. If this auditing gig doesn’t work out for me, I’m thinking of becoming a plumber. I hear they’re hiring.

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