How Are We Doing: The Economics of a Pandemic

Posted August 25, 2020 at 5:08 am by

Coun­ty Audi­tor F. Milene Hen­ley on the County’s eco­nom­ic con­di­tion through the 2nd quar­ter of 2020…

I like hor­ror films. I enjoy them, know­ing that they’re not real.  Mon­sters can’t real­ly hurt you, and zom­bies don’t real­ly exist.

Right now, I feel like I’m liv­ing in a real-life hor­ror film, one about a glob­al pan­dem­ic with no end in sight.  But I’m not enjoy­ing this one, because it’s all too real.

Part of the thrill of hor­ror films is the sus­pense – not know­ing what is going to hap­pen, or when. That is cer­tain­ly true of the sto­ry we’re liv­ing now.  For exam­ple, the Coun­ty pro­ject­ed a rapid fall into a reces­sion, as busi­ness­es were forced to shut down and employ­ees were unable to work.  With reces­sion would come a fall in gov­ern­ment rev­enues, as the eco­nom­ic activ­i­ties that pro­duce gov­ern­ment rev­enue fell. 

Yet to date, the fall has not been so deep or so broad as we expect­ed.  Sales tax rev­enue dropped, as expect­ed, dri­ven large­ly by the pro­hi­bi­tion on nonessen­tial trav­el into the coun­ty.  Pro­jec­tions of year-end sales tax rev­enue have been drop­ping month­ly, the cur­rent pro­jec­tion being that the Coun­ty will achieve 87% of bud­get­ed over­all sales tax rev­enue and only 50% of bud­get­ed lodg­ing tax rev­enue.  Will that turn around in the third quar­ter, since accom­mo­da­tions began to be per­mit­ted, at 50% of occu­pan­cy, in mid-June?  Or will the cumu­la­tive effects of ongo­ing busi­ness clo­sures and unem­ploy­ment off­set the gains in tourism and con­tin­ue the down­ward trend?  Ah, the suspense.

In oth­er rev­enues, reviews are mixed.  Prop­er­ty tax is plod­ding along at its usu­al, reli­able pace.  Not so with inter­est earn­ings, how­ev­er.  All of the County’s high­er-pay­ing secu­ri­ties have been called, and what is avail­able on the mar­ket yields lit­tle return.  The cur­rent rate with the state-run Local Gov­ern­ment invest­ment Pool is just .26%.  Inter­est earn­ings have nose­dived as a result. 

And then the plot twist: The Land Bank had its best month ever in July, and 2020 may turn out to be its best year ever.  In addi­tion to real prop­er­ty sales, real prop­er­ty devel­op­ment is con­tin­u­ing at a bet­ter pace than the Coun­ty expect­ed.  Per­mit­ting and plan­ning rev­enue won’t have its the best year ever, but is like­ly to beat bud­get.  Is it true that urban dwellers are buy­ing prop­er­ty in rur­al areas to escape this and future pan­demics?  Will real prop­er­ty trans­ac­tions save the Coun­ty from the pan­dem­ic-led recession?

Or is the worst yet to come? There’s no doubt that stop­gap mea­sures by the fed­er­al and state gov­ern­ments, includ­ing grants and loans and unem­ploy­ment ben­e­fits, have slowed the reces­sion by prop­ping up gov­ern­ment, busi­ness­es, and indi­vid­u­als.  Those mea­sures will not last for­ev­er.  Even­tu­al­ly, we will have the tools to defeat the virus, the tiny mon­ster in this real-life hor­ror film.  The hope is that life will then return to a pre-virus nor­mal.  But the dam­age done to the econ­o­my will not be healed instant­ly. Some busi­ness­es will close, unable to sus­tain long peri­ods of clo­sure or reduced rev­enue.  Some jobs will go away for­ev­er.  Unem­ploy­ment ben­e­fits will be reduced and even­tu­al­ly end, and FedEx planes full of Ama­zon box­es will stop coming. 

The chal­lenge now is to antic­i­pate what’s going to hap­pen in 2021.  It seems like­ly that this real-life movie will have a sequel.  I already don’t like it.

Milene Hen­ley,
San Juan Coun­ty Auditor


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