How Are We Doing: The Economics of a Pandemic
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.
San Juan County Auditor