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County finance update: Coming out of the pandemic

by F. Milene Henley

San Juan County Auditor

I have always been amazed by four-way stops. Drivers learn as teens to negotiate these tricky, cooperative intersections, and most of us never forget. It’s a marvel of social engineering.

This past year has been one giant experiment in social engineering. We all had to learn to behave in ways that were not natural but were necessary to get us all through this painful intersection. Because of San Juan County residents’ cooperation and care, our county had the lowest rate of COVID cases in the state and so far (knock on wood), no deaths.

Financially, San Juan County, like all of Washington State, was dealt a blow last March when businesses were closed and people told to stay home. Sales tax plummeted. The County Health Officer’s order to close accommodations dealt a further blow. In June, the County had its first month ever in which lodging tax – a component of sales tax – was negative, because of refunds.

Based on the last recession, the County prepared for the worst: reduced sales tax slowed building activity, decreased real estate sales, reductions in other economy-driven revenues. That’s not what happened. As soon as accommodations re-opened in mid-June, the economy began to pick up. Cooped-up families found that they could travel to the San Juans, enjoy the outdoors, and still keep their distance from others. Second-home owners moved to their island homes, to work and school remotely, in the relative quiet and safety of the islands. Their presence showed in unexpected ways – solid waste revenue, for example, doubled compared to the previous year. This change is in sharp contrast to what happened during the last recession when solid waste revenue decreased.

The new interest in remote living showed itself in other ways, as well. Rather than dipping, real estate sales soared, giving the Land Bank its best year ever. Building permit revenue exceeded not just budget, but also all previous years.

In addition, the Coronavirus Aid, Relief, and Economic Security Act poured hundreds of thousands of dollars into the County to manage the response to the pandemic. Between grant revenue and higher-than-budgeted building revenue, the County’s general fund revenue for 2020 ended higher than budget, despite a decline in sales tax revenue.

In 2021, the upward trend continues. Total first-quarter general fund revenues far exceeded all previous years. First-quarter sales tax revenue exceeded past years and all expectations. Building continues strong, and real estate sales are limited only by inventory. Although we do not yet have final data for the second quarter, these upward trends are clearly continuing. Only interest lags expectation.

One of the big questions facing the county now is how to spend the $3.4 million (spread over three years) that it will receive from the American Rescue Plan Act. Some additional protective measures, such as those implemented with CARES funds, are already budgeted. Attention to the County’s physical plant is needed. A plan to consolidate customer service activities to improve public access to services is being discussed. More possibilities are being considered.

Although San Juan County and many of its economic sectors are thriving, the COVID-induced recession did not hit all sectors equally. Many businesses, particularly restaurants and entertainment venues, are still suffering from the losses of last year. Others are struggling to find staff to re-open. Until in-person school resumes in the fall, many persons formerly in the workplace – particularly women – are finding it necessary to stay home with children rather than return to work.

As the recovery continues, our cooperation is still needed. Businesses still need our support. Some places still require masks. It was our cooperation that got us safely through the past year. If we can successfully navigate this, maybe we can learn to navigate roundabouts as well as we do four-way stops.