How Will The Coronavirus Impact San Diego County's Economy?

Speaker 1: 00:00 Now that the curve has a new covert 19 cases is beginning to flatten in San Diego County. The pressure is on to lift restrictions and get the economy going again. So now we've been focusing on public health data and stopping the pandemic from spreading, but the other side of the equation is now coming into focus the economic data on how much the economy is suffering. Joining us now is Ray major chief economist who the San Diego association of governments. That's the regional body with a representative from 18 cities in the County of San Diego. Ray, thank you very much for joining us. Thank you for having me. So right off the top, what in your view is the biggest risk to our economy? If we were to push the quarantine from two months as it currently is to three or four or even five, Speaker 2: 00:48 there are several factors that really impact how quickly we can get back to a normal economy. And what you're referring to are things like the length of disruption for instance. And uh, right now all the indications are that this is going to take longer for us to recover. Then we had originally thought a word today seems to be that we're looking at something like the May 15th opening. With that happening within what, how that impacts the economy is that the longer we're in a recession or the longer we're in a disruption, I should say the deeper of a recession is we're more likely to get into. So there's the second factor that we really need to look at is how deep the impending recession is going to be from this disruption. And again, like I said, the longer the disruption, the longer the possibility of a of a deeper recession. Speaker 2: 01:38 And the third factor, which is really the hardest one to predict is, is the shape of the recovery. You've heard a lot of economists talk about a V shape recovery and that was predicated on the fact that we had an extremely strong economy and that if we shut it down for a couple of weeks, we could bounce right back out of it, maybe in a matter of months. But the longer we keep shut down and the more rules that you hear coming out, things like social distancing that may be in play for a long time. Uh, those types of things are going to disrupt the underlying fabric of our economy. So if you consider things like the restaurant industry where before you were able to sit in tables next to each other and now those tables are going to be six feet apart and you potentially have waiters and waitresses having to wear masks and gloves, how does that impact the restaurant business? And w we're going to have to wait and see how these rules really play out. But in many cases these businesses will not be able to remain in business and that's going to have a significant impact on the recovery. Speaker 1: 02:41 Well, speaking of restaurants, what are some of the sectors that will be likely most hard hit, which are the ones that are suffering most right now and which are the ones that would take the longest to recover? Speaker 2: 02:53 The, the industry that is going to be hit the hardest from this is tourism. And that I think you can see with the, uh, the reduction in the number of flights that are coming into the San Diego region. Uh, there are events that are being canceled. I believe that vacations, uh, for this summer will probably be, uh, canceled also. So not only recreational travel, but business travel is also impacted. So conventions and, and other such things that would happen in San Diego are going to be canceled. We just recently canceled the San Diego fair. And so tourism is going to take the longest to, even when we come out of the economy, it's going to take them maybe another year to get back to where they were at. The retail industry is also been hit extremely hard as have restaurants. Uh, this is all still going to translate into a hit on the real estate industry. Uh, the entertainment industry. So any, uh, movie theaters or ballparks or concerts or anywhere where you'd be in close proximity with people, those things are going to be hit until we understand how to reopen the economy and have social distancing in place where people or a vaccine, uh, potentially that would allow people to feel comfortable sitting next to complete strangers. Speaker 1: 04:05 And we just heard today that the San Diego pride events is being canceled. That's just an example. And of course, many of our cities rely on some of the taxes from the industry, the tourist industry tot taxes. They rely on sales tax, they rely on property tax. Miro, Kevin Portner just released his initial proposed budget and it includes over 350 job cuts. Do you have a concern that there may be some cities in San Diego County who risk bankruptcy as a result of all this? Speaker 2: 04:35 Well, I think the, we're going to have to see how deep and how much revenue we lose from these cuts from this recession. But I do think that there are some cities that are going to suffer significantly from this. Those that are dependent upon sales tax revenue will be definitely impacted bigger cities like San Diego, although the transient occupancy tax or tot tax, the property taxes and sales taxes are a huge part of the budget. Uh, those larger cities have some reserves and they're going to be able to make it. But I do worry about the smaller cities in the region. Speaker 1: 05:11 When you look around the County, are there any cities that you're particularly concerned about? Speaker 2: 05:16 Well, um, I would be particularly concerned about, uh, lemon Grove for instance, possibly a national city. Um, El Cahone has a very large retail base, uh, and if that's disruptive for a long time they could have issues too. So some of the, some of the outer line East County jurisdictions and possibly some of the North County jurisdictions also. Speaker 1: 05:39 Now, one of the impacts that you analyzed as a big decrease in the Transnet tax, and we heard earlier this week about how this could derail the proposed November ballot initiative to expand bus and trolley service and transit in general, how could this affect how we keep San Diego moving? Speaker 2: 05:56 Well, I think it's important to remember that the sales tax that SANDAG collects for transportation improvements is really the money that goes to the longterm infrastructure that we're building. And this disruption is bad as it is right now. And this is, you know, historic proportion. Uh, we will overcome this and we will, we will come out of this at some point I will be disrupted for a matter of months and in in a year or two or three we'll be back to where we were at before. So the infrastructure projects that we plan, which are really measured in decades in terms of of their construction, um, won't be significantly impacted and those things still need to be built. Um, there will be a short term disruption of course because sales tax revenues are down and we aren't getting as much money from that particular source. But then we also take a look at these stimulus packages that are coming from the federal government and there are PO potential dollars that are going to be able to offset the losses from sales tax revenue to fund other transportation projects for us. Speaker 1: 07:01 Overall. Ray, what is your message to decision makers who are trying to decide when to lift the quarantine restrictions? Speaker 2: 07:10 My advice to them would be not to lift them too early, but also don't be too conservative about when you lift them. We have to get the economy back to work. We have to find a way to have some industries get back to work, maybe, uh, come up with, uh, schedules that are, that are flexible, come up with ways of opening up, uh, one department or another within a business. Um, we, we have to be able to get back to work. There were a significant amount of the San Diego who are impacted by this and the longer that we keep the economy shutdown, the more businesses there are that will not be able to weather this, uh, downturn. And you'll see restaurants going out of business. You'll see small businesses who weren't able to get loans from the federal government going out of business. And those will have longterm effects on the San Diego economy. So whatever the leaders can do to safely open up the economy again, come up with the rules that we need to follow. Uh, that would be the thing that would really help us get going. Again, Speaker 1: 08:15 come up with the rules we need to follow. That's a good one. I've been speaking with Ray, major, chief economist of SANDAG. Ray, thank you so much. Thank you very much for having me.