Tourism’s Shutdown Merits Austerity Mode

Hopefully, local officials are making contingency plans. Restarting the local economy is going to take time.

— Steve’s Marketplace —

Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace.

To say Amelia Island resembles a ghost town may be an exaggeration, but not when you compare this stagnant atmosphere to a typical spring break.

The inactivity begs for activity, for the hotels and restaurants and beaches. And the question on everyone’s mind is how long will this – or should this – prescribed shutdown last?

Of course, this is a complicated question. We are dealing with a complicated intruder that cannot fester in isolation. So here we remain. Isolated.

A word of caution. When we decide to restart the local economy, it’s not like turning the ignition key in your car. It’s going to take time. Businesses must re-staff and re-stock. Tourists must decide to return.

In the meantime, this impasse will inevitably cause some local businesses to fail. Even though a bold $2 trillion federal aid package should be forthcoming, it may be too late for some businesses.

Hopefully, local officials are making contingency plans for the exorbitant spending they targeted this year. In other words, scrap the runaway spending and revert to an austerity mode. We don’t know how long this frigid atmosphere will last.

Fernandina Beach officials gushed about the projects they had planned, like buying unusable parcels for conservation. Or adding more employees, expanding government. In fact, a 30 percent increase in the property-tax rate this year was justified by city commissioners (even without the rate increase, the city expected more than $1 million of additional property tax revenues).

It would be difficult to make that case now. One commissioner even boasted that he “couldn’t find one thing to cut” in the new budget. Even though this commissioner obviously was using dull scissors, even a laymen could find excesses in a bloated budget of a small town.

It remains to be seen how the real estate market is impacted by this pervasive virus. In the 2008-09 decline, stocks and bonds and real estate plummeted in tandem. That has not yet been the case. While both stocks and bonds have tumbled, not so for real estate prices. At least not yet.

If property values fall, property taxes will follow. And this means less money for local government bodies. Also, a falloff in property values on Amelia Island would have a magnified effect. You see, more than 70 percent of property-tax revenues in Nassau County are generated from Amelia Island.

So the slowdown on the island, in activity and tourism and businesses, can only have a negative impact on real estate. If we fall into recession, this scenario only gets magnified. And the revenues generated by tourism (through a bed tax assessed at local hotels) will fall off a cliff, at this pace.

So elected officials must be doing more than restricting the beaches right now. They must be busily planning contingency measures anticipating a sudden decline in property taxes, sales taxes, gasoline taxes, bed taxes.

It’s easy to spend money. It’s harder to save it.

______

Steve Nicklas Financial Advisor
Steve Nicklas

Steve Nicklas is a financial advisor for a regional brokerage firm who lives and works on Amelia Island. He is also an award-winning columnist. His columns appear regularly in several newspapers in North Florida and South Georgia, and on his website: www.SteveNicklasMarketplace.com. He has also published a book, “All About Money,” consisting of some of his favorite columns over the past 20 years. The book is available at local stores and on Amazon. He can be reached at 904-753-0236 or at [email protected].