Santa Barbara is a destination town, which is a place that people make a special trip to visit. How are destination towns doing in the summer of 2022?
The destination town of Park City, Utah, will be used as an example. It has a small population of 8,401, but represents trends that may also be occurring in larger destination cities, such as Santa Barbara with a population of 88,604.
This August, as has happened for over a decade, my board and I set the operating budget for the next year for the Park Hotel, a small hotel located in the historic district of a Park City town bound by mountains, just like Santa Barbara. .
It was particularly tricky this year to estimate the impact of inflation on the number of guests and the expenses for utilities, insurance, maintenance, supplies and perhaps most of all, employees. This process caused me to reflect on how the past decade could be divided into three time periods: pre-COVID, COVID and post-COVID.
Pre-COVID times saw travelers, from the U.S. and elsewhere, arriving and sometimes taking advantage of the low inflation and mortgage rates to buy a place and perhaps even become residents.
The COVID times began with a “bang” on a Friday in March 2020 when the first case arrived. Everything changed overnight. Saturday ski resorts closed, and Sunday all other business, except food stores, closed. The bustling Friday became the ghost town Sunday: no traffic, no people, not even any dogs.
Everyone was surprised. Everyone, that is, except Dr. Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases, because the Obama-Biden administration had permitted Fauci to fund the Wuhan Laboratory in China to do research on how to “change-the-function” of a bat virus so that it could infect humans. Their “success” began the COVID times.
The COVID times in many ways resembled the Dark Ages — a term used to describe the Middle Ages in Europe centuries ago, when the economic, educational and cultural aspects declined.
Economically the Park City businesses that supported the residents either struggled or closed. However, some businesses elsewhere were able to permit, and even require, their employees to work remotely, which incentivized those employees to relocate to less expensive, more desirable, places to live: such as Park City. It does not take many of the 35 million Californians, particularly from the Silicon Valley, searching for expensive housing to avoid paying capital gains for their California houses, to drive up the cost of real estate in a town of 8,407 to an average of $2.6 million, which was far greater than any resident could earn locally.
This was a common phenomenon in destination towns, such as Aspen, Colo.,, population 7,004, where an average house rose to $3.2 million and to well over a million in Jackson Hole, Wyo., population 10,760, with the highest income zip code in the US.
Education declined as The National Center for Educational Statistics) indicated that from the pre-COVID 2020 to 2022, the average test scores for 9-year-olds declined 5 points in reading, the largest decline since 1990, and 7 points in math, the first decline ever in math. Students regressed to levels last seen two decades ago.
Cultural activities withered as they always do in isolation.
During COVID, and continuing in “Ppst-COVID,” President Joe Biden’s spreading taxpayers’ dollars to help the people in states whose governments ordered private businesses to shut down, which even included the governmental employees who never missed a paycheck, reminded me of the Germany experiment.
The experiment began after the end of World War II in Europe, when a failing President Franklin Roosevelt permitted Germany to be divided into a West Germany,a democracy with incentives and rewards for work, and East Germany, where communism did not provide those rewards. About 40 years later when President Ronald Reagan said “Tear down that wall,” Germany and its city of Berlin were reunited, uncovering that in that short time the West Germans, in a democracy, were very productive. But the East Germans, receiving Biden-type payments, were so “disincentivized” that the West Germans had to support them.
The “Germany effect” was my response this August to the question businesses, including the Park Hotel, asked: “Where are the employees?” Why since pre-COVID has there been such an incredible shrinkage in people willing to work? Was there any other possible explanation than the presidential policies disincentivizing the employees in places that closed, like Park City, by sending them money for not working, much like East Germany? Meanwhile the increased inflation has made it too expensive for the employees to live in the town, and the president’s energy policy is doing the same for the cost of commuting.
My research indicated that the primary source of employees for restaurants has shifted from the “green card” program to the J-1 visa program that enabled people, such as Angela, to leave a position in human resources in Romania, which is suffering from trying to support the flood of Ukrainians, to become a server.
Meanwhile, President Biden’s energy policies and spending programs are increasing the speed at which the inflation spiral is sweeping up the appraisals of real estate and the accompanying increases in real estate taxes that led residents, such as Dave Keaton, to complain that the proposed increase of 42% over last year meant that “his property taxes would be greater than his mortgage and would force many, like himself, to leave after 18 years as a resident” (Park Record).
To unsuccessfully try to combat the inflation caused by the government spending, the Federal Reserve has been forced to raise interest rates, and the accompanying mortgage rates have almost tripled 6%, and are going higher, which is driving down the appraised value of housing but not the real estate taxes, causing people, such as Gerd Aguilar, to say that “the value of our homes is starting to go down.”
But any taxes, including property taxes, rarely go down since the same inflation also drives up the cost of living for the state, county and town’s employees.
Is Santa Barbara mirroring the Park City experience?
Brent E. Zepke is an attorney, arbitrator and author who lives in Santa Barbara. His website is OneheartTwoLivescom.wordpress.com. Formerly, he taught law and business at six universities and numerous professional conferences. He is the author of six books: “One Heart-Two Lives,” “Legal Guide to Human Resources,” “Business Statistics,” “Labor Law,” “Products and the Consumer” and “Law for Non-Lawyers.”