MCALLEN, RGV – McAllen Chamber of Commerce President Steve Ahlenius says he is not too concerned about a dip in sales tax revenues for McAllen because the city’s fundamental approach to retail development is sound.

Steve Ahlenius
Steve Ahlenius

Among cities in the Rio Grande Valley, McAllen and Mercedes are seeing the biggest dip in sales tax receipts this year. Both are down four percent. Other cities in the region are either up or pulling in about the same amount of revenue.

“What is obviously impacting us probably more than some of the other cities is the Mexican nationals. The Peso is now trading at about 18 to 1. If you go back three years ago it was at 13 to 1. So, obviously, the Peso is having an impact and we are seeing that across the board with our retail businesses. I would suspect other communities are feeling it to,” Ahlenius said.

When the Peso is worth less against the Dollar, Mexican shoppers have less spending power. According to Rigo Villarreal, superintendent of bridges for McAllen, the number of visitors crossing the Hidalgo-Reynosa International Bridge is up compared to last year. Which suggests Mexican shoppers are spending less. McAllen would be affected more than other nearby cities because it has La Plaza Mall, a popular mall for Mexican shoppers. Mercedes would be affected also because it has Premium Outlets, a mall popular for Mexican shoppers.

According to statistics released by the Comptroller’s Office, McAllen’s sales tax revenues are down 4.31 percent in 2016. Mercedes’s sales tax revenues are down 4.30 percent in 2016. Here are the percentages for some of the other Valley cities:

Alamo: 1:38 percent UP
Brownsville: 1.95 percent UP
Donna: 21.64 percent UP
Edinburg: 4.95 percent UP
Harlingen: 1.84 percent UP
Mission: 1.4 percent UP
Pharr: 5.28 percent UP
San Benito: 3.35 percent UP
San Juan: 1.45 percent UP
South Padre Island: 1.51 percent DOWN
Weslaco: 1.88 percent DOWN

For July, 2016, the most recent reporting period, McAllen’s sales tax revenues are down 6.54 percent compared to July, 2015. For Mercedes the percentage drop is 6.14 percent.

Comparing July 2016 to July 2015, Pharr’s sales tax revenues are down 1.9 percent. Weslaco’s is up 2.26 percent. Donna’s is up 4.3 percent. Alamo’s is up 8.4 percent. Brownsville’s is up 6.12 percent. Port Isabel’s is up 2.68 percent. Harlingen’s is down 3.13 percent.

Ahlenius says other factors are in play, not just the spending power of Mexican shoppers.

“What you are seeing is a big national trend on retail sales across the board where people have really stepped back and they are not buying electronics. Normally, when you see a recovery from a recession, that is one of the first indicators – you see an increase in consumer spending. So, nationally, consumer spending is down,” Ahlenius said.

“I think we are part of that trend. I think we are okay. The reason I tell folks not to panic is, one, we have a very young population, they are at the front end of that bell curve where they are going to be buying lots of stuff. Second, we have got Mexico so it is not always going to stay at this 18 to 1 exchange rate and those are the two big drivers as far as the things you want to see. So, the fundamentals are sound as far as the retail economy is concerned.”

Another reason not to be pessimistic, Ahlenius said, is the investment that is happening in the retail sector in McAllen.

“Take a look at the investments that are being made. La Plaza Mall, I think they realize what is happening nationally as far as mall space is concerned but here they are making a huge investment. That tells me that they see the future is bright because they are a very sophisticated company. They are not going to make those investments unless they get the return they want to have. So, I think we have got a lot of the fundamentals in place. I see it more as a short term blip, as opposed to a long term trend.”

Increasingly, Ahlenius argues, McAllen is going to be a destination location for retail shoppers.

“I think that is part of our strategy – one-of-a-kind retail destinations. Dave & Buster’s is a prime example of that. I know the City is working on several other deals that fit that category. That is where we are. You have got to have the competitive advantage.”

Another factor to keep in mind, Ahlenius said, is that overall, McAllen still leads the way in the Valley for retail shopping.

“We are still double the retail sales of everybody else in the Valley. Yes, it has been slow, the last six months. I was the idiot you predicted that by this time the Peso would be gaining against the dollar. We just haven’t gotten there yet. But it is going to rebound. People that have been through this know that. I am confident in where we are at and what we see happening.”

Matt Z. Ruszczak, executive director of Rio South Texas Economic Council, said that overall, the Valley is doing well for sales tax revenues, and certainly is compared to Nueces County, home to Corpus Christi, and Webb County, home to Laredo.

“When you compare us to our friends and neighbors in other parts of the state we are actually performing quite well. The state is down 1.59 percent in terms of sales tax collections. When you look at our neighbors to the north, Corpus, they are down 7.51 percent.  Our neighbors to the west, Webb County and Laredo, they are down 10.48 percent. Compared to them, our numbers look quite good. In Hidalgo County we are down slightly, by 2.17 percent. In Cameron County we are actually up, 1.29 percent. So, we can see, the Valley continues to be a strong market for retail sales,” Ruszczak told the Rio Grande Guardian and 88 FM.

Asked to comment on the year to date figures, Ruszczak said: “The year to date figures look even more encouraging. If you look at the figure for Hidalgo County, it is practically flat, slightly up 0.15 percent. Cameron County is up year to date, 2.61 percent. If you compare us to Nueces County, they are down 9.83 percent. Webb County, the Laredo area, is down 6.3 percent. The state is also fairly flat at 0.67 percent increase. So, again, the Valley’s numbers are quite in line with the statewide numbers. We are certainly doing better than the folks in the Laredo area or the Corpus area.”

Asked to comment on the Peso situation, Ruszczak said: “If you look at July 2016 compared to July 2015, the Peso is off about 17 percent. That is a significant hit and obviously some of the communities which are more centric to the Mexican shopper will start feeling the impact a little bit stronger than some of the communities that are primarily driven by the local market. Even if you look at some of the communities that are very focused on the Mexican shopper, their numbers look quite good, taking into account the 17 percent drop in buying power for the Mexican shopper.”

La Plaza Mall

Eddie Morin
Eddie Morin

Meanwhile, Simon Properties has announced that Eddie Morin has been hired as the Director of Operations at La Plaza Mall. In this role, Morin will oversee all day-to-day operations, maintenance, grounds keeping, custodial and contracted services. Morin has over 10 years of real estate management experience. Most recently, he served as the property manager for Jones Lang LaSalle in Mission, Texas, where he was responsible for 4.3MM sq. ft. of industrial real estate in Houston, McAllen and Laredo. Prior to joining the Simon team, Morin held various management positions in South Texas including management in residential construction and commercial real estate.

“Eddie’s vast property management experience has helped him transition well into his new position,” said Audrie Thompson, Regional Vice President for Simon’s Southwest Region. “His knowledge of our industry and the McAllen market makes him an excellent choice for La Plaza Mall.”

Morin graduated from University of Texas – Pan American where he received a Bachelor’s of Business Administration with a focus in Management. He later earned his MBA in 2005 from his alma mater and became a Certified Manager of Community Associations. Morin said he is looking forward to continuing his career in the McAllen area and working with both current and future tenants at La Plaza Mall.