WESLACO, Texas – An expert on the Rio Grande Valley’s sales tax revenue collections says he is seeing a shift in spending patterns away from local magnet cities towards bedroom communities.

Matt Ruszczak, executive director of Rio South Texas Economic Council, crunches the numbers on data collated by the Texas Comptroller’s Office. In addition to providing this information to RSTEC’s board of directors, Ruszczak provides a monthly update to The Rio Grande Guardian and News Talk 710 KURV.

The most recent data collected by the Comptroller was for the month of June, 2020. Comparing it with the same month in 2019, Ruszczak found that the Valley did better than Texas as a whole.

Sales tax revenues for the state of Texas as a whole were up 4.96 percent in June 2020, as compared the June 2019. “All things considered a really strong number,” Ruszczak said. 

Matt Ruszczak

For the Valley, the percentage increase was 8.28 percent. “We are on the border, we will have an impact from Mexican shoppers, the bridges are closed to non-essential traffic, we should not perform as well as the state as a whole. But, on the contrary, we are actually up 8.28 percent. That is a very, very, strong performance,” Ruszczak said.

Ruszczak pointed out that June 2019 was not a bad month. “We are building on strength despite the COVID circumstances,” he said.

As for the four Valley counties, Hidalgo County’s sales tax revenues were up 6.74 percent in June 2020, as compared to the same month last year. Cameron County’s were up 11.34 percent and Starr County’s were up 16.27 percent.

Willacy County did not do as well in June 2020. Its sales tax revenues were down 5.37 percent, compared to the same month in 2019. However, Ruszczak said there is a “reporting issue” from Lyford dating back to June, 2019 that skews the numbers. “Raymondville up 16 percent, a very strong performance,” Ruszczak explained.

Ruszczak said he is noticing a “COVID shift.” He explained: “Retail sales have shifted from the magnet communities to the bedroom communities. From the larger markets to to the smaller markets. We are clearly seeing that, with 19 out of 44 communities in the Rio Grande Valley up over 20 percent, as compared to June 2019.”

Of the 19 communities that saw a 20-plus percent increase in sales tax revenues, “almost all of them could be classified as bedroom communities, not magnet markets,” Ruszczak said.

McAllen’s sales tax revenues were up 0.9 percent in June 2020. “All things considered a good result,” Ruszczak said. However, McAllen’s bedroom communities did better. Mission’s sales tax revenues were up 13.10 percent. Pharr’s were up 13.82 percent, and Edinburg’s were up 5.36 percent.

Weslaco’s sales tax revenues for June 2020 were up 12.97 percent, as compared to the same month in 2019.

Ruszczak said if one thinks of a magnet community in the Valley, a community people drive to to spend their money, Mercedes is the banner community. It sales tax revenues for June 2020 dropped 15.64 percent, as compared to June 2019.

Smaller bedroom communities in Hidalgo County did incredibly well, Ruszczak reported. Alton’s sales tax revenues for June 2020 were 39.85 percent up on the same month in 2019. Penitas did even better, recording a percentage increase of 44.86.

“That is a massive boom,” Ruszczak said. “It is the COVID shift, people are shopping closer to where they live, rather than traveling to the larger magnet communities to spend their money.”

As for Cameron County, Brownsville’s sales tax revenues for June 2020 were up 7.35 percent on the same month in 2019. Ruszczak described this as a “respectable number.” Harlingen’s were up 11.68 percent. But, San Benito, the definition of a bedroom community, in Ruszczak’s opinion, saw a 25.43 percent increase in sales tax revenues. “A real boom due to the (COVID) shift,” Ruszczak said.

South Padre Island, another magnet city, saw a 14.78 percent increase in sales tax revenues in June 2020, while Port Isabel’s numbers were up 8.78 percent.

Raymondville saw a16 percent increase in sales tax revenues in June, 2020, while Rio Grande City saw a 14.89 percent increase.

“This COVID shift from magnet communities to bedroom communities replicates itself across the state,” Ruszczak said. “The COVID shift has really ingrained itself. We have seen this shift for several months.”

Year to date, the sales tax revenues for the Valley as a whole are up 0.33 percent. 

COVID period

Ruszczak wanted to analyze the impact of COVID over the past three reporting periods. That is April, May and June 2020. These three months cover the shelter-in-place order and the months coming out of the order. The Valley’s international bridges were closed to non-essential travel during this period.

For the three month period, sales tax revenues for Texas as a whole were down 2.11 percent. For the Valley, the percentage drop was 1.12 percent. “We were unexpectedly outperforming the state number,” Ruszczak said.

During this three-month period, 35 out of 44 Valley communities saw an increase in sales tax revenues. Sixteen of them saw an increase of over 20 percent. Most of these were bedroom communities. 

Only nine communities in the Valley saw a decrease in sales tax revenues during the April-June period. They were: Brownsville, down 2.8 percent; Los Indios, down 25.35 percent: South Padre Island, down 4.3 percent; Lyford, down 37.4 percent; Elsa down 7.4 percent; the city of Hidalgo, down 0.37 percent; McAllen, down 13.65 percent; Mercedes, down 32.16 percent; and Sullivan City, down 17.6 percent.

Four of these nine can be described as magnet communities, Ruszczak said. Namely, Brownsville, McAllen, Mercedes, and South Padre Island. Three could be described as transit communities, he said. Namely, Los Indios, Hidalgo and Sullivan City. 

The two outliers, Ruszczak said, were Lyford and Elsa.

“This COVID shift really magnifies itself, particularly when you start looking at the COVID period,” he said.

Over this three-month period, San Benito’s sales tax revenues were up 18.34 percent; Weslaco’s were up 7.53 percent; Pharr’s were up 4.69 percent; Rio Grande City’s were up 9.84 percent; Alton’s were up 37.69 percent; Penitas’ were up 35.02 percent; and Palm Valley’s were up a whopping 63.47 percent.

Ruszczak said these numbers show how the Valley’s local consumer has helped the Valley stay fairly stable. “The money has shifted within the region,” he said. “The shift is towards the bedroom communities, the neighborhoods, the suburbs, and away from the major magnet cities.”

Ruszczak added: “When the dust settles and we get more data and we start looking at per capita sales, I think we are going to start seeing some serious shifts in those patterns. Will this paradigm shift open up opportunities for communities like Weslaco? Rio Grande City has big ambitions retail-wise and hospitality-wise. This might be a golden opportunity for them to jump start that. There are some interesting storylines emerging.”

Editor’s Note: This is the first in a two-part series on the June 2020 sales tax revenue figures for the Rio Grande Valley. Part Two, focusing on the Mexican shopper, will be published in our next edition. 

Editor’s Note: The main image accompanying the above news story shows the the City of Alton’s municipal building. Alton’s sales tax revenues were up 39.85 percent in June, 2020. Over the April-June 2020 period they were up 37.69 percent.

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