Business prosperity dwindles

When Texas Wings Inc., the franchisee for the Hooters restaurant concept for the state of Texas, closed its restaurant in Brownsville recently it became the latest brand name business to leave the city in the past year.

In no particular order the departed businesses include, Mervyns, Hooters, Taco Cabana, Circuit City, Starbucks, Petco, Kay-Bee Toys and Linens-N-Things.

Now, and for the first time in a long time, the Brownsville business community is looking for cover amid a rising economic storm.

"We're used to compiling a list of growth, not the other way around," said Gilbert Salinas, director of marketing and communications for the Brownsville Economic Development Council. "We're kind of in uncharted territory here."

For the last several years, Brownsville's business community watched as commercial and retail development ushered in a new era of prosperity to a city that at one time had soaring unemployment. It was widely believed that the promise of post-NAFTA, or North America Free Trade Agreement, growth had finally arrived and that the big box stores and chain restaurants had taken note of "the city on the border by the sea."

Even with a recession looming in states like California and Michigan, Brownsville saw its ability to attract Mexican shoppers as a buffer against a similar dive at home. But with the peso devaluing some 50 percent in recent months, Mexican shoppers have lost a significant amount of purchasing power.

Today the vacant commercial buildings serve as a reminder that not even Brownsville will escape this recession unscathed.

In some cases, such as with Circuit City, the departing business declared bankruptcy across the board, impacting all its stores in the nation and thousands of employees, including Brownsville's.

In other cases, the community simply could no longer sustain businesses that once thrived.

That is the nature of for-profit corporations, said Mostafa Malki, assistant professor of business administration at the University of Texas at Brownsville and Texas Southmost College. "The goal is to maximize profit, not hire additional employees," Malki said. "If that requires firing people, they're going to do that to meet their target revenue."

Small businesses are also interested in profit, but they don't answer to shareholders. Even if sales decline from one quarter to the next, they aren't inclined to fire half their employees, said Malki.

Amid this rash of store closings, the Brownsville Chamber of Commerce attempts to keep its members upbeat. To accomplish that feat, it is offering additional seminars and peer contact than in the past to help foster business.

"Even in a strong economy, businesses fail and in a weak economy business failure increases," said Angela Burton, president and CEO of the Brownsville Chamber of Commerce. "We must remember that ups and downs are part of our business cycle and one must search for ways to adjust."

During less tumultuous circumstances when one store or restaurant closes its sales shift to another business. But these are extraordinary times. As stores have closed it appears they are taking a portion of their sales receipts.

According to Pete Gonzalez, deputy city manager and chief financial officer for the city of Brownsville, sales tax allocations are down more than 1 percent through the first four months of the fiscal year starting in October.

And the trend could be accelerating. Total collections for January and February of 2009 are down 7.1 percent compared to the same period in 2008, according to the office of the Texas Comptroller of Public Accounts.

Already the shortfall has forced the city to consider trimming its budget. If sales continue their decline the city could be forced to make significant budgetary changes.

"We're looking to sit down with the department heads in the near future to adjust our budget to make up for the losses," Gonzalez said. "That may include leaving certain job openings vacant and cutting back on travel and supplies."

At the BEDC, Salinas said it is always chasing leads, hoping to lure businesses to border.

"We were the last ones to really be affected by this recession and we're pretty optimistic we'll be the first ones out," Salinas said.