McALLEN — A billion dollar a year industry here has dried up because of the pandemic and according to local officials, if things don’t change soon it may never come back.
McAllen Mayor Jim Darling said the city has seen its sales tax revenues drop nearly six times as much as other Rio Grande Valley cities during the pandemic, a phenomenon he attributes to the city’s reliance on international shoppers from Mexico.
Those shoppers have been barred from crossing the border to spend money in the city since March 21. Last week, the Department of Homeland Security extended the closure to nonessential travel through July 21.
“If you look at the sales tax numbers, McAllen and Mercedes were hit by the hardest by far,” Darling said. “We always knew we were kind of a shopping center for the Valley and northern Mexico. Well that proves it, because we’ve gone down significantly because of it and other cities haven’t because they still have their core businesses. They’re only hurt by loss of their own citizens going in.”
According to Darling, the city has seen its sales tax revenue decline by about 30%, and there’s a chance some of that income could be gone for good.
“One of the reasons we’re concerned about the travel ban is because we’ve heard from the chamber that each month you’ll lose more business for good,” he said.
Steve Ahlenius, McAllen Chamber of Commerce President, said that’s a fair assessment.
What’s more concerning is that he says the longer those shoppers stay away, the lower the odds are that they’ll ever come back.
“We’re concerned that the shopping pattern of Mexican nationals coming here may be changing and we may be losing out if we keep the border shut down the way it has been since the end of March,” he said. “For McAllen it’s over a billion dollars in sales, and we have a lot of businesses that have built their business model off of Mexican nationals coming and shopping here. La Plaza Mall is a key example, that’s one of those destination shopping points where Mexican nationals come and shop.”
In Darling’s view, the reasons for barring buyers from McAllen businesses are too flimsy and inconsistent. The border is closed to nonessential travel via car or foot, he says, but not by air. Darling says he views the rules as arbitrary.
“I can jump on an airplane and fly — why would that be?” he said.
Furthermore, Darling says, ports of entry are still open to Americans and essential travelers who don’t appear to have disproportionately contracted or spread COVID-19.
“We have had unrestricted American travel into Mexico and we’ve had very few, very, very few travel-related cases with Americans from Mexico, so that’s not happening,” he said. “It just doesn’t seem logical.”
The city is currently in the process of hammering out its budget. McAllen is aided by a healthy fund balance and five months of healthy commerce in 2020, Darling said.
But other factors, like health insurance being up and especially the prospect of losing international commerce long term are causes for concern.
“That’s scary for us. We had the advantage and now that’s a disadvantage from a budget standpoint,” Darling said. “I’m worried about this year’s budget — making it — but then I’m worried about the 2021 budget.”
So far the city hasn’t planned any large budget cuts, Darling said. He says they’re reviewing a list of capital improvements that have been postponed, and that cuts might come down the road.
“Roads and drainage are important. You let roads deteriorate and it costs twice as much to repair them later on. Drainage is obviously important, it’s raining again today, so we don’t want to stop drainage projects necessarily,” he said Friday. “If we have to cut, I think we’ll look at what are some truly essential services versus public wants.”
City Manager Roy Rodriguez says the city commission will discuss a budget amendment Monday to cover the general fund shortfall due to the pandemic.
“On Monday alone, depending on what action the city commission takes, for our budget alone we’re looking at probably a $6 million adjustment that we’re going to have to make right now. That’s just in the general fund. You include all other funds for this year and next year, we’re probably approaching $15 to $20 million,” he said.
On Monday the commission will consider whether to use the unassigned general fund balance in the amount of $3,350,495 to cover a 2020 fiscal year budget shortfall, or release the hold on the capital projects with a transfer back to the capital improvement fund.
“Staff recommends a budget amendment of $3,350,495 to cover the FY 2020 Budget shortfall or to release the hold on the Capital Projects in the amount of $2,843,366 with the transfer back to the Capital Improvement Fund in the amount of $2,843,366,” stated a memo written by Budget Director Angie Rodriguez to be presented to the commission Monday.
Rodriguez says the city will continue to address the unknowns in revenue caused by the pandemic on multiple fronts.
“We’ve got holds on capital outlay, we’ve got projects on hold, we’ve got a hiring freeze, we’re having to both fill gaps in revenue as well as make expenditures in order to combat this issue. There’s just a lot of stuff that we’ve got to do,” he said.
Darling says that in four decades of experience with the city he’s never seen a situation quite like this. He expects the budget process to require a few additional meetings this year.
“It’s never been like this. In ’94 we had the peso devaluation, but that’s a little different from the standpoint that that’s a one-facet kind of deal, you still could count on the local,” he said. “This one’s different because it’s across the board.”