The tough (times) get going

The retail king of South Texas wants to diversify.

For years, the city of McAllen has relied heavily on sales tax from an abundance of shopping options and on a steady stream of Mexican consumers to fill city coffers.

But as the economy changes here and in Mexico, city leaders hope to add a couple of legs to its economic stool.

The plan is crucial as police, roads, libraries and other city services are now funded largely via the 2 percent city sales tax levied on shoppers.

"The challenge is, if you have one segment of the economy — with all your eggs in one basket — you open yourself up to dramatic downturns," explained Steve Ahlenius, who heads the McAllen Chamber of Commerce.

Chief among the city's goals for diversifying its economy is its attempt to land an auto manufacturer. Officials have been mum on the details of that project, but its impact could change the face of the local economy and provide many high-paying jobs.

Meanwhile, the city has also been talking with University of Texas-Pan American about establishing an 80-acre research park within the city.

Deputy City Manager Brent Branham said McAllen is looking to high-tech research parks in North Carolina and South Carolina as models. City leaders hope to lure medical manufacturing firms and drug companies to the region as well.

Such projects won't happen overnight, and Ahlenius notes that it took North Carolina decades to become the research hub it is today.

But the research parks have changed that region's economy in many ways.

"What is being spun off of the research is patents and new products," Ahlenius said. "We said we really need to start beginning that process of attracting research facilities and (considering) how do we make that happen."

Officials also want to promote the city to housing developments that cater to wealthy retirees, citing the upcoming retirement of millions of baby boomers — along with the area's warm climate and low cost of living — as a major opportunity in that sector.

"The challenge is to do all these things simultaneously," Branham said.

The city's business plan, finalized this summer, warns that a heavy dependence on retail could cause problems as the city's costs rise and in the event the retail sector slows down.

That's already starting to happen.

The International Council of Shopping Centers estimates that U.S. same-store sales for retail chains fell last month by 0.9 percent. It and other trade groups are predicting weak holiday shopping seasons as well. Right now, the retail sector is "simply awful," the group wrote in a statement.

McAllen is starting to feel the pinch, too.

Through August, there were $2.25 billion in retail sales this year in Greater McAllen, down about 1 percent compared to 2007.

The city's share of the retail market has dropped since the opening of the Mercedes outlet mall and expansion of retail in other Rio Grande Valley communities.

And changes occurring in Mexico are reducing the city's ability to depend on Mexican shoppers in the future.

The purchasing power of the Mexican peso compared to the U.S. dollar has fallen by nearly 30 percent since August.

And a series of high-end retail projects under way in Laredo are designed to cater to Mexican shoppers. Chief among those is a $250 million mall set to open next year in that city, which is the same distance from Monterrey as McAllen.

"We've been fortunate so far that we haven't seen a dramatic drop-off in Mexican shoppers," the McAllen chamber's Ahlenius said. "But that's one of our concerns."

Keith Patridge, president of the McAllen Economic Development Corp., emphasized that the city isn't abandoning retail and that it has plans to boost that sector as well.

Among those plans is a push to establish retail outlets in McAllen that don't have locations elsewhere in the Valley and in northern Mexico, as well as plans to work with the Volaris Mexico airline to establish tour packages for Mexicans visiting McAllen.

But business and city leaders recognize change is imminent.

"The more different elements of the economy you can address in bad times, the better off we're going to be," Branham said.

___

Ryan Holeywell covers McAllen, PSJA, the Mid-Valley and general assignments for The Monitor. He can be reached at (956) 683-4446.