Several South Texas cities saw significant sales tax increases in December, furthering a trend that has been ongoing in the region for months, and leaving leaders in the Rio Grande Valley optimistic for the next decade and beyond.
Sales tax revenues dipped in only a few cities across the three-county region, while most saw substantial gains, which officials attributed to more employment, a healthy state and national economy and marketing efforts in Texas and Mexico.
McAllen’s December 2018 sales tax intake increased by more than 12 percent from December 2017, the third largest gain of the 20 largest cities in Texas. Edinburg and Harlingen also saw jumps of more than 12 percent, comparing December 2017 to December 2018. Of the larger cities in the Valley, Pharr had one of the more unexpected hikes — a 44 percent gain in December 2018 compared to December 2017.
“We were just as shocked as you were,” Pharr City Manager Alex Meade said.
The largest gain in the region was La Villa, which saw a 240-percent boom when comparing December 2017 to December 2018. Alton and Donna both saw roughly 20-percent gains comparing the same months, while South Padre Island saw a 37-percent jump and Palm Valley saw a 143-percent increase. The four Starr County cities that report sales tax to the Texas Comptroller all saw gains of 10 percent or greater comparing December 2017 to December 2018.
“I think a lot of it is tied to the low unemployment rate that we have,” said Sergio Contreras, president of the Rio Grande Valley Partnership, which is a sort of regional chamber of commerce.
Meade also noted the low unemployment being “a huge factor — 5 percent is one of the lowest unemployment rates we’ve ever had.” He also mentioned the sports entertainment venue Topgolf as a contributor to the city’s sales tax increase, as well as holiday shopping.
Steve Ahlenius, McAllen Chamber of Commerce president, also cited holiday shopping, but spoke more broadly about the region’s sales tax future.
“What we’re doing as far as promoting and advertising is paying huge dividends for the city of McAllen,” Ahlenius said, referencing the marketing efforts by the chamber in conjunction with the city aimed at consumers in Texas.
The chamber once focused more advertising resources on Mexico and continues to market there; but over the last couple years, Ahlenius and the chamber has shifted some of its efforts toward what he calls the South Texas triangle. This triangle stretches from Corpus Christi to Laredo and everything south of that imaginary horizontal line.
“In 2016, as the entire United States economy was starting to take off, we were hit with the rhetoric about the border and Trump being elected,” Ahlenius said. “So I think that impacted Mexican nationals coming to shop here.”
McAllen for decades has relied heavily on sales tax revenues, and roughly 40 percent of those revenues have come from Mexican shoppers. But McAllen noticed a drop off in Mexican shoppers at La Plaza Mall and other areas in the city around the time Trump was elected, which city officials cited as part of the reason some Mexican shoppers stopped coming, as well as gang violence in northern Mexico.
“Mexican nationals are coming back — not quite as much as five years ago, but they are coming back to shop,” Ahlenius said.
Perhaps most notably, Ahlenius pointed to a young employment pool in the region.
“The average age in the Valley is 29,” Ahlenius said. “At 29 you start to get married, buy homes, start families. Those are major purchases. So I see nothing but positive growth for the next 10 to 20 years for this region.”