Economic Development

U.S. Border Cities See Profits in Bridges to Mexico

Forget the border wall. Leaders see economic development opportunities in opening and updating international bridges.
by | February 2011

Donna, Texas, a sleepy farming town of about 18,000 people, is perhaps best known for its corn maze. The eight-acre agricultural attraction draws families from across the region. But without it, most drivers along U.S. Route 83 -- the highway that snakes the U.S.-Mexico border in Texas -- would likely speed past the community without a second thought.

City leaders here hope that will soon change, thanks to the new multimillion dollar, eight-lane Alliance International Bridge across the Rio Grande, which opened in December. If the bridge is as popular as city leaders anticipate, it could transform Donna into an industrial center, bringing much-needed jobs and money along the way. For Donna -- whose leaders initially began discussing a bridge 50 years ago -- the linkage across the water to Rio Bravo, Mexico, could be a game changer. Officials envision Donna becoming a hub for warehousing and shipping businesses servicing companies that transport goods north across the border.

Those hopes are based largely on a proposal by Rhodes Enterprises, a company that plans to invest, through the Alliance River Crossing Project, more than $950 million to develop 900 acres of land surrounding the bridge. Ernesto Silva, a consultant hired by the city, says the development could nearly triple the city’s tax base. Meanwhile, Ken DeJarnett, director of development at Rhodes Enterprises, says the project could boost Donna's annual sales tax revenue to $36 million annually -- it's currently around $1.5 million -- and create 7,000 new jobs. That's nearly the number of working age adults currently living in the city.

If that happens, the fortunes of Donna, whose poverty rate is 40 percent, could be forever changed. "It would be a whole new town," says Silva, a former assistant city manager of nearby Pharr, Texas, which has an international bridge of its own. "These bridges are economic engines."

At a time when politicians in Washington and state capitals are hotly debating the topic of immigration, and the federal government has literally built walls between the U.S. and Mexico, leaders in border cities and counties are increasingly making it easier to enter the country. By becoming host to a land port linking the U.S. and Mexico, a locality hopes to create a valuable hub for businesses that facilitate the international transport of goods -- and in the process yield revenue from tolls and taxes on businesses, property and sales.

The gamble is risky. Although federal and state money paid for much of the project, Donna is still on the hook for about $28 million. And the bridge, which opened with a ceremony that included Mexican President Felipe Calderón, is coming on line when fewer people are making the trip between the two countries, amid fears of drug cartel violence. Commercial traffic -- a prerequisite of any industrial development -- is not yet allowed on the bridge, because U.S. Customs and Border Protection has not yet committed to staff commercial inspection stations.

Still, despite the obstacles, it's a chance Donna is willing to take, says DeJarnett. "You’ve got to risk a little to gain a lot."

Planning New and Expanded Border Crossings

When the Anzalduas International Bridge near McAllen, Texas, opened a little over a year ago, it became the first new U.S.-Mexico border crossing in more than 10 years. The 3.4-mile bridge, which passes over a wall built in 2008, in part, to keep undocumented workers from entering the country, creates a striking visual juxtaposition between two different attitudes toward Mexico. Proponents of border crossings say it's not inconsistent to encourage Mexican tourists to visit the U.S. while opposing undocumented Mexicans living here, since there's a distinction between legal and illegal visitors.

Now, a bevy of communities across the Southwest are planning new and expanded border crossings. A new bridge in El Paso County, Texas, could open in 2015. The project is demolishing an existing crossing and incorporating it into the new structure -- the Guadalupe Tornillo International Bridge. In Nogales, Ariz., the Mariposa Land Port of Entry -- the main port of entry for produce entering the U.S. from Mexico -- is undergoing a massive $184 million reconfiguration that's scheduled for completion in 2014. And leaders in the San Diego area are planning a new freeway and port, the Otay Mesa East project, for 2015 that could cost as much as $700 million.

In most cases, the funding for the crossings -- which typically include widened roads, expanded infrastructure and new inspection facilities -- comes from a combination of local, state and federal money. But in all cases, local leaders play an integral role in lobbying federal officials for the projects by trying to persuade the State Department to grant the necessary permits and convince U.S. Customs and Border Protection to staff the sites.

(See a map of all the U.S.-Mexico border crossings. Article continues below.)

These communities believe the investment and energy will be worth it: New crossings bring new money. In some cases, that means tolls. The bridge in Pharr, for example, which connects to the manufacturing center of Reynosa, Mexico, is expected to generate $9.5 million in tolls this year. That's almost as much as Pharr's property tax revenue and even more than its sales tax revenue. Only half those funds are needed to operate the crossing; the rest goes to city coffers.

Retail spending is another revenue driver. Shopping is the primary reason Mexican nationals visit the U.S., largely due to the lower prices, higher quality and a greater variety of stores. Mexican shoppers spent nearly $8 billion in Arizona, California and Texas border counties in 2004, one of the busiest years ever for crossings, according to a study from the University of Texas-Pan American. In shopping center parking lots in U.S. border communities, it’s typical to see just as many Mexican license plates as American ones.

The real revenue hope, though, is that a new crossing will spur industrial development. American companies use low-cost laborers in Mexican factories called "maquilas" to manufacture textiles, electronics and vehicle components. Companies with maquilas often have nearby corporate offices on the U.S. side, and warehousing and trucking industries serve the flow of goods coming north. Laredo, Texas -- the closest U.S. crossing to Mexico’s industrial center of Monterrey -- is home to more than 1,000 logistics companies.

For these firms, congestion at border crossings is a major issue. Heightened post-9/11 security measures have dramatically increased wait times, and as more manufacturers have shifted to a just-in-time delivery model, backup on the highway can be a big problem. "That's why I think you're seeing so many bridges open up and border crossings open up," says Keith Patridge, president and CEO of the McAllen Economic Development Corp., whose organization is under contract with the city to encourage businesses to locate to McAllen and Reynosa. "It's really being driven not necessarily by volumes of traffic but the speed at which the traffic needs to move.”

Border cities are more than happy to help alleviate that congestion by building new crossings that bring truck traffic their way and may in turn encourage new companies to locate nearby. Among the most ambitious new border crossings in the works is San Diego's Otay Mesa East project. Traffic at the area's three existing bridges has skyrocketed since the North American Free Trade Agreement took effect in 1994, says Marney Cox, chief economist with the San Diego Association of Governments (SANDAG), a regional group of 18 cities and counties. Today, Cox says, traffic can take up to four hours to move through the crossings. (Actual border-crossing times are much higher than those officially reported by U.S. Customs and Border Protection, because federal stats don't include congestion on the roads leading up to the crossing.)

That means very few trucks can make multiple crossings in a day, slowing down and increasing the cost of shipping goods from Mexico. A 2006 study commissioned by SANDAG found that long wait times caused travelers to skip as many as 8.4 million trips annually, resulting in a loss of $1.28 billion to the San Diego area and preventing the creation of about 31,000 jobs. The federal government has been reluctant to put money toward the project, Cox says, but SANDAG has projected that demand for a faster crossing is so high that it can finance nearly the entire project with tolls. "Of all the things discussed in the region here," Cox says, "I can't think of another that has as big an impact as facilitating traffic across the border."

Other cities have similar hopes for easier border crossings -- even in the state with the nation's toughest immigration laws. In December, San Luis, Ariz., celebrated the opening of its second border crossing, designed to ease congestion at an existing crossing downtown. “We have over 1,000 acres of developmental land around the new port of entry," says Julie Engel, president and CEO of the Greater Yuma Economic Development Corp. "We're hoping it will kick-start and generate a major economic impact, not only for the city but the whole region."

It's easy to imagine an almost endless loop of returns: More crossings mean more businesses, which mean added congestion, which calls for more crossings. "Is there a point where you say, 'We don't need any more bridges?'" says Patridge. "I guess there probably is, but I don’t know what that is."

Shifting Economics and International Bridges

Even as many border towns are racing to build new crossings, however, the economics are already starting to shift. For one thing, personal travel across the border has fallen sharply over the past few years, in large part due to concerns over drug-related violence in northern Mexico. Noncommercial crossings, such as tourists and shoppers, are down by almost 30 percent since their peak in 2005. That's a problem that's here to stay, says Xochitl Mora Garcia, a spokeswoman for Laredo, which has shelved plans to build what would have been its fifth border crossing. “It’s not temporary,” Garcia says of the decline. "It's not a fluke. [The violence in Mexico] doesn't seem to be subsiding anytime soon."

Fears of violence could begin to affect commercial transport as well, although that traffic is relatively stable for now. Just last month, the manager of a Black & Decker maquila in Reynosa -- who lived on the American side of the border -- was found strangled, his body left in a vacant Reynosa lot. Although the circumstances of his death are unclear, local officials worry those types of incidents could deter companies from locating there in the future. "What we have to do," says McAllen City Manager Mike Perez, "is work with the Mexican government to ensure that the people setting up manufacturing operations in Mexico feel comfortable and safe for the managers to cross back and forth."

Violence aside, some critics of the renewed zeal for building bridges question just how beneficial they actually are to the local community. One of the persistent ironies of border towns is their sky-high poverty rates. While the increased number of crossings has helped the northern Mexico economy, poverty remains a "hallmark" of U.S. border communities, according to a paper published by the Federal Reserve Bank of Dallas. Border cities such as San Luis, Pharr and Brownsville, Texas -- which all have international crossings -- also have poverty rates in excess of 32 percent, more than double the national rate. And the McAllen and Brownsville regions have among the lowest median household incomes in the country.

Ports of entry used to be reliable cash cows for any city or county fortunate enough to have one, but that's not always the case anymore, says Nelson Balido, president of the Border Trade Alliance, a nonprofit group of government and private-sector representatives advocating for improved trade relations. A new crossing still almost always yields some benefit to the local economy, even if it's just a small boost. But cities can no longer count on bridges being the moneymakers they once were, says Balido. "A lot of municipalities automatically think a bridge equals big bucks. That's not necessarily true."

Those concerns haven't dimmed hope for the new bridge in Donna, however. While the newly opened crossing is currently surrounded by little more than fields of cotton, sorghum and corn, officials envision a future building boom. Silva, the bridge consultant in Donna, is confident that the project will be a hit. "We've heard, 'Why are you going to build the bridge? There's an economic downturn,'" he says. "I don't think they fully understand that people still have to live. People still have to buy products. You’re still going to need bridges."

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