SANTA FE, NM (By Nicholas Riccardi, Los Angeles Times) July 24, 2010 — Every time a customer buys some of the large fabric tote bags from the Dollar Store at 43rd Avenue and Thomas Road, Najmuddin Katchi sees another piece of his business vanish.

The purchase of the briefcase-sized shoulder bags means that another one of Katchi's customers, mostly Latino immigrants, is packing to leave the state before what is touted as the nation's toughest law against illegal immigrants takes effect July 29.

Katchi's store isn't the only business suffering. The vast shopping center that holds his small shop is almost empty. The Food City supermarket closed this spring. Then the furniture shop. Then the pizzeria.

The giant apartment complex across the street, once brimming with tenants, is two-thirds vacant. Katchi is behind on his rent.

"The business is broken," said Katchi, who has operated his shop at this intersection for 14 years. "After the 29th of July, what happens? Maybe I have to close the store."

For the last 20 years, Arizona has been one of the fastest-growing states in the nation. It depends on an expanding population to power its economy, which relies heavily on the construction of new houses.

At the corner of 43rd and Thomas, it's hard to determine how much of the neighborhood's woes stem from Arizona's immigration laws and how much from the state's economy, battered by a once red-hot housing marked that cooled.

Katchi's revenue was already sagging before April 23, when Gov. Jan Brewer signed SB 1070 into law. Since then, sales have plummeted.

In adopting the legislation the state embarked on a grand experiment — trying to drive out hundreds of thousands of its residents by what the law calls "attrition through enforcement."

The law requires police to check the immigration status of people they lawfully stop and also suspect are in the country illegally. Civil rights groups and the Obama administration have sued to stop the law from taking effect, and a federal judge heard arguments in the case Thursday.

The departure of illegal immigrants, proponents of SB 1070 argue, can only help Arizona's economy.

"As long as there are legal Arizona residents scrambling for jobs, a slow, steady attrition of low-wage, government-educated illegal aliens is a beneficial facet of the law," said Bob Dane, a spokesman for the Federation for American Immigration Reform, or FAIR, in Washington, which argues for stricter immigration standards and estimates that illegal immigrants cost Arizona taxpayers $2.5 billion annually.

But it's hard to get solid data on illegal immigrants and the economy.

A 2007 report from the Congressional Budget Office that reviewed 29 studies — but not ones from advocacy groups like FAIR — found that illegal immigrants place a "modest" burden on state budgets.

Even people whose families use more government services than they pay in taxes still help the economy, said Judith Gans of the University of Arizona's Udall Center for Studies in Public Policy. In a 2008 study, she found that Arizona immigrants contributed $29 billion annually to the state economy, representing about 8% of its activity.

When immigrants leave, Gans said, "stores experience dramatic drops in sales. Apartment owners who rent to immigrants have high vacancy rates and risk losing their buildings. Legal workers or renters or consumers don't generally step in quickly enough to prevent these businesses from experiencing real additional hardship."

At 43rd and Thomas, such short-term economic perils are no abstraction.

"If people don't come here, I don't make money and I don't pay taxes," Katchi said.

The junction of two six-lane thoroughfares, 43rd and Thomas lies in the heart of immigrant Phoenix, a blue-collar mass of ranch homes and strip malls known as Maryvale.

No one has measured the effect of SB 1070 on businesses, or the number of immigrants it has prompted to leave Arizona. But merchants say the repercussions are clear — not just in how it's prompted many families to leave the state, but scared others enough to curtail their regular activities.

"The economy's already bad, but on top of it [SB 1070] is like a bullet in the head to us," said Osameh Odeh, 35, whose Eden Wear clothing store was empty one recent afternoon. "People don't come out of their houses anymore."

Odeh has laid off workers and doesn't pay his utility bills until the day they come due. He's not sure he can stay open and notes that the effect spreads well beyond the rough-and-tumble streets of Maryvale. A resident of the middle-class suburb of Gilbert, Odeh has cut back his purchases at home.

"If my son wants a toy, I can't afford it," he said.

Edgar Vela lives in another comfortable suburb, but his ability to spend money at home hinges on the success of his Salvadoran restaurant at 43rd and Thomas, La Pupusa Loca. He just closed his neighboring bakery last week and has laid off six employees. His daughters, both doctors, now come in on weekends to work the floor.

"People used to feel secure here; they'd come in, spend two, three hours," said Vela, sitting in his mostly empty restaurant, lined with mirrors and a full bar. "Now they eat and run."

He recalled one recent evening when two families were eating dinner. Their cellphones rang. Friends were alerting them that Maricopa County Sheriff Joe Arpaio — strongly disliked in the area for his targeting of illegal immigrants — had sent deputies to raid a nearby car wash. The families quickly asked for their checks, paid and ran from the restaurant.

Last month, a bank foreclosed on a rental house Vela owns nearby; it's one of three vacant homes on a short block. The families there told Vela that the breadwinners had been arrested by Arpaio's deputies, and they could no longer pay the rent.

Some of those leaving are U.S. citizens or legal residents who believe that all Latinos in the state are already being targeted by police. Vela, for example, said he had been stopped by police while driving to his restaurant "more times than I can count."

Faviola Davenport, 42, owns 3Girlz Retail across the street from Vela's restaurant. Davenport, who emigrated legally from Mexico 23 years ago, expects she will close the shop next month. In the small space, crammed with phone cards, mattresses and purses, Davenport said that if the law takes effect she will probably abandon Arizona as well. Her three adult daughters and their families — all U.S. citizens — are thinking of following her.

SB 1070's supporters say legal residents like Davenport have nothing to fear from the law, which bans racial profiling.

But earlier this year, Davenport said, she was stopped by a police officer on her way to work. She said the officer did not believe she was in the country legally and warned that he could refer her to immigration authorities for deportation.

"They don't want Mexicans," she said. "So we'll leave."