Improving job market fuels higher sales tax revenue

Businesses across the four largest cities in Northwest Arkansas collected 10.7% more sales tax in January, which is reflected in a nice revenue boost for three of the four cities in March.

The entire metro area also boasted its best January employment rate since January 2008 with an unemployment rate of 5.9%, down from 6.3% a year ago, the Bureau of Labor Statistics reported on Friday (March 22).

“It’s no surprise sales tax collections in January were up, given that more folks were employed. I know there had been some concern about higher payroll taxes and the possibility consumers would spend less in January. That wasn’t the case,” said Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas.

The cities of Fayetteville, Springdale, Rogers and Bentonville together reported March collections of $4.357 million, up from $3.936 million a year earlier. The collections are for good and services sold in January.

Each of these cities collect a 2% tax, which is split equally between the general operating fund and debt repayment. This reporting reflects the 1% of collections that are dedicated to city budgets.

Bentonville posted the highest gain in March collections, thought it’s the only city of the four to track overall lower collections year-to-date in 2013. The city reported tax revenue of $1.078 million during March, up 20.7% from the year-ago period, which was $353,000 more than budgeted, according to city officials.

Denise Land, finance director for the city, said collections are up and down through the year but she remains confident the budget will remain in good shape. City officials agree the local economy is showing modest signs of improvement but still keeping one watchful eye on the jobs numbers.

Deck said it’s wise for city officials to remain cautious with their budgets, but she is encouraged by the growth in jobs over the past four months.

“All of the employment sectors with the exception of the information sector, posted at least a 2% gain in jobs year-over-year. The largest sector (trade and transportation) was up more than 4%. One in five jobs in this market are in the trade and transport sector. It’s a big deal when this sector is moving in the right direction,” Deck said.

The broad-based job recovery is a positive sign and Deck says the local market is performing better than the nation as a whole with respect to its diversity in job creation. She said working consumers spend more money and the cities benefited nicely in March collections.

Springdale was the only city in the four reporting to report softer collections in March. The city had $784,253 in revenue collections, down 3.4% from March 2012. Springdale city officials remain optimistic their budget is solid with collections up 1.11% through the first three months of this year.

Rogers reported March sales tax collections of $1.07 million, up 15.5% from a year ago. The city’s total collections this year are $ 3.629 million, up 10.94% from the previous year period.

In Fayetteville, city officials reported March revenue of $1.424 million, up 9.2% from the prior year. Finance Director Paul Becker is happy to see the strong numbers.

“We didn’t forecast it but we will take it,” he said.

For the first three months of 2013, Fayetteville collections total $4.633 million, up 6.9% from the prior-year period.

The combined four cities in this report showed tax collections are up 2.11% through the first three months of this year, when compared to 2012.
 
Sale Tax Collections (year-to-date)
Bentonville
2013: $2.090 million
2012: $2.509 million
-16.6%

Fayetteville
2013: $4.633 million
2012: $4.333 million
6.9%

Rogers
2013: $3.629 million
2012: $3.271 million
10.94%

Springdale
2013: $2.540 million
2012: $2.512 million
1.11%