Sales tax revenue drops in Northwest Arkansas with August reports

Consumers in June pulled back on spending in Northwest Arkansas resulting in weak sales tax revenue growth. Fayetteville, Springdale, Rogers and Bentonville reported cumulative sales tax revenue of $5.048 million in August, down 0.66% from a year ago. It was the weakest August report for the region since 2012.

The August revenue is from 2% local sales tax on goods and services sold in June. Each of the cities in this report use half of that revenue for debt retirement and the other half is funneled into the city’s annual budget. This report tracks the latter. Following are August report revenue amounts in the four cities.
• Bentonville $741,342, down 17.41%
• Fayetteville $1,728,589, up 5.13%
• Rogers $1,478,034, up 1.49%
• Springdale $1,090,433, up 1.52%

While individual cities had mixed results in August revenue, officials within each city indicated that collections are well within their annual budget. For the first nine months of 2016 cumulative sales tax totals $40.702 million, up 4.5% over the $38.927 million reported in the same period of 2015. Three of the four cities in the report show double-digit gains in sales tax revenue through August. Bentonville is the only city to report negative growth rates year-to-date. While Bentonville has collected 2.29% less sales tax revenue through August, the city is more than $576,000 ahead of budget, according to city finance director Denise Land.

Fayetteville Mayor Lioneld Jordan is pleased with the 20% sales tax growth the city has seen thus far in 2016. He said retail expansion and continued area population growth have helped fuel the rise. Springdale reports 16% sales tax growth for the year and Rogers’s sale tax revenue is up more than 21% over the same period in 2015.

CONSUMER SPENDING IMPACT
Sales tax revenue is a lagging indicator and a look at how consumers are spending at retail, restaurants, entertainment, and other venues. Nationally retail sales rose 2.7% in June, from the year-ago period. The bulk of that spending was on bigger-ticket items, travel and building materials, which saw the largest increase in spending since April 2010.

Some economists believe consumers are spending selectively, for instance not eating out as much and taking advantage of price depreciation in beef, chicken and other foods in recent months. Fast casual chains from Wendy’s to Sonic reported lackluster sales through the recent quarter.

Lindsey Piegza, chief economist for Stifel Nicolaus, said U.S. consumers did some heavy lifting throughout the second quarter. Consumers took advantage of lower gasoline prices making road trips and taking family vacations in June. Piegza said personal income rose just 0.2% in June, adding to the total second quarter 2.7% bump in disposable income growth. She said this well below the near 4% income growth rate logged at the first of the year.

That said, she believes the U.S. consumer appears to be on solid footing, at least for now. The continued deceleration of income growth, however, coupled with an ongoing lack of business investment suggests the consumer may face additional hardship in the second half of the year, potentially restraining spending activity below these more recent rates of consumption. Her more pessimistic outlook for the consumer is based on the lack of business investment and development needed to spur robust job and income growth for the nation at large.

“The U.S. consumer will be hard-pressed to maintain a near 4% spending pace heading into the second half of the year,” Piegza said.

Local business investment appears to be solid with major expansions planned in the region’s healthcare industry with Arkansas Children’s Northwest and Mercy Health’s recent building projects that will add jobs and services to the growing region. J.B. Hunt Transport and Tyson Foods continue expanding their corporate footprints in the region as does the education sector with NorthWest Arkansas Community College’s Brightwater Culinary School and the major expansions also underway at the University of Arkansas.

Wal-Mart, often viewed as a barometer for the average consumers, said during its recent earnings report that consumers have not shown major changes in spending habits over the past few quarters that they can detect. The retailer also said they are beginning to see an uptick in shopping trips, with a slightly bigger basket, but consumers are still very focused on value pricing.

SALES TAX REVENUE (January through August)
Bentonville
2016: $7.015 million
2015: $7.18 million
-2.29%

Fayetteville
2016: $13.593 million
2015: $11.326 million
20%

Rogers
2016: $11.471 million
2015: $9.407 million
21.94%

Springdale
2016: $8.622 million
2015: $7.222 million
16.23%