NWA sales tax revenue dips again in May

Rebates for various projects continue to hinder sales tax revenue growth across the region’s four largest cities. Bentonville, Fayetteville, Rogers and Springdale reported cumulative tax revenue of $5.94 million in May, down 4.03% from a year ago.

Each city collects local tax on the sale of goods and services. Half of that tax goes to retire debt and the other half flows into the respective city budgets. This report reflects the latter. The May revenue report is related to taxes collected in March.

City officials across the region have said they are pleased with the sales tax growth in the past two years. Bentonville’s revenue ran abnormally high throughout 2018 — up 37.9% for the year. City officials are not surprised to see the lower number to start 2019.

Bentonville has set aside $2.5 million to cover any rebates that might be requested in the near term. City officials declined to say what businesses get rebates, but they generally relate to large construction projects that support new jobs. There is also a 12-month lag time for businesses to request the rebates under state law.

The drop in the region’s sales tax for May is largely based on the 23.7% decline in Bentonville’s sales tax revenue this month. Large sales tax rebates offset the city’s sales tax to $993 million, the first time revenue has dipped below $1 million this year. City officials said they have come to expect the large month-to-month swings in sales tax revenue and they remain pleased with the retail growth the city continues to experience. For the first five months of 2019, Bentonville tax revenue totals $5.53 million, down 37.8%, but remains within the city’s annual budget.

Fayetteville also contributed to the decline with sales tax revenue decreasing 4.08% from the year-ago period. Fayetteville’s revenue was $1.87 million this month. It was the second highest May on record, despite the decline. Through the first five months of this year, Fayetteville’s sales tax revenue totaled $9.12 million, flat with a year ago. Mayor Lionel Jordan expects modest sales tax revenue growth between 4% and 5% for the full year so the city will need to make up some ground in the back half of 2019.

Springdale and Rogers saw positive gains in sales tax revenue this month. Rogers lead the growth with a 5.84% jump in revenue from a year ago. The city reported $1.74 million in sales tax revenue for May, compared to $1.65 million a year ago. The city recently saw the opening of Duluth Trading Co., the first location in the state, and the city continues to draw interest from other retailers looking for new locations.

Through the first five months of this year, Rogers sales tax revenue totaled $8.05 million, up 2.61% from the same five-month period last year. That includes $413,000 in rebates charged through April, according to city records. Rogers has budgeted for $18.4 million in sales tax revenue this year, which is $1.53 million each month. Through May, the city has received 44% of the budgeted amount for the year.

Springdale is the least developed retail center among the four cities, but it saw its May sales tax revenue increase by 3.08% in May to $1.33 million. It was the best May on record for the city. Like Rogers, Springdale has not seen its revenue fall short of last year in any month thus far. For the first five months of 2019, Springdale’s sale tax revenue totaled $6.23 million, up 5.3% from the same period last year.

City officials are pleased with the solid sales revenue growth thus far as retail expansion and development overall has slowed a bit. Mayor Doug Sprouse has said previously Springdale continues to play catch up with its neighbors on retail, noting the city still has a long way to run.

Overall, the U.S. economy is expected to slow a bit this year. Mervin Jebaraj, director for the Center for Business & Economic Research at the University of Arkansas, recently said the biggest threat to the local economy is any major hiccups nationally relating to tariffs. He said if housing prices continue to escalate across Benton and Washington counties, the region’s growth could also choke.

He characterizes consumers as healthy overall amid low unemployment and rising wages. He said consumers are spending, but they are choosing to spend in other ways as opposed to buying new cars or upgrading iPhones. Consumers, Jebaraj said, can be fickle.