Northwest Arkansas sales tax revenue up 16.75% in August report 

Inflation continues to boost sales tax revenue in Northwest Arkansas’ four largest cities, which cumulatively reported a 16.75% gain from a year ago in their August data. The combined revenue reported in August totaled $9.216 million, a monthly record for the region in August.

Year-to-date through the August report, the four cities reported revenue totaling $77.664 million, up 30.6% from the same period a year ago.

Bentonville, Fayetteville, Springdale and Rogers each reported double-digit growth from the same month last year. The August revenue is generated from 1% of the local sales tax each city collected on goods and services in June. The U.S. Department of Commerce reported consumer prices rose 9.1% in June, the biggest increase in 40 years. The following month the CPI moderated to 8.5% gains from the prior year.

Mervin Jebaraj, director of the Center for Business & Economic Research at the University of Arkansas, said inflation is part of the revenue increase, but so is continued population growth and the pent-up demand from consumers who are spending down savings accumulated during the pandemic.

Fayetteville reported revenue of $2.529 million for the month, up 18.15%. The city has added more than $19.473 million to its coffers so far in 2022, up 10.7% year-over-year. Devin Howland, director of economic development in Fayetteville, recently said the city’s growth at six new people a day has the population projection reaching 151,000 by 2045. Fayetteville’s population is also bolstered by a University of Arkansas student population that saw a 5.4% increase in student enrollment last year.

Bentonville reported an August revenue of $2.184 million, up 17.6% from the same month last year. For the first eight months of reports, Bentonville has collected sales tax revenue of $15.87 million, up 13.68% year over year. Bentonville Mayor Stephanie Orman told Talk Business & Politics the city is on track to meet its budgeted revenue for the year.

“Our sales tax amount, which only makes up approximately 50% of our revenue, is currently exceeding the budgeted revenue through this point of the year,” Orman said. “We have been fortunate with long-term steady growth in Bentonville in key areas of population, jobs, and development. The question we are grappling with now is how long does this pace of growth last in these three key economic areas. Every city has its own distinct opportunities and challenges, and what works for one may not work for another.”

Orman also said economic growth presents challenges in city management.

“Our number one concern right now is the pace of inflation and the impact that it has on the capital infrastructure projects and services that we provide. The combination of workforce shortages, supply chain challenges and unprecedented inflation is driving up the cost to provide city services to a growing population,” Orman said.

Springdale saw a whopping 17.15% in its revenue reported in August at roughly $2.042 million. Mayor Doug Sprouse said the city is in good fiscal shape thanks in part to stronger-than-expected revenue and lower expenses due to more open positions. He said a struggle for the city is to keep wages high enough to offset record inflation.

“We are putting together next year’s budget now, and we have a conservative outlook given the projected slowdown in 2023 from most economists. We will probably budget sales tax revenue gains between 6% and 8%, which we should be able to meet even with a slowdown,” Spouse said.

Through the August report, Springdale’s sales tax revenue totaled almost $14.849 million, up 19.34% from a year ago. The city budgeted for less than half that gain.

Rogers also is on track for another record year of sales tax revenue, posting a gain of 14.29% in the August report with revenue of nearly $2.461 million. Through the first eight months of this year, Rogers’ sales tax revenue totals $15.870 million, up 13.68% from a year ago.

Mayor Greg Hines said the city has strong reserves remaining from the pandemic years when the city buckled down on expenditures. Hines said with respect to the budget for next year, city officials will try and ensure worker wages are in line with offsetting some of the cost of living increases. The city gave cost of living raises to all city workers earlier this year. He said budget expenditures will likely be pretty bare except for the wage increases.

“We hear a correction is coming, and it’s needed, but we don’t know when or how long it might last. We are in a position to weather a downturn at this time. We never spend all the revenue we budget for but we will spend the appropriate amount on our workforce and other needed improvements to keep up the population growth,” Hines said.

He said the city is not yet seeing any slowdown in large-scale development plans despite the higher interest rate environment. He said entertainment venues in the city are busy with consumers attending shows at the Walmart AMP and the new Railyard venue in downtown.

“I am not gonna say we are recession proof, but there is still tremendous pent-up demand from consumers coming off of the two-year pandemic to be out and about even if it’s more expensive to do so,” Hines said.

Jebaraj said he believes there will likely be an economic dip next year but said the region appears to be quite resilient to the inflationary pressures seen this summer.

“If there is a downturn, it is expected to be brief and somewhat shallow, but some of that will depend on how much fuel prices moderate in the coming months,” he said.