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Northwest Arkansas’ fiscal growth lifted by sales tax profit

April 14, 2019

FAYETTEVILLE, Ark. (AP) — City and county officials in Northwest Arkansas say they’re confident the area’s economy will continue growing steadily for the foreseeable future, based on increasing sales tax revenue.

“We look pretty good here,” Fayetteville Mayor Lioneld Jordan said of his city’s sales tax revenue. “From 2017 to 2018 we ended up growing by about 5%. That’s really, really good.”

All four of the largest cities and Benton and Washington counties showed increases in sales tax revenue. Each of the cities collect a 2% sales tax, with half going to the general fund. One-cent taxes collected by the counties go to the general fund. Additional taxes pay off bonds or other costs. Fayetteville is asking voters to continue a 1-cent sales tax to pay for about $226 million in improvement projects, the Northwest Arkansas Democrat-Gazette reported.

According to city reports, Fayetteville received $21.3 million from its 1-cent sales tax in 2017 and $22.3 million in 2018. Paul Becker, the city’s finance director, said he’s budgeting for a 2% increase this year. Becker said he’s comfortable the city will meet that projection.

Springdale is also expecting continued growth. Wyman Morgan, the city’s finance director, said sales tax amounted to $14.5 million in 2017 and just more than $15 million in 2018. That came in at a 3.9% increase, Morgan said, and the city is budgeting for another 4% increase this year.

“We feel like Springdale’s got pretty healthy growth right now,” Morgan said.

Casey Wilhelm, director of administration and finance for Rogers, said the city always budgets conservatively and has received more in sales tax revenue than budgeted every year since at least 2013. Wilhelm said the city received $18.4 million in 2017, and that grew to $19.2 million in 2018.

“From what I see coming through our planning office and the things I see in the other cities — Bentonville had a big building announcement just the other day — I don’t see any signs of slowing. The whole region has been strong and stable,” Wilhelm said.

Bentonville’s sales tax revenue has fluctuated some in the past two years, but growth remains strong, according to Jake Harper, the city’s director of finance and administration. The city received just less than $12 million in 2017 and $16.5 million in 2018.

According to a month-by-month breakdown, the city had a 326% increase in January 2018 and 54% increase in February 2018 compared with the same months in 2017. That jump prompted the city to set aside $2.5 million to cover any rebates that might be requested. State law allows businesses to ask for rebates of sales taxes paid under certain circumstances, generally involving new construction or expansion and job creation. The state doesn’t identify the businesses involved in rebate requests, Harper said.

Harper said the state gives businesses 12 months to request rebates, so the city has now restored the money set aside to the general fund.

“We had some rebates, but nothing significant enough to make us think it was for that full amount,” Harper said.

Benton County officials saw a similar bump in sales tax revenue in 2018 and took the same sort of precaution, setting aside $1.2 million, which has now been restored to the county’s general fund, according to Brenda Guenther, comptroller. Guenther said the county received $8.8 million in sales tax revenue in 2017 and $10.1 million in 2018.

Washington County Treasurer Bobby Hill said Washington County received $7.3 million in sales tax revenue in 2017 and $7.7 million in 2018. He said his office is projecting a growth rate of about 4.5% for 2019.

“We haven’t had a negative month since April 2017,” Hill said. “I don’t see any signs of it slowing down yet.”

Mervin Jabaraj, director of the Center for Business and Economic Research at the University of Arkansas, said the country is nearing the longest period of continued economic growth since World War II. The nation’s economy has grown in 119 consecutive months, he said.

“Next month will be tied for the longest economic expansion,” he said.

Jebaraj said the state and regional economies have grown, with Northwest Arkansas’ growth being “really strong” while Arkansas “has done OK.” He said fluctuations in agriculture have a greater effect on the state economy than on Northwest Arkansas. According to the Arkansas Department of Finance and Administration, sales and use tax revenue for this fiscal year has grown over the previous by $45.8 million. The state’s fiscal year begins July 1.

Jebaraj said the period of economic growth could continue but there are things to be concerned about. He said trade disputes with China and other countries that have prompted tariffs on imported goods remain unresolved. He also said President Donald Trump’s talk of closing the southern border has raised other concerns.

“A lot of people are talking about these things, and they could affect the economy,” he said. “We could easily talk ourselves into a recession.”

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Information from: Northwest Arkansas Democrat-Gazette, http://www.nwaonline.com