Northwest Arkansas Democrat-Gazette
Region sees revenue rise from sales tax
Collections up from May 2016 in four major cities, two counties
New businesses, well-attended events, a rising population and Amazon reporting sales tax for the first time has contributed to a growing revenue source in Northwest Arkansas.
Sales tax collection in the four major cities and two counties rose across the board from May last year. That means more money to put toward salaries, projects or reserve.
City leaders will attribute the prosperity to a variety of reasons, but one common thread linked everyone, said Don Zimmerman, executive director of the Arkansas Municipal League. Online retailer Amazon started collecting sales tax on items not from a third-party seller, equating to about half its transactions, he said.
“Amazon voluntarily agreed to start collecting it on their sales as of March 1,” Zimmerman said. “Then the cities started receiving those increases in May, as did the counties.”
Cities in Northwest Arkansas collect a 2 percent sales tax with half going toward repaying bonds. The other 1 percent goes into each city’s general fund. County collection gets divvied up based on Census estimates.
July figures represent May sales.
UP NORTH
Bentonville’s 26 percent increase in sales tax collection from May last year to May this year doesn’t necessarily represent actual growth
that large. Businesses such as Wal-Mart get their sales tax rebates in batches, resulting in figures that jump up and down.
However, it’s clear Bentonville is on the up, Mayor Bob McCaslin said. The years of 2012, 2013 and 2014 each had one $1 million month of sales tax collection. Three months hit $1 million in 2015, as was the case in the following year, with $900,000 months on the rise. It seemed like Bentonville crossed into a new normal, McCaslin said.
This year has already had three $1 million months. The lowest was April at $841,751. The growth in sales tax collection is on track to far exceed what the city anticipated for the year, said Denise Land, Bentonville finance director.
“We are ahead of last year by about 10 percent,” she said. “We budgeted $10.1 million. We’re halfway through the year, and we’re at $6.1 million. So, we’re doing better than we planned.”
The third annual Bentonville Film Festival held in May no doubt contributed to a $363,103 jump from the prior month, Land said.
The “destination” moniker for the city has become much more real, McCaslin said. The hospitality industry in Bentonville has shown the greatest increase over recent years, he said.
“More and more people are hearing about us,” McCaslin said. “Supporting that, their visits, to a great degree, are in this number because they’re part of the overall tax collection. Whenever they’re here, they’re spending money.”
Sales tax collection in Rogers has remained steady for years, said Casey Wilhelm, city finance director. May figures rose about 2 percent from 2016. Rogers had the second-highest gross amount of sales tax revenue in May with $1.5 million.
Being in the middle of everything geographically and having strong retail hubs such as Pinnacle Hills Promenade and Cabela’s helps keeps the numbers consistent, Wilhelm said.
“We do benefit from any time there’s a big event at the U of A, or if something in Bentonville’s going on,” she said. “Anytime we have those events I think we still feel those benefits in our area because of the amount of shopping and dining.”
Mayor Greg Hines said being able to rely on steady sales tax growth, more building permits and business licenses and increases in property tax revenue means more money can go into reserves. The city has made some big moves using reserves over the years, including buying a $1 million piece of property for a park, building a new fire station and turning the Hailey Ford building, which once housed the Rogers Morning News, into an expansion of the Rogers Historical Museum.
“It’s prudent for us to have some resources set aside for the things we don’t know might happen,” Hines said. “I think that’s the difference between the way we function and the way that some other cities in America function that are literally sitting on the hills of potential bankruptcy.”
An economy on the rise contributed to a 12 percent increase in collections for Benton County, but May saw a significant jump from the month before, said Brenda Guenther, comptroller.
The actual collection the county received, which is about 19 percent of the total, was $810,939. April collection was $672,980. A big difference maker likely was Amazon, Guenther said.
“We’re starting to see those numbers come in where otherwise they weren’t in the past,” she said. “Any kind of collection that wasn’t available in the past, that’s absolutely correct.”
DOWN SOUTH
Washington County’s sales
tax collection went from $582,114 in April to $645,929 in May. Amazon likely amounted to a good chunk of that nearly $52,000 difference, but taxing all online sales would turn in millions in revenue, said Justice of the Peace Eva Madison. Two bills addressing that issue died when the state Legislature adjourned May 1.
“The Internet sales tax issue is really big for counties because we’re seeing a loss in revenue, especially in Washington County,” she said. “With the state doing things like having a surplus and cutting taxes, it passes more burdens onto the county. We’re footing the bill for a lot of state things.” Madison used as an example holding state inmates at the county jail and not being fully reimbursed for the costs.
Springdale reported a record achievement in sales tax collection with $1.4 million in May. Mayor Doug Sprouse attributed the growth not only to Amazon but to an overall boom in business such as Sam’s Club and 10 Box CostPlus setting up shop in the city with resident support.
Sam’s Club opened in May off Interstate 49 near Arvest Ballpark. The warehouse club operated in Springdale until moving to Fayetteville in 2007. City leaders have repeatedly pointed to the store closing as a loss of about $1 million in sales tax revenue annually.
Harps Foods opened the 10 Box grocery store in February.
“Our downtown is also growing, and new businesses are opening with much success. We all must work together to support our community,” he said. “As our residents continue to choose to shop local, and businesses continue to choose to invest in our community, which draws in shoppers from around NWA, we expect revenue to continue to increase.”
Springdale has boasted at least $1 million in sales tax revenue for 15 straight months and 26 of the past 27 months. If the trend continues, Springdale could soon meet Rogers in sheer monthly amount collected, said Wyman Morgan, Springdale’s finance director.
Fayetteville led the cities with the most sales tax collected in May with $1.8 million. The figured represented an $85,247 increase from May the previous year, or about 5 percent.
Chief Financial Officer Paul Becker budgeted for about 2 percent sales tax growth, which means the city should be able to pay for raises with current revenue without having to dip into reserves, he said.
Becker attributed the growth to a combination of a rising population with more people spending money in the city and an uptick in new businesses. However, it’s hard to say how much Amazon contributed because the state hasn’t released those numbers.
“From my perspective, all I know is I’m happy because we’re getting more money than I expected,” Becker said.
State law doesn’t allow municipalities to collect a tax the state doesn’t collect, so there’s no law requiring Amazon to do what it decided to do in March, Chief of Staff Don Marr said.
It’s a benefit not only to larger cities such as Fayetteville but across the region and state, he said.
“Even really small towns that normally don’t get anything have seen some small payments,” Marr said.