Inflation continues to drive up sales tax revenue in Northwest Arkansas’ four largest cities, which cumulatively reported a 16.75% gain from a year ago in their August data. Combined revenues reported in August totaled $9.216 million, a monthly record for the region in August.
For the year to date of the August report, the four cities reported revenue totaling $77.664 million, up 30.6% from the same period a year earlier.
Bentonville, Fayetteville, Springdale and Rogers each reported double-digit increases from the same month last year. August’s revenue is generated by the 1% local sales tax collected by each city on goods and services in June. The US Commerce Department reported that consumer prices rose 9.1% in June, the largest increase in 40 years. The following month, the CPI moderated to 8.5% gains from the previous year.
Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, said inflation is part of rising incomes, but so is continued population growth and pent-up demand from consumers who are spending savings accumulated over time. pandemic. .
Fayetteville reported revenue of $2.529 million for the month, an increase of 18.15%. The city has added more than $19.473 million to its coffers so far in 2022, a 10.7% year-over-year increase. Devin Howland, Fayetteville’s director of economic development, recently said the city’s growth of six new people a day has the population projected to reach 151,000 by 2045. Fayetteville’s population is also bolstered by a student population. of the University of Arkansas that saw a 5.4% increase in student enrollment last year.
Bentonville reported August revenue of $2.184 million, up 17.6% from the same month last year. For the first eight months of reporting, Bentonville collected sales tax revenue of $15.87 million, up 13.68% year over year. Bentonville Mayor Stephanie Orman told Talk Business & Politics that the city is on track to meet its budgeted revenue for the year.
“Our sales tax amount, which is only about 50% of our revenue, is currently exceeding budgeted revenue at this point in the year,” Orman said. “We have been fortunate to have sustained long-term growth in Bentonville in the key areas of population, jobs and development. The question we are now facing is how long this growth rate lasts in these three main 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 at the moment is the pace of inflation and the impact it has on the capital infrastructure projects and services we provide. The combination of labor shortages, supply chain challenges and unprecedented inflation is driving up the cost of providing city services to a growing population,” Orman said.
Springdale saw a 17.15% increase in reported revenue in August to about $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 have a conservative outlook given the slowdown predicted in 2023 by most economists. We’ll probably budget sales tax revenue gains between 6% and 8%, which we should be able to meet even with a slowdown,” said Spouse.
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 of that profit.
Rogers is also on track for another record year of sales tax revenue, posting a 14.29% gain in the August report on revenue of nearly $2.461 million. During the first eight months of this year, Rogers’ sales tax revenue reached $15.87 billion, up 13.68% from a year ago.
Mayor Greg Hines said the city has strong reserves left over from the pandemic years when the city cut back on spending. Hines said that with next year’s budget, city officials will try to ensure workers’ wages are in line with offsetting some cost-of-living increases. The city gave cost-of-living raises to all city workers earlier this year. He said that budget expenditures will be quite bare, except for salary increases.
“We hear that a correction is coming and it is necessary, but we do not know when and how long it may last. We are able to handle a downturn at this time. We never spend all of the revenue we budget for, but we will spend the right amount on our workforce and other improvements needed to keep up with 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 Walmart AMP and the new Railyard venue downtown.
“I wouldn’t say we’re recession proof, but there’s still tremendous pent-up demand from consumers coming off the two-year pandemic to get out and whether it’s more expensive to do so,” Hines said.
Jebaraj said he believes an economic downturn is likely next year, but said the region appears to be resilient enough to inflationary pressures seen this summer.
“If there is a decline, it is expected to be short and somewhat shallow, but part of that will depend on how much fuel prices soften in the coming months,” he said.