Surge in sales tax revenues reflect strong economy

NWA Democrat-Gazette/J.T. WAMPLER Donna Cunningham of Elkins shops at 10 Box Cost Plus in Springdale on Feb. 2. Harps closed its Price Cutter grocery store in Springdale and replaced it with the company’s third 10 Box Cost Plus store. Sales tax collections were up in Washington and Benton counties in January and February.
NWA Democrat-Gazette/J.T. WAMPLER Donna Cunningham of Elkins shops at 10 Box Cost Plus in Springdale on Feb. 2. Harps closed its Price Cutter grocery store in Springdale and replaced it with the company’s third 10 Box Cost Plus store. Sales tax collections were up in Washington and Benton counties in January and February.

FAYETTEVILLE -- Washington and Benton counties received a windfall in sales tax revenue in January and February, proving Northwest Arkansas is continuing to grow, economic experts said.

"Our tax collections are showing that things are positive for the future," said Kalene Griffith, president of Visit Bentonville. The organization promotes the city as a tourism destination, among other things.

The sales tax revenues are outpacing predictions and providing more money for county services, buildings, roads and bridges, officials said. Those gains also are the latest sign of a booming economy, said chamber of commerce and county officials.

"We are fortunate to live in Northwest Arkansas that's got a good economic machine," Washington County Treasurer Bobby Hill said.

Washington County's sales tax revenue this year is the highest since 2007, Hill said. Revenue fell in Washington County during the Great Recession, starting in 2008, but has climbed back up, he said.

"I don't see any reason why this (upward trend) won't continue throughout 2017," Hill said.

Outpacing predictions

Money coming into the counties from sales taxes are outpacing predictions, Benton and Washington county officials said.

"We didn't budget that big of an increase at all," Benton County Comptroller Brenda Guenther said.

In Benton County, sales tax revenue in January was nearly 16 percent higher than the same time a year ago. February was up about 13 percent, according to county records.

The first two months of this year brought in about $1.5 million, or $188,653 more than last year, Guenther said.

Washington County brought in nearly 7 percent more in sales tax revenue this January than a year ago, county records show. February was up about 4 percent. That represents about $1.2 million brought in from the tax so far this year, compared to about $1.1 million a year ago, records show.

Benton County projected about $8.1 million in revenue from the tax this year, up by about $100,000 from 2016, Benton County records show. In Washington County, Hill has projected about $6.9 million in revenue from the county's tax.

Guenther and Hill cautioned sales tax revenues fluctuate month to month, and both counties have been growing more sales tax revenue over the past few years. Washington County had $72,000 more than projected last year, Hill said.

Washington County is up about 5 percent over the same period a year ago, Hill said. If the pace keeps up the rest of this year, Washington County will have $275,000 more than what was projected, he said.

Benton County is putting money aside for capital building projects, including a new court facility.

Washington County is struggling with a tight budget where expenses are outpacing expected new revenue.

Hill cautioned the revenue won't be enough to offset that gap. The county has a $66 million budget with projected revenue of about $61 million, county records show.

The 1 percent sales tax levied by the counties is split with cities. About 18 percent of the 1 percent goes to Washington County, Hill said. Benton County gets about 19 percent of its tax, according to county records.

The increase in the tax points toward more construction activity, business development, population growth, low unemployment and tourism, chamber of commerce officials in Bentonville, Fayetteville and Springdale said.

Most of Washington County's sales tax revenue is from people buying general purchases, eating at full-service restaurants and starting or finishing construction projects, Hill said. People cut back on eating at more expensive, full-service restaurants during the recession, but that trend has taken off again, chamber officials said.

In Benton County, tourism also is taking off, Griffith said.

The sales taxes may be going up partly from visitors coming to see attractions, including Crystal Bridges Museum of American Art, Guenther said. Griffith agreed that more people are visiting Bentonville and more businesses are opening.

Roughly 32 restaurants opened last year in Bentonville alone, Griffith said.

"I think our tax collections are proof positive that our cities are continuing to grow," Griffith said. "For us, we are continuing to evolve."

The bullish market

"At the end of the day, sales tax is not where the story starts -- the story starts with job growth," said Bill Rogers, vice president of communications and special projects at the Springdale Chamber of Commerce.

From 2014 to 2015, employment in Northwest Arkansas grew by 4.9 percent, according to a 2016 report by the Center for Business and Economic Research at the Walton College at the University of Arkansas. That's faster than similar regions, the state and the nation, according to the study.

The study also shows Northwest Arkansas's economic outlook is bright: population, income, education and business are all growing while unemployment and poverty are falling, the report shows. All those indicators come together to increase the money from the sales taxes, chamber of commerce officials say.

For example, the population and job growth has revived construction across Washington County. Sales taxes are poring in from building materials and supplies, Hill said.

The Washington County Planning Department reported the number of building permits has more than doubled, County Attorney Brian Lester said in email. More people are asking for water hookups from the Washington Water Authority, too, said Josh Moore, general manager.

Subdivision projects abandoned during the recession are coming back to life, Assessor Russell Hill has said.

People are employed and confident, so they are spending money, said Chung Tan, director of economic development at the Fayetteville Chamber of Commerce. People are willing to eat out more at full-service restaurants, businessmen are holding more business lunch meetings and people are more interested in buying houses or cars, she said.

"Both businesses and consumers feel good," she said.

The Fayetteville chamber has 14 projects in the works, Tan said. Many of those are for business expansions or new businesses. Usually, the chamber gets about 10 projects a year, she said.

Springdale has about 10 projects this year -- five of those are new or expanding businesses, Rogers said. There also are 16 projects underway from last year, he said.

"If you are trying to read the tea leaves of the environment that we live in, not just here but across the nation, I think you'd have to say it's a very optimistic environment," Rogers said. "I think that's hard evidence that this economy in Northwest Arkansas is very bullish."

NW Business on 03/19/2017

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