FAYETTEVILLE — Next year’s U.S. census will show population growth in the cities of Benton and Washington counties, which will reduce the share of sales tax dollars each county government receives.
Their slice of the revenue pie shrinks with every census, finance figures for both counties show. The upcoming 2020 slice is expected to be the thinnest yet, according to Washington County Treasurer Bobby Hill and Benton County Comptroller Brenda Guenther.
“I dread it every time,” agreed Tom Allen of Bentonville, Finance Committee chairman for Benton County’s Quorum Court.
“People expect the county to just keep functioning, and it will, but it should be a concern,” he said.
For example, Benton County is looking at plans to renovate the courthouse for about $15 million. The money will come from county revenue and reserves after voters rejected a one-eighth percentage point sales tax increase in a March 12 election.
Washington County’s Quorum Court on Thursday imposed a daily fee for cities to house detainees in the jail. The county will charge cities as much as $63.12 a day per prisoner. The court approved the action in a 10-4 vote after transferring more than $1 million a year from the general fund to cover jail expenses. The jail’s shortfall is expected to go up to $1.5 million in 2020.
How the counties will cope with their lessening share of tax revenue is a decision leaders will have to make in late 2021, after 2020 census figures are finalized.
The largest source of money for the counties’ operating budgets by far is the county-wide sales tax. Each of the two counties imposes a sales tax of 1%. Washington County has an additional 0.25% sales tax used solely for jail operation and maintenance.
Cities within each county get a share of the county’s sales tax revenue. How much of a share depends on each city’s population at the time of the census. Fayetteville, for example, was home to 36% of Washington County’s population in 2010, according to that year’s census. So Fayetteville receives 36% of the money raised through Washington County’s sales tax.
The shares based on each city’s population cut into the county’s portion.
“We are fortunate that the economy here is growing, but, at some point, our share is going to be so small that it is going to be difficult to maintain county offices,” Allen said. “It is going to come to a head someday.”
The population of the unincorporated part of the counties is increasing, but not as much as in the cities within the counties.
Benton County’s total population has grown by 31.2% over the past nine years, from 184,488 in 2010 to 242,092 this year, census estimates show. But most of that growth has been in Benton County’s cities.
The population in unincorporated Benton County has grown by just 4.3% over the past nine years, from 49,290 in 2010 to an estimated 51,390 this year. In other words, the percentage of the county’s residents living in unincorporated areas has fallen from 26.7% in 2010 to 21.2% this year, according to estimates.
Allen, who was a member of the Rogers City Council, said he understands it’s in a city’s interest to annex recently developed property. Such development helps the county’s overall property tax collection, but it takes that area’s population out of the county’s portion of sales taxes, he said.
Benton County received $10 million of the countywide sales tax in 2018, county figures show. Guenther estimates each percentage-point drop in the county’s share of the population in the 2020 census will reduce the county government’s revenue by $200,000 a year.
Hill estimates that each percentage-point drop in unincorporated Washington County’s share of the population could take even more of the $7.2 million the county got last year from the sales tax.
“If I had to give my best guess, I’d say [the county’s share] will probably fall again to about 16%,” Hill said about the 2020 census.
The method of splitting countywide, general sales tax revenue between cities and counties is prescribed in state law, said Jeff Hawkins, executive director of the Northwest Arkansas Regional Planning Commission.