TAX REVENUE Officials Track Sales

ANSWERS TO BLACK FRIDAY’S REVENUE STILL PENDING

By Brenda Blagg

Posted: November 29, 2009 at 3:47 a.m.

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Retailers weren’t the only ones watching those Black Friday sales in Northwest Arkansas.

Public officials were, too, hoping that sales tax revenue would also be spurred by the annual after-Thanksgiving shopping spree. That sentiment must have been universally felt in both state and local governments, all of which rely heavily on the pennies of sales tax that are tacked onto every dollar’s worth of sales.

Local streets were certainly clogged with traffic and the most determined bargain hunters were out in force on Friday, but were they buying? And will they keep buying during this holiday season?

The answers to those questions won’t be known for a while, but there are plenty of signals that shoppers this year are still cautious and may not answer the holiday wishes of the retailers - or the tax collectors.

One more point: While these end-of-the-year numbers are significant to local governments, they aren’t quite as critical to them as to retailers, some of whom make or break during the season.

In terms of the effect on sales tax collections, it will actually be months before local cities know whether the holidays will help refill their coffers, all of which have experienced declines in sales tax revenue.

But that’s the way this tax works.

In fact, when the idea of local sales taxes took hold a few decades back, the big sales pitch was about how this particular tax would rise and fall with the economy.

It was a time when the local population was growing but existing revenue streams weren’t.

So, the expectation was that local governments in Northwest Arkansas could levy a sales tax that would raise revenue to match the growing population.

Cities and counties have had that experience in the good times; and, as recent reports illustrate, they’ve seen declines when the economy struggled.

Last week’s reports of September sales tax collections in the major cities of Northwest Arkansas showed drops in revenue for each over the same month a year ago.

The worst of the numbers came from Rogers, where collections fell 15.78 percent, and in Bentonville, which saw a drop of 15.31 percent.

In Fayetteville, the decline was 3.92 percent and, in Springdale, 3.19 percent.

That’s just a one-month mirror of their experience, but the trend has been one of declining numbers for months.

The numbers on these reports received in November reflect business activity from two months earlier.

It takes that long for businesses to report tothe state and the state to report back to the local governments, which means it will be early next year before they know what this big shopping weekend will provide in sales tax receipts.

In the meantime, all of the local governments are watching their budgets and making adjustments to meet the reality of their collections.

Recent reports from the city halls confirmed as much:

In Rogers, where the city has seen drops in sales tax revenue for five consecutive months, Jerry Hudlow, the city treasurer, reported that city probably won’t make its budget for sales tax collections.

Thankfully, that’s not the city’s only source of funding and the overall projections for revenue, he said, are “somewhere between plus or minus 2 percent” of projected annual revenue.

In Bentonville, Denise Land, the finance director, similarly reported to the City Council there that sales tax revenue will likely fall short of budgeted amounts. But, she, too, expects to make up at least some of the difference from other revenue sources.

In Fayetteville, the downward trend in sales tax collections is continuing, according to Paul Becker, that city’s finance director.

He is optimistic that the economy is getting better and hopeful that the revenue reports that will result from current holiday sales will reflect that change. If December revenue drops, he warned, “that will be a down year on top of a down year.” Last December’s sales were down 2.6 percent from 2007.

Falling sales tax collections are old hat in Springdale, which has seen a drop in collections every month except two since November 2006.

That probably explains why Springdale hasn’t projected it will get more than it is in sales tax revenue.

As Wyman Morgan, city director for finance and administration, said, “We’ve already made our big cuts and prepared for falling revenues.”

We’ll leave it to Springdale Mayor Doug Sprouse to speak for his city and for the others as they all wind down this budget year and move toward the next.

“Hopefully, we’ve seen the worst.” BRENDA BLAGG IS A COLUMNIST FOR NORTHWEST ARKANSAS NEWSPAPERS LLC.

Opinion, Pages 11 on 11/29/2009

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