Fayetteville Gets To Business After Tax Dip

Mayor Says City Must Shed "Bad For Business" Image To Overcome Loss Of Sales Tax Revenue

Last updated Sunday, March 18, 2007 4:19 PM CDT in News

By Dug Begley
The Morning News

"You just don't throw the door open and any business will do," Jordan said.

Paul Becker, Fayetteville's finance director, told the council on Tuesday that December's sales tax revenue was $119,000 less than the December 2005 collections and $214,000 below budget estimates.

"This is the third month it showed a decline from the previous year," Becker told council members.

If the decline continues on the same path, Becker said it could mean $1.3 million less coming into the city's general fund this year. The city's share of the county sales tax and Fayetteville's 1 percent sales tax that goes to the general fund make up more than 60 percent of the general fund's revenue. Sales taxes should generate about $20.8 million for the general fund, according to Fayetteville's 2007 budget.

Becker said the dip in sales tax revenue could be temporary. He said for now the city will monitor the situation, but immediate changes are unlikely.

Steve Rust, president and CEO of the Fayetteville Economic Development Council, said the downturn could be over by the time the city made changes.

"Some of the sales taxes across the country are down," Rust said. "It could bounce back anytime."

Not every tax in Fayetteville is in tumult. The hotel, motel and restaurant tax that funds the city's Advertising and Promotion Commission saw modest gains in 2006. Hotel, motel and restaurant tax revenue rose during eight months in 2006, despite stiffer competition from new Benton County eateries.

"I'm thinking we're kind of level," said Marilyn Heifner, executive director of the Advertising and Promotion Commission.

She said collection of delinquent hotel, motel and restaurant taxes can skew numbers. February saw a more-than-18 percent decline compared to February 2006, she said, but only because February 2006 had a tremendous level of growth.

Fayetteville could recoup the lost sales tax dollars, Rust said. Business can rebound from slow periods, and sales could increase or new stores and restaurants could open.

"If you can draw from outside your community, that is something," Rust said.

In Fayetteville, that's one of the reasons cited for the loss. Benton County residents can stay north of the county line for shopping options.

"That's a contributing factor," Coody said.

Attracting business that adds to the sales tax base and does not merely redistribute it to other shops is the only way to increase sales tax revenue, Rust said. Encouraging industries that will bring in new workers also helps raise a city's bottom line, he added.

"The goal is so you're prepared when an opportunity comes," Rust said. "Thinking ahead and positioning yourself to succeed."

Coody said Fayetteville needs to address how it can make itself more appealing.

"We make it very difficult for investors to look at Fayetteville as a place to do business," Coody said.

Jordan said he believes the city is supportive of the types of businesses Fayetteville should be recruiting. He said the city rates highly as one of America's most livable cities and it can use that accolade to attract businesses that enhance Fayetteville.

"It needs to be something we want," Jordan said.

Rust said predictability in city regulations is a big factor for potential developers of commercial properties.

Developers recently rallied against a proposal to reduce building heights in downtown Fayetteville, citing the city's shifting laws as a deterrent to investment.

Coody acknowledged the proposed height reduction is one example of the image Fayetteville sets as anti-business. He said a "larger conversation" needs to take place, but hesitated to provide specifics of what the city could do to promote investment.

Jordan said the city also needs to address its spending until officials can determine whether the sales tax loss is permanent.

"We're going to have to monitor it to see if this is a trend or something that is occurring right now," Jordan said. "And have monthly reports to the council."

The drop in sales tax revenue is not reason to panic, Rust said, adding the recent sales tax booms in Bentonville and Rogers could one day benefit Fayetteville.

"The bottom line is the pie in Northwest Arkansas is getting bigger," Rust said. "And that can help everybody."

At A Glance

Growth fund

Fayetteville's general fund has grown by nearly $10 million over the past five years. The following is the budgeted general fund amount in millions:

2003 $24.41

2004 $25.88

2005 $30.49

2006 $32.24

2007 $34.30

Source: City of Fayetteville

Reader Comments (24 comment(s))

The following comments are provided by readers and are the sole responsibility of their authors. The Morning News does not review comments before their publication, nor do we guarantee their accuracy. By publishing a comment here you agree to abide by our comment policy. If you see a comment that violates our policy, please notify the web editor.