Chart from city staff shows rebates for 2025 already nearing total rebates for last year.
A big hit to sales tax revenue has led the City of Bentonville to enact a hiring freeze, cut non-essential travel, review department expenses, and potentially delay planned projects.
Patrick Johndrow, finance director, told the City Council during a briefing Monday night that the city remains in good shape overall and has adequate financial reserves.
“Bentonville is still strong financially, and the steps we’re taking are to make sure we stay that way,” he said.
Sales tax rebates of around $4.5 million were redeemed in April. That amount is unusually high and, when combined with other rebates redeemed in previous months, brings the total to more than $6 million so far this year.
“Our typical rebate that we plan for is $7-8 million dollars for the year. So we’re four months in, and we’re already at $6 million in rebates,” Johndrow said.
The amount of rebates redeemed in April is a record for the city — and possibly for the state.
“We just got hit with the largest rebate – we think – ever in the state,” Mayor Orman said.
To encourage economic development, certain capital and business expenses qualify for rebates under state law, allowing a portion of local sales taxes paid to be returned to the purchaser.
Two rebate-related issues are adding uncertainty to the city’s financial planning:
Instead of being discounted at the time of purchase, rebates can be redeemed at any point in the following 12 months.
The state government — not the city — collects the tax and then passes it back to the city, making it difficult to predict how much and when rebates might be redeemed in the future.
“The state even described it as kind of like getting a paycheck, and you don’t really know if you’re going to get your full check or you’re going to get 20%,” Johndrow said.
In response, city leaders are asking state officials for more transparency so they can better plan for the rest of the year.
Latest Projections
A range of financial scenarios were mapped out by city accounting staff. The most severe shows the city coming in about $18 million under budget, while the most optimistic shows $196,207 more than budgeted for the year.
The projection in the middle is the one city staff are working from — and it shows $8,506,645 less in revenue than what was budgeted for the year.
“So we’re kind of settling in and looking at the [$8,506,645] as possible, so we’re taking some steps now in June so we can make sure we’re on budget by the time we hit year end,” Johndrow said.
Other revenue streams are performing better than expected, but sales tax remains the city’s largest source of income.
Who’s Cashing in the Rebates?
City Councilmember Chris Sooter said that, considering the volume of purchases, there was likely one local project responsible for the unusually high rebates.
“I’m pretty firm in my belief that I know where it's coming from. If you look around at the developments going on, there’s only one project that would be big enough to have that kind of rebate. I’m also pretty firm in thinking we’re going to see more of it this year,” he said.
Johndrow said he was actively talking with “other entities” in Bentonville about what’s to come and noted that while rebates add uncertainty to forecasts, they also — in another way — reflect healthy activity in the city.
“$225 million was spent in one month in Bentonville, and we will reap the benefits from that. So we have some high-class problems,” Johndrow said.
“We just have to give a little bit of it back,” Councilmember Bill Burckart said.
