The annual cattle inventory report confirmed that the U.S. cattle herd shrunk 2% from a year ago, according to a U.S. Department of Agriculture annual report. What's more, the 87.7 million head of cattle and calves is the smallest U.S. herd since 1951, according to Derrell Peel, livestock marketing specialist with Oklahoma State University.

The beef cow inventory was 29 million head, down 0.9% from last year and the smallest beef cow herd since 1962. The numbers indicate that the industry is poised to begin rebuilding in 2014, weather permitting, Peel said.

Among the 10 largest beef cow states, the cow herd was up in five states and down in five. The largest decrease in cow numbers occurred in Texas, followed by South Dakota, Montana and Kentucky and Nebraska. Beef cow numbers increased in Arkansas, Kansas, Missouri, Oklahoma, and North Dakota, Peel notes. On net, he said there was a slight increase in beef cow numbers in the top ten beef cow states. 
 
The inventory of beef replacement heifers was up 1.7%, a bit smaller than pre-report expectations. But Peel notes that the number of beef replacement heifers as a percent of the beef cow herd, at 18.8% was the largest in more than 20 years, including the last cyclical expansion in the early 1990s. Beef replacement heifers increased in seven of the top 10 beef cow states, resulting in a 4.1% net gain.

Peel said only Montana, North Dakota and Kentucky had fewer replacement heifers compared to last year while Texas, Missouri, Oklahoma, Nebraska, South Dakota, Kansas and Arkansas had an increase from 2013. Oklahoma led the increase among states with 45,000 more beef replacement heifers, an increase of 16.1% year over year. Arkansas’ beef replacement heifers increased 6.2% year-over-year to 137,000 head, according to the USDA report.

The 2013 U.S. calf crop was 33.93 million head, down 1% from 2012. A smaller calf crop, combined with increased heifer retention and fewer feeder cattle imports, resulted in a 2.7% decrease in estimated feeder cattle supplies. As of Jan. 1, there were 24.8 million head of feeder cattle, down from 25.5 million head one year ago. Inventories of steers over 500 pounds were down 2.5%, calves under 500 pounds were down 3.7% and other (not for replacement) heifers were down 5%, Peel notes.

The fact that cattle on feed was also down 5% limited the decrease in estimated feeder supplies outside of feedlots to 2.7%. Estimated feeder supplies as a percent of the 2013 calf crop was 72.9%, down from 74.2% past year and below the ten year average of 74.4%. This indicates that a smaller than average percent of feeder cattle supplies were carried over from 2013 into 2014. 

The number of cattle grazing small grains pasture on Jan. 1 in Kansas, Oklahoma and Texas was 1.61 million head, up 20% from last year and the highest total for the region since 2010. The share of estimated feeder supplies in these three states on January 1 increased to 25.7% up from the 2013 low of 25.1 percent but still below the ten year average of 28.3 percent.
 
The Jan. 1 cattle inventories for all cattle as well as beef cows can be the lows from which the industry rebuilds over the next several years, Peel said. However, the industry is vulnerable to drought conditions that could re-intensify this spring and postpone herd expansion once again. Market signals for expansion are strong and growing and the industry is poised to respond. 

“We know what we want to do; we just don’t know what Mother Nature is going to let us do,” Peel said.

The percentage increase in year-to-date Arkansas gross tax collections fell to 2.1% in January compared to a 3.4% level in the December report. Also, sales and use tax collections continue to come in below the budget forecast, a potential sign of uncertainty among Arkansas consumers.

Year-to-date gross revenue (July 2013-Jan. 2013) totaled $3.482 billion, 2.1% above the same period last year and above forecast by 0.7%, according to the report issued Tuesday (Feb. 4) by the Arkansas Department of Finance and Administration.

Individual income taxes for the fiscal year totaled $1.68 billion, up 0.5% from last year and 1% above the budget forecast. Year-to-date sales and use tax collections were $1.279 billion, up 3.4% above last year and below forecast by 0.7%. Income taxes and the sales and use tax collections are the two primary sources of state revenue.

“Sales and Use tax represented the major drag on collections in January. Collection growth was only 0.2 percent compared to year ago and 4.0 percent below forecast. Weaker than expected retail sales to consumers accounted for this result,” John Shelnutt, head of the Department of Finance and Administration’s Economic (DFA) Analysis & Tax Research division, noted in his report.

Corporate income tax collections for the first seven reporting months of the fiscal year totaled $234.5 million, up 6.9% compared to last year and 5.5% above forecast.

In a Tuesday morning interview with Roby Brock for a Talk Business Internet broadcast, Gov. Mike Beebe said consumer spending could be weather related but he does watch for trends in the tax collection reports.

“You try to follow trends, and the trend currently is that we’re on forecast,” Beebe explained. “It tells me whether or not i have to cut the forecast. ... You don’t want to get behind the curve and wait too late to have to make adjustments in the forecast, because if you do that, then it compresses in a time period decisions that can be much harder to make, or much harder to live with.”

The revenue forecast for fiscal year 2015 is $6.333 billion, up just 2.1% above the 2014 estimate. The 2015 estimate includes an anticipated reduction of $85.2 million from tax cuts approved in the 2013 Legislative Session.

JANUARY NUMBERS
January gross revenue was $560.5 million, down 3.9% above last year and 0.7% below forecast.

Individual income tax collections during January totaled $320 million, down 6.3% compared to January 2012 and above forecast by 0.2%.

Sales and use tax collections during the month totaled $178.6 million, up just 0.2% from last year and 4% below the forecast.

Corporate income tax collections January totaled $30.9 million, up $3 million from January 2013 and 11.2% above forecast.

OTHER TAX COLLECTIONS
Alcoholic beverage
July 2013 - Jan. 2013: $30.2 million
July 2012 - Jan. 2012: $29.1 million

Games of skill
July 2013 - Jan. 2013: $21.7 million
July 2012 - Jan. 2012: $19.1 million

Tobacco
July 2013 - Jan. 2013: $130.8 million
July 2012 - Jan. 2012: $131.9 million

Insurance
July 2013 - Jan. 2013: $45.3 million
July 2012 - Jan. 2012: $42.8 million

COLLECTIONS HISTORY
Tax collections during fiscal year 2013 (July 2012-June 2013) totaled $6.214 billion, up 4.9% above the previous fiscal year and up 2.5% compared to budget estimates. A result of the gain was a budget surplus of $299.5 million.

Fiscal year 2013 marked the third consecutive year of year-over-year gains. Arkansas tax collections reversed a negative two-year slide in the 2011 fiscal year, with collections up 4.5% in the July 2010-June 2011 period.

State tax collections for fiscal year 2011 totaled $5.673 billion, up 4.5% above the $5.43 billion in the 2010 period.

The biggest declines in the 2009 and 2010 fiscal years were with individual income tax collections and sales and use tax collections.

Mike Duke stepped away from the day-to-day leadership of Wal-Mart Stores Inc. on Saturday, (Feb. 1) after five years and some of the most profitable times for the retailer in decades.

Though Duke did not grant any outside media interviews, the company’s internal communications department did release a question and answer format they conducted with Duke in mid-January. Wal-Mart World made that interview public this week.

Duke said in that interview he will continue as a consultant to Doug McMillon over the next year and he will retain his board seat indefinitely to help with the smooth transition, according to company protocol. When asked about the retailer’s biggest opportunity in the next five years, Duke spoke of urgency.

“We have to move even faster, with real speed and urgency, to exceed the expectations that our customers have in how they want to shop. Technology is driving so much change. It’s at the intersection of e-commerce and physical stores where Walmart can serve customers better than any other global retailer,” Duke said in the interview.

He was asked about any advice he might give Doug McMillon. Duke answered, “You may not have enough ink for my answer. But if I could boil it down to one thing, and this is the best advice I got when I became CEO, it is to be yourself. A different role doesn’t mean you should be a different person. You got the job because of who you are, and you will succeed because of who you are. Doug is a fantastic leader. And he has succeeded because he is real, authentic, and trusted. He just needs to be himself.”

Just four other people on the planet have had the opportunity to follow Sam’s Walton’s lead as CEO of the company he founded a half century ago. Duke was asked what he most admired about Sam Walton?

“I’ll mention two things. First, he led with integrity, which is the foundation for everything. If you have integrity, you can be trusted. Without it, you won’t be able to lead. Second, I admire how Sam was able to put the emphasis on customers and on associates serving customers. He was clearly so good at communicating in an informal, approachable, and meaningful way.,” Duke responded.

Duke was also asked to share his proudest accomplishment in his 19 years at the company.

“I’ve seen so many associates – men and women at all levels across our company – learn, grow, and take on bigger roles. If I made even a tiny contribution to encourage that development, to help someone truly excel in his or her job and better serve our customers then that makes me very proud,” Duke answered.

Lastly, Duke said he plans to be out and about in stores and clubs more, which is has been one his favorite aspects of the job.

“I have great memories of visiting associates in the stores, talking with customers in their homes, and representing the company in front of global leaders. It’s been hard work but a great honor and joy,” he said.

Gov. Mike Beebe said Tuesday (Feb. 4) there are a “multiplicity” of reasons Arkansas Legislators should vote to fund Arkansas’ private option plan, and he also took a shot at Republican gubernatorial candidates who “don’t understand the budget” with respect to the private option.

Beebe was interviewed Tuesday by Roby Brock as part of the “Talk Business” Internet broadcast series. Topics of the interview included Arkansas’ economy, prison and parole issues, and his plans for life after he leaves the governor’s office in January 2015.

PRIVATE OPTION POLITICS
In the 2013 Arkansas General Assembly, a bipartisan group of state lawmakers, led by Republicans Sen. Michael Lamoureux and Rep. Davy Carter, worked with Beebe to push through a plan that allows Arkansas health officials to steer Medicaid expansion funds from the Affordable Care Act – aka Obamacare – into private health insurance plans. Arkansas officials obtained permission in early 2013 from federal officials to use Medicaid expansion money promised in the federal health care law to subsidize insurance for low-income Arkansas workers. The money would help some previously uninsured citizens who earn up to 138% of the federal poverty level to obtain insurance. By some state estimates, that universe could include as many as 250,000 Arkansans.

Funding for the private option narrowly passed both chambers of the Arkansas General Assembly in 2013 and is expected to come up for renewal funding in February 2014. Some Republican members of the Arkansas Legislature plan to block funding, a move that could leave the state without a mechanism to process increased federal funding of the Medicaid program in Arkansas.

Brock asked Beebe to explain how the private option plan saved Arkansas $89 million to those who are skeptical of that number. Beebe agreed that some are skeptical.

“Including, apparently, some people running for governor that don’t understand the budget,” Beebe quipped.

Beebe did not mention a name, but Republican gubernatorial candidate Asa Hutchinson recently said claims of benefits from the private option plan are the result of “fuzzy math.” Hutchinson is the presumptive GOP nominee who is likely to face former U.S. Rep. Mike Ross for governor. Beebe is backing Ross.

Beebe said the savings come from several sources, including reduced spending on uncompensated care to hospitals and savings from reduced spending on those enrolled in Medicaid.

“The combination of all those moves saved state general revenue between $80 (million) and $90 million dollars,” Beebe explained.

PRIVATE OPTION AND TAX CUT DEAL
He added that the private option deal was coordinated with a tax cut deal that reduced state revenue by about $86 million. Beebe argued that if legislators now come back and nix private option funding, they will see a return to higher medical costs for the state and the lost revenue from the tax cuts.

“That money has already been spent by giving back it back to the taxpayers,” Beebe said of the tax cut deal. “If you don’t have the private option, then the money that you saved and the money that you otherwise have given back to the people and those folks that are now being paid for by the private option will no longer be paid that way.”

Beebe said the vote during the upcoming fiscal session “will be a close vote.” But he believes Legislators will ultimately “deal with logic and money” and set aside ideology.

“You can hate Obamacare and you can hate what they are doing in Washington. What Arkansas did, in a bipartisan manner, Republicans and Democrats leading together, is to take something and make something better out of it. It’s the alternative to strict Obamacare. It’s something different, and it’s now being copied by Republican Legislatures and Republican governors across the country,” Beebe said.

‘MULTIPLICITY OF ARGUMENTS’
Beebe said there are a “multiplicity of arguments” for funding Arkansas’ private option plan, with one of those reasons being that 100,000 more Arkansans enrolled in Medicaid.

“These aren’t deadbeats. These are working folks that work for people who do not carry insurance and they don’t make enough money to be able to have their own individual policy,” Beebe said.

He also said Arkansas’ businesses are estimated to save $38 million a year by not having to pay penalties under Obamacare. Also, private option funding will help Arkansas hospitals, especially rural medical operations.

“The hospitals are paying for this whether we take it or not,” Beebe said. “There will be some small hospitals that may or may not make it as a result of this.”

OTHER TOPICS
Beebe took listener questions on several topics. Following are some of the topics and Beebe’s responses.

• Prison policy
As to Arkansas’ prison system, Beebe said systemic issues with the parole process has resulted in “lax treatment” of some who fail to meet parole requirements. But he said the fix to that has to be balanced with how many people Arkansas can afford to jail. He said there are about 2,700 “backed up in county jails” that are state prisoners

“We’re going to have to open some more beds,” Beebe said, and find the revenue to pay the counties for housing the prisoners.

Beebe has proposed about $45 million in the next budget to help alleviate the problem. He said the money could be jeopardized if the Legislature nixes private option funding.

• Tax cuts
Beebe said his administration has proposed and pushed the effort for more tax cuts “than anybody in the history of Arkansas. Any Republican, any Democrat, any governor in the entire history of our state.”

Beebe said the combined tax cuts during his years as governor total close to $1.3 billion, with much of that through the reduction in the sales tax on groceries.

“But we do it in a responsible manner so that we don’t impact essential services like education, or like public safety with the prisons or any of the other things that the state has to be able to provide,” Beebe said.

• Post-retirement
Following a question about how he planned to use his “extensive knowledge” of public policy once he leaves office, Beebe joked that he would use a lot of that knowledge “at the coffee shop.”

“Certainly I’m not going to roll over and play dead, but I don’t have any specific plans to do anything full time,” Beebe said.

Beebe said his official papers will go to his alma mater, Arkansas State University in Jonesboro.

• Arkansas job numbers
When asked about Arkansas’ labor force numbers still being below levels prior to the beginning of the Great Recession in 2008, Beebe said the state often lags the nation when coming out of an economic downturn. He expressed confidence that the state’s job figures will recover.

“I think it’s a timing thing,” he said, and added that a possible help could come from the effort by Bentonville-based Wal-Mart Stores Inc. to return manufacturing jobs to the U.S.

But manufacturing jobs may not fully recover, Beebe said, and was pointedly critical about Whirlpool’s decision to close its refrigerator manufacturing plant in Fort Smith. Benton Harbor, Mich.-based Whirlpool closed the plant, which at one time employed as many as 4,600, in mid-2012.

“You know, when Whirlpool takes their marbles and goes to Mexico, I mean, we need policies that punish the heck out of companies that take their business, their manufacturing and take it for cheap labor outside this country. That’s another problem on the national level that I detest,” Beebe said.

Tuesday's (Feb. 4) meeting of the Fort Smith Board of Directors dealt almost entirely with issues most other city governments would probably find to be ordinary and mundane.

But for Fort Smith, a city that has been dealt its share of economic blows, the spate of ordinance zone requests before the Board Tuesday and the recent planning commission meeting in January show that activity may be returning to the city, though one official said it is too early to form any opinions.

Wally Bailey, director of planning services for the city of Fort Smith, spoke to the Board about five of the seven items on its Tuesday agenda. In the planning commission meeting in January, he said there were 28 projects up for consideration, the highest he had seen in about a year.

"You know, I don't know (why there has been a surge)," he said. "It was interesting. We don't really know what caused it, so many applications. That particular agenda, we had 28, 29 items on the agenda. That was probably the biggest agenda we've had in quite some time. And certainly the most we had in 2013. And it was the most significant development items we had had at one time."

The first item to come before the Board was the development of two six-unit apartment buildings at 4615 Old Greenwood Road. At the present time, the property houses a mini-storage facility.

The property, which had been zoned commercial (General Commercial and Commercial Heavy Special, C-5-SPL), backs up to the Pavilion Shopping Center and was re-zoned to residential (Residential Attached and Residential Multi-Family High Density, RM-4).

Bailey said he had no estimate of what the development would cost to construct, though renderings of the planned apartments show what appear to be high-end apartments not commonly seen within the Fort Smith region.

Another amendment to the Master Land Use Plan included a request at 1412 South 34th Street, where City Administrator Ray Gosack said a planned gated community would be erected on property owned by the Cancer Support House, though Bailey clarified that Rick Griffin would be the developer of the property, which will include five duplex structures he described after the meeting as being "very nice."

"The duplexes, I don't know what amenities they're putting into those, what it will cost."

The remaining three amendments to the zoning map all dealt with private businesses:
• Re-zoning 3900 and 3920 Rogers Avenue from Transitional (T) to Commercial Light (C-2), which would allow a salon and spa business to locate at the existing property;
• Re-zoning 5400, 5401 and 5451 Phoenix Ave from Industrial Light (I-1) to Commercial Heavy (C-5), allowing a liquor store to build at the site as well as plan for future development of the properties; and
• Re-zoning 8201 and 8205 Veterans Avenue from Not Zoned to Industrial Light (I-1) for the development of a contractor's office.

The only contentious issue of the meeting was a resolution concerning the placement of a cell phone tower in Carol Ann Cross Park, an issue that also came before the planning commission but was primarily a parks issue since the tower would sit on park land.

City Director Philip Merry urged his fellow Board members to table the issue or vote no, in order to explore other sites for the 170 feet tall communications tower.

Following a discussion among the Board, Merry ended up being the only dissenting vote on the resolution.

Bailey said even though he was not sure whether the small projects that came before the Board Tuesday were a sign that a shift was happening in Fort Smith's economy, he said projects in the works — such as the redevelopment of the Fianna Hills Country Club— were the true sign that developers are ready to open their wallets again and move dirt, thereby creating jobs.

"I think there for some time, we were seeing after the economic downtown from 2008 and forward, that there was a lot of hesitancy to jump in and spend money. (People) really didn't know what was going to happen with the economy, so I think investors were a little bit hesitant to invest. Developers were a little bit hesitant to put their own money into it. So I think it's a good sign that on that scale, that there is interest from those that are in the development business wanting to do things. Thinking out there, getting property ready. Moving forward. Testing the waters. …I think that is a good sign."

In other business, the Board spent over an hour in executive session conducting a performance review of Gosack. Following the conclusion of the performance review, Mayor Sandy Sanders said Gosack's next scheduled performance review would be conducted in July.

This was Gosack's sixth performance review since 2011, though City Director Pam Weber has declined to say why she requested the review at the last City Board meeting in January.

Merry also declined to discuss the contents of the meeting, saying that it would violate protocol. Asked specifically what items were discussed, Merry again declined to provide specifics.

"We had our discussion. Things were dealt with."

The hostile takeover effort against Van Buren-based USA Truck by Knight Transportation is over. At least for now.

The two trucking companies announced Tuesday (Feb. 4) the settlement of litigation filed Oct. 10, 2013, by USA Truck against Knight. The lawsuit, filed in Crawford County Circuit Court, accused Knight officials of “improperly using USA Truck's confidential information to begin a creeping hostile acquisition of USA Truck at a price that the Board has unanimously concluded does not reflect the Company's full intrinsic value.”

Prior to the lawsuit, Phoenix-based Knight went public on Sept. 26 with a $9 per share bid for USA Truck – which at the time was a 39% premium from USA Truck’s share price on Sept. 25. The share purchase and assumption of liabilities creates a $242 million deal. At risk in a deal with Knight would be some or all of the 500 jobs at USA Truck’s corporate headquarters in Van Buren.

The USA Truck management and Board of Directors rejected the offer, saying it “substantially undervalues” the company and does not reflect the value of potential gains from ongoing turnaround initiatives.

On Oct. 17, USA Truck filed a quarterly earnings report that was better than what market watchers expected. The company reported a third-quarter loss of $602,000, a big improvement over the $6.072 million loss posted in the third quarter of 2012. For the first three quarters of the year, the income loss for USA Truck is $3.975 million, better than the almost $19.5 million loss during the same period of 2012.

Officials with Knight were not impressed.

“Knight continues to believe that its $9 per share, all-cash proposal fully and fairly values USA Truck, especially in light of USA Truck’s consistent underperformance, including nine consecutive quarters of losses totaling approximately $30 million,” Knight noted in a statement issued Nov. 4.

But Knight’s push to convince USA Truck shareholders to sell the company has been brought to a legal “standstill.” The deal announced Tuesday notes that “Knight Transportation will not acquire any securities or assets of USA Truck, propose any tender or exchange offer to acquire USA Truck securities or any consent solicitation, or seek representation on the Board of Directors of USA Truck,” until Sept. 30, 2014. Also, Knight will not vote with the USA Truck share it owns at the USA Truck shareholders meeting.

“We are pleased that the parties have reached a settlement. USA Truck's management team and employees have been focused on executing plans to restore the Company's profitability and unlock its earnings leverage potential through improved operational excellence, profitable revenue growth and cost effectiveness,” explained the statement from USA Truck. “Nevertheless, by eliminating any of the distractions that have been created by this litigation, the settlement is a positive outcome for USA Truck's employees, customers and shareholders.”

Officials with Knight issued this statement: “Our agreement with USA Truck represents a positive outcome for our company, as it resolves all related litigation while preserving our flexibility with respect to our investment. Knight Transportation may continue to own shares in USA Truck and, subject to the terms of the agreement, may consider its options in the future regarding that investment. At this time, our focus is on leveraging our industry-leading operating efficiency to continue gaining market share and meeting the needs of our customers while considering other potentially value-enhancing external growth opportunities.”

Halting the Knight attempt is the second successful pushback by USA Truck officials against a takeover attempt within the past three years. Indianapolis-based Celadon announced in October 2011 its intent to acquire USA Truck. USA Truck officials rejected the request, and Celadon moved to an easier target. Celadon officials sold the shares of USA Truck on Feb. 28, 2012, and on Feb. 29 announced it had “purchased a significant portion of the operating equipment of Teton Transportation, Inc.”

Shares of USA Truck (NASDAQ: USAK) closed Wednesday at $13.81, up 23 cents. During the past 52 weeks, the share price has ranged from a $16.38 high to a $4.37 low. The company is scheduled to release its fourth quarter and full year earnings report on Feb. 11 before the markets open.

Democratic gubernatorial candidate Mike Ross proposed a major overhaul of the state’s personal income tax structure on Wednesday (Feb. 5) and said the plan would have to be phased in over time as allowed by the state’s finances.

The total price tag of the restructuring would cost an estimated $574.5 million, according to the Arkansas Department of Finance and Administration.

The crux of Ross’ plan would be to retroactively index Arkansas income tax brackets taking a 1997 state law and applying it to the 1971 realignment of the tax code. Act 328 of 1997 tied state income tax brackets to inflation on a forward-going basis.

The proposal also includes reductions of one-tenth of a percent to the personal income tax rates passed under Act 1459 of 2013. When fully implemented, Ross’ plan would achieve the following:
• Wage earners making less than $9,000 would pay at a 0.9% tax rate;

• Those making $9,000 to $17,999 would pay at a 2.4% tax rate;

• For workers earning $18,000 to $26,999, they would pay at a 3.4% tax rate;

• $27,000 to $44,999 would pay a 4.4% tax rate;

• $45,000 to $75,099 would pay a 5.9% tax rate; and

• Those making $75,100 or more would pay at a 6.9% tax rate.

The state’s existing top income tax bracket of 7% starts at $34,000, meaning taxpayers who make more than $34,000 pay the 7% rate. Ross said his tax cut plan sets the state’s top tax bracket at $75,100 and lowers the tax rate for nearly all income earners under $75,100.

“I want to modernize our income tax code in a way that means lower, fairer taxes for working families and small businesses in Arkansas, and I want to do so in a fiscally responsible way that maintains our balanced budget and protects vital state services like education, Medicaid and public safety,” Ross said. “Just like Governor Beebe did with the sales tax on groceries, I will also gradually phase in my tax cut plan as the state can afford to do so.”

Ross said his tax cut plan, when fully implemented, would cut income taxes by as much as $465 for incomes at $30,000; $665 at $40,000; $880 at $50,000; and, $1,148 at $75,000 and up. He proposed mimicking Gov. Mike Beebe’s phase-out of the sales tax on groceries as his blueprint for restructuring the tax code.

Ross’ likely Republican opponent, Asa Hutchinson, has also proposed an income tax reform proposal. Hutchinson’s plan would reduce the income tax rate from 7% to 6% for Arkansans earning between $34,000 to $75,000 a year, and from 6% to 5% for those earning between $20,400 to $33,999 annually. He estimated his tax cut plan would cost roughly $100 million.

Hutchinson responded to Ross’ plan with the following statement: “I’m glad longtime Democratic Congressman Mike Ross finally recognizes the need for tax relief in Arkansas. Unfortunately his plan is just not serious. It has no specifics or time-frame for action.

“Three months ago, I laid out a serious plan to begin reductions of our income tax rates in Arkansas. I gave a specific timeline and how I will lead as Governor. This is a clear difference in leadership. My plan is specific and on day one we will have legislation for middle income tax relief in Arkansas.

“While my plan focuses on competitive tax rates in Arkansas for job creation, the Ross plan is not a long-term solution for economic growth. Under Mike Ross, Arkansas will continue to have the highest income tax rate in the region. This is a fundamental difference in our vision for growing Arkansas’s economy and creating jobs.”

Hutchinson concluded: “Finally, Mike Ross needs to answer this question: What is his first priority? Is it the $40 million dollar tax relief that he promised to the manufacturers or the half a billion-dollar tax proposal made today?”

Link here for the full outline of Ross’ plan.

This year's race for the U.S. Senate got off to an unusually early start with the presumptive nominees known well before U.S. Rep. Tom Cotton, R-Dardanelle, announced his intention to challenge incumbent U.S. Sen. Mark Pryor, D-Ark., on Aug. 6, 2013.

The race, which political experts are warning could be the most expensive political campaign in Arkansas history, not only got their presumptive nominees early, but the two men and groups in support of both have started pouring money into television advertising, with many ads appearing on air and online well more than a year before the general election and six or more months before either would officially become their party's nominee.

But with so much emphasis placed on political advertising so early, is any of it working? Not really, according to polling conducted by Impact Management Group of Little Rock, 40.6% of surveyed likely voters favored Pryor while 41.7% favored cotton and 17.6% remained undecided.

REACHING ARKANSANS
According to two political consultants who spoke with The City Wire, those numbers are unlikely to change based on the barrage of advertising to hit the airwaves so far, both by the campaigns and outside interest groups. (Some of the ads mentioned in this story are included at the end of this story.)

Will Watson, a Democratic consultant with Natural State Strategies in Fayetteville, said narrow issue ads such as one titled Every Single One by the Judicial Crisis network, an ad that attacks Pryor's voting record on judicial nominees, would not resonate with Arkansas voters.

"Arkansans will probably answer more to Medicare, the shut down, loans for small business, those types of things," he said.

President and CEO Kristi McKinnon of Waterchase Consulting in Little Rock, an independent who has worked for Democrats and Republicans, agreed with Watson's assessment, explaining that rural Arkansas voters have not tuned into a Senate race that is already all the buzz in the inner circles of Little Rock and Washington.

"It's so early right now," she said.

TUNING OUT ADS
McKinnon said some potential voters have already tuned out the advertisements they see on television not only because they are tired of the ads, but also because some of the ads from outside groups have yet to connect with voters. She points to a specific ad by the National Republican Senatorial Committee called Safari.

"The worst one has to be that Safari ad. I think for Arkansans, they're not friendly to outside groups anyway. And that Safari ad — you're going to automatically tune it out. And to have someone with that accent talking about Arkansas politicians is unreal."

Even ads coming from the candidate's own campaigns are not resonating with voters, according to McKinnon, who pointed to an ad from Cotton's campaign entitled Infantry, which highlights some of Cotton's military service after graduating from Harvard Law School.

"None of these (ads) are doing anything. People are not paying attention right now. Even with the Infantry ad," she said. "I come from a military family and they saw that and didn't appreciate that ad. Things like that are not effective. Voters are thinking Harvard elitist."

SIMPLE MESSAGES NEEDED
McKinnon believes that what will finally start to move voters to either candidate, eliminating the virtual tie reflected in the poll numbers, is to simplify the messages and for the campaigns to stop trying to one up each other with each new ad.

"They really have to simplify it," she said. "Simplicity can do a lot more. I think we get away from that."

She equated it with Twitter, explaining that just because a person may have more followers it does not mean that they are reaching the audience they should, a point previously made by Brent Robinson, CEO and chief thought officer at Fayetteville-based social media consulting firm Modthink.

"My guess is right now that the senator is talking to his (network of supports). He is getting that engagement because he is talking to people who are interested in the conversation. Cotton maybe has a wider audience, but they're not so deep. He has a national audience, but he doesn't seem to get the people on the local level who will be going to the ballot box."

‘BEST LINES FOR NOVEMBER’
Watson said there is one thing that will immediately start to shift the poll numbers and he believes it will likely be to Cotton's benefit.

"There is an ad that the G.O.P. took out against (U.S. Sen.) Jeanne Shaheen in New Hampshire," he said. "The title is Like Your Senator. It's a 30 second ad. It basically uses the line, 'The biggest lie of the year — if you like your plan, you can keep it.' It takes these senators that are on the record (saying that about Obamacare and private insurance) and it overlaps that line with if you like your Senator, you can keep her. If you don't, you can cast your vote in November. It's probably one of the best lines for November."

It is an ad by Ending Spending Inc., and is one Watson said is likely to make its way to Arkansas with Pryor as its target.

"Let's look at it as a math equation. We know (President) Barack Obama is immensely unpopular in Arkansas. We know Obamacare is unpopular at this point. If the Republicans and outside groups can equate that program and Obama with Pryor, I don't see how he has much luck."

Even if a dark horse ad, such as the one Watson is talking about, makes its way into the 2014 Senate race, McKinnon said other factors would need to factored into any voter outreach efforts, as well.

"There are so many factors going on in this election that no one is really thinking about," she said. "So many changes have occurred (with redistricting and population shifts). People (on the inside of campaigns and media) are trying to rely on the 2010 governor's race (for historical guidance), but that's not predicative of what's going to happen."

RECENT ADVERTISING MOVES
Ads from the campaigns continue to find their way onto the local airwaves and the Internet.

On Wednesday (Feb. 5), Pryor's campaign released two new ads each to start running Thursday (Feb. 6) featuring what it said was "a concerned Arkansas voter discussing Rep. Tom Cotton's reckless agenda that would turn Medicare into a voucher system, force seniors to pay more and reduce benefits."

A press release from the campaign continues: "The two ads illustrate how devastating Cotton's agenda for Medicare would be for Arkansas families."

Pryor Press Secretary Amy Schlesing declined to say specifically how much the campaign was spending on the ad buy, only calling it "a six figure ad buy," adding that it would run statewide.

Cotton spokesman David Ray was quick to condemn the ads, calling them "despicable scare tactics are typical of Washington politicians like Senator Pryor."

"In all his time in Washington, Pryor has done nothing to preserve Medicare or keep the program solvent.  Instead of protecting Medicare, Pryor voted to cut $700 billion from Medicare to pay for Obamacare, a law he calls 'an amazing success' that has Arkansans suffering from lost insurance plans and drastic increases in premiums, deductibles and co-pays."

Ads for Cotton have also continued to blast local airwaves during the first month of 2014, though the majority of ads have been from outside groups.

The latest ad by the group Concerned Veterans for America, airing January 23 through February 11, focuses on Cotton's vote against a budget that the group said cut veteran's benefits. The ad buy was $665,616. The Washington Post reports another attacking Pryor's support of Obamacare is to be released Wednesday by Americans for Prosperity, an ad buy worth another $600,000, sources familiar with the group's ad purchase confirmed to The City Wire.

Figuring those numbers, plus an ad buy early in January by the Cotton campaign, ads buys in support of the Congressman have already totaled $1.5 million in 2014.

America’s Car-Mart has made a name for itself and its “drive easy” motto providing credit for used-car sales to generations of higher-risk borrowers since 1981. But, the changing dynamics in the subprime lending sector have thrown up a road block for the buy here, pay here used car dealer and finance company, according to analysts.

The Bentonville-based company has fallen short of Wall Street expectations in the past three of four operating quarters, each time citing heightened competitive issues that weighed down sales and allowed credit losses to tick upward.

Car-Mart will report its third quarter earnings on Feb. 18, and management will hold a brief earnings call the following day (Feb. 19) at 10 a.m. local time.

Wall Street expects the company to report 70 cents per share on revenue of $126.7 million. This compares to 84 cents a share on revenue of $118.9 million in the year-ago period.

COMPETITIVE HEADWINDS
Analysts polled by The City Wire this week noted that the heighten competition Car-Mart faces with each sale is not likely to soon subside as more subprime lenders continue to make credit available at perhaps lower interest rates than the 15% Car-Mart charges.

“Private equity firms and other initial public offering activity with companies like Springleaf Leasing are creating a lot of liquidity in the subprime auto and consumer credit space,” said Martin Kemnec, analyst with Jeffries, who rates America’s Car-Mart as a “hold” with a one-year target price of $38.

“While we believe in the strength of Car-Mart’s management team, they have some delicate balancing to do fending off the competition, growing sales and not incurring more risks in the process,” he said during a phone interview.

Jeff Williams, chief financial officer at Car-Mart, told The City Wire that the company believes the 15% interest rate charged to all of its customers is fair.

“We try to set everyone up to succeed and feel like the 15% is a good rate even for our very best customers,” Williams said.

That said, the company knows it stands to lose some of its better customers to other dealers willing to offer new cars at similar or even lower interest rates.

More independent lenders are making new auto loans to credit challenged borrowers and the packaging the credit pools into portfolios and selling that debt instrument on Wall Street to investors seeking higher yields.

SUBPRIME LOAN INCREASE
Total sales linked to subprime car loans surged 24.4% through August of 2013, according to Deutsche Bank. For the full year these subprime auto loans totaled $17.2 billion, just shy of the $20 billion record set in 2007.

Equifax reports that nearly one in three new car loans last year were to consumers with credit scores below 500. Analysts don’t see any pullback in this subprime growth market in 2014, which could present continued problems for Car-Mart.

The healthier funding environment reflects investors' interest in increasing exposure to subprime lending. Fitch Ratings believes there are a number of factors likely driving increased investor interest, including the favorable trends in operating fundamentals and potential for higher returns. However, Fitch warns the market is cyclical, and credit issues can emerge quickly larger problems emerge in the U.S. economy.

Wall Street investors have recently taken notice of the potential problem for Car-Mart. Shares (NASDAQ: CRMT) have tumbled 12.15% year-to-date, based on Wednesday’s closing price at $36.86 per share. It’s fair to note that the Russell 2000, a small cap index that Car-Mart is part of, is down 6% so far this year. The Dow Jones Industrials are also down 6%, while the S&P 500 has lost 4.19% since Jan. 1.

LOWER GUIDANCE
Despite Car-Mart’s aggressive plans to grow the number of dealership 10% annually, analysts with Jefferies and C.L. King recently reduced their earnings guidance for fiscal 2014 and 2015.

Jeffries expects Car-Mart to earn 72 cents a share in the recent quarter and $2.94 for fiscal 2014 which ends April 30. Annual 2014 profit expectation compares negatively to the $3.36 per share earned in fiscal 2013. Jeffries expect fiscal 2015 earnings per share of $3.42.

C.L. King analyst Bill Armstrong recently lowered his fiscal 2014 earnings estimate by 54 cents to $3.01 for the full year. His 2015 estimate is $3.41, down from $4.08, based on the competitive pressures already noted. King said the bulk of the earnings reduction in the back half of fiscal 2014 relates to a more conservative stance on the company’s sales growth and gross margins.

“Most of the competitive financing pressure Car-Mart is feeling is at the higher end of its vehicle price range and in its more mature stores. The company is also seeing more demand for entry level vehicles and is adjusting its inventory mix accordingly. We note entry level vehicles are frequently purchased by unseasoned customers and tend to generate higher charge-offs,” King said.

Not only did the Fort Smith metro jobless rate jump to 7.6% in December but the November rate of 6.9% was revised to 7%, meaning that the region’s jobless rate has been at or above 7% for 57 consecutive months. However, the December report showed an increase in workforce size and the number of employed.

Metro employment of 122,466 was down slightly from the 123,011 in November 2013, but was up from the 121,200 in December 2012. The December jobless rate of 7.6% was up from a revised 7% in November and down from 7.7% in December 2012, according to figures released Wednesday (Feb. 6) by the U.S. Bureau of Labor Statistics.

Only one metro area (Memphis-West Memphis) in or connected to Arkansas had a jobless rate decline in December compared to November. Three areas had jobless rate increases compared to December 2012, three had declines and two areas were unchanged. For perspective, 91.1% of the 372 U.S. metro areas had year-over-year jobless rate declines in December compared to 37.5% of Arkansas’ eight metro areas posting year-over-year declines.

During December, the lowest metro jobless rate in the state was 4.9% in Northwest Arkansas and the highest rate was 9% in the Pine Bluff area.

FORT SMITH METRO NUMBERS
The size of the Fort Smith regional workforce during December was 132,560, up from 132,200 during November, and up compared to the 131,316 during December 2012. The labor force reached a revised high of 140,253 in November 2007.

Unemployed persons in the region totaled an estimated 10,094 during December, down from the 9,189 during November, and below the 10,116 during December 2012.

The Fort Smith area manufacturing sector employed an estimated 18,400 in December, up from 18,300 in November, and below the 18,900 during December 2012. Sector employment is down more than 35% from a decade ago when December 2003 manufacturing employment in the metro area stood at 28,600. Also, the annual average monthly employment in manufacturing has fallen from 28,900 in 2005 to 19,200 in 2012 – the first year the average has dropped below 20,000 since surpassing that level.

Jobs in the Trade, Transportation and Utilities sector — the region’s largest job sector —  totaled 26,300 in December, up from the 25,900 in November, and above the 25,100 during December 2012. The December employment marked a new employment high in the sector.

Employment in the region’s tourism industry was 9,000 during December, down from 9,100 in November and above the 8,700 in December 2012. The sector reached an employment high of 9,800 in August 2008.

In Education & Health Services, employment was 18,100 during December, down from 18,000 in November and above the 17,300 during December 2012. December employment tied a record for sector employment – first set in October – in the Fort Smith area. Annual average monthly employment in the sector has steadily grown since 2005 when it reached 14,000. In 2012 the average was 17,100.

In the Government sector, employment was 19,700 during December, down from 19,800 in November and up compared to 19,600 in December 2012.

NATIONAL NUMBERS
Unemployment rates were lower in December than a year earlier in 339 of the 372 metropolitan areas, higher in 25 areas, and unchanged in 8 areas, noted the broad BLS report.

The U.S. unemployment rate in December was 6.7%, down from 7.9% from a year earlier. Arkansas’ jobless rate was 7.4% in December, down from 7.5% in November and up from 7.1% in December 2012.

Oklahoma’s jobless rate during December was 5.4%, unchanged compared to November, and up compared to 5.1% in December 2012. The Missouri jobless rate during December was 5.9%, compared to 6.1% in November and better than the 6.6% in December 2012.

ARKANSAS METRO AREAS
Fayetteville-Springdale-Rogers
December 2013: 4.9%
November 2013: 4.9%
December 2012: 5.1%

Fort Smith
December 2013: 7.6%
November 2013: 7%
December 2012: 7.7%

Hot Springs
December 2013: 7.5%
November 2013: 7.5%
December 2012: 7.4%

Jonesboro
December 2013: 6.6%
November 2013: 6.3%
December 2012: 6.9%

Little Rock-North Little Rock-Conway
December 2013: 6.2%
November 2013: 6.2%
December 2012: 6.2%

Memphis-West Memphis
December 2013: 8.8%
November 2013: 8.7%
December 2012: 8.7%

Pine Bluff
December 2013: 9.8%
November 2013: 9.5%
December 2012: 9%

Texarkana
December 2013: 6.8%
November 2013: 6.8%
December 2012: 6.2%

FORT SMITH METRO AREA HISTORY
Past annual average unemployment rates
2012: 7.7%
2011: 8.6%
2010: 8.2%
2009: 7.9%
2008: 4.8%
2007: 5.3%
2006: 4.9%
2005: 4.5%
2004: 5.2%
2003: 5.5%
2002: 5%
2001: 4.2%
2000: 3.7%

Retailers may not be feeling the love this Valentine’s Day, with total spending projections are down 6.9% from 2013 as fewer consumers plan to give gifts this year.

Consumers are expected to dole out $17.3 billion in Valentine’s Day’ spending on average $133.91 this year, with that average up 2.2% from last year’s holiday, according to the National Retail Federation.

Following a holiday shopping season that did not set records for consumer spending, cautious consumers aren’t quite ready to splurge on Valentine’s Day this year, continuing to keep their budgets in check. The retail trade group reports 54% of American’s will celebrate with their loved one this year, compared to 60% in 2013.

“Valentine’s Day will continue to be a popular gift-giving event, even when consumers are frugal with their budgets. This is the one day of the year when millions find a way to show their loved ones they care,” said NRF President and CEO Matthew Shay. “Consumers can expect Cupid’s holiday to resemble the promotional holiday season we saw just a few months ago, as retailers recognize that their customers are still looking for the biggest bang for their buck.” 

He said consumers will definitely stay within budgets whether shopping for candy, flower, jewelry or an evening out. Nearly half (48.7%) will buy candy, a third will give flowers (37.3%) and over half (51.2%) will send greeting cards. Another 19% plan to buy something sparkly, with projected jewelry sales of $3.9 billion this Cupid’s Day. The survey results indicate 37% plan to spend the evening out for an estimated cash outlay of $3.5 billion.

Men will spend $108.38 on gifts for their significant others – twice as much as women who will spend $49.41 on their special someone. And like every holiday, Americans won’t forget about their pets, 19% will buy gifts for their furry friends, spending an average of $5.51, according to the survey.

“While fewer are planning to celebrate Valentine’s Day this year, millions of shoppers will still make room in their discretionary budgets to send cards and gifts to loved ones or enjoy a special evening out,” says Prosper Insights and Analytics Director Pam Goodfellow. “Consumers can expect promotions on everything from flowers to date night dinner packages in the coming days, leaving plenty of ideas for those looking to spoil their Valentines.” 

She said consumers do their research and many will purchase gifts online. The survey found 26.3% of shoppers plan to shop online for Valentine’s Day gifts.

Following are some Valentine’s Day stats from the 2013 season according to the Retail Advertising and Marketing Association.
• 196 million roses were produced for the holiday, with 73% of the flowers purchased by men.

• The percent of women who sent themselves flowers on Valentine’s Day: 14%.

• 180 million Valentine’s Day cards were exchanged.

• 85% of cards are purchased by women.

• 61.8% of consumers celebrated Valentine’s Day.

According to the U.S. Census Bureau, history is unclear on who was the original Valentine, but the most popular theory is that he was a clergyman who was executed for secretly marrying couples in ancient Rome.

“In A.D. 496, Pope Gelasius I declared Feb. 14 as Valentine Day. Esther Howland, a native of Massachusetts, is given credit for selling the first mass-produced valentine cards in the 1840s,” notes a Valentine’s Day profile from the bureau.

The value of building permits in Fort Smith, Greenwood and Van Buren were a combined $9.469 million in January, down 26.52% compared to January 2013.

The month's building permit totals are rare in the fact that Van Buren's valuations were higher than Fort Smith's, with the city logging $4.655 million on 30 building permits to Fort Smith's $4.631 million based on 129 permits. It is the start of what could be a good year for Van Buren as several projects are planned for the city.

And while Fort Smith's northern neighbor has started the year with the bang, the first month of the 2014 started off slower for the three combined cities than the brisk year that concluded Dec. 31, 2013, where the three cities saw a combined increase of 29.06% in building permit valuations over the 12 month period.

FORT SMITH
The city of Fort Smith issued 129 permits during January with a total value of $4.631 million, a decrease in value of 49.17% from 2013's valuation of $9.11 million.

The city's valuations were largely driven by residential construction, with $1.821 million in permits issued for seven new homes.

Commercial construction, including additions, demolitions, new construction and remodels, only accounted for a cumulative total of $1.259 million during January.

GREENWOOD
Fort Smith's southern neighbor reported considerably lower valuations, as well, with only three building permits issued totaling $182,960. Greenwood's valuation for last month is a drop of 87.3% in January 2013, when the city issued $1.441 million in permits, including more than $600,000 for residential construction.

VAN BUREN
The city directly north of Van Buren posted a rare month of higher valuations than Fort Smith, largely driven by the issuance of a $4 million building permit for the new alzheimer's unit at Legacy Heights Retirement Center.

In total, the city issued $4.655 million in permits last month, a 99.55% increase from January 2013 when the city issued $2.333 million in building permits.

Had Legacy Heights not applied for the permit, the city would have posted the worst decline of the three cities, having only issued $655,400 in building permits. It would have represented a 71.91% decline in permit values.

The expansion of Legacy Heights is just one of the large projects either currently underway or planned for the city in 2014. CVS Pharmacy was issued a permit in December 2013 for a new $1.283 million store, currently under construction at the intersection of Rena Road and Fayetteville Road. Plans are also underway to permit the construction of the city's new police station at the site of the former Sherman's Grocery store, further down Fayetteville Road.

Additionally, the site of a former truck stop and used car dealership at the intersection of Fayetteville Road and Interstate 40 has been purchased, with Mayor Bob Freeman having said the site will be used for a semi-truck dealership, though no firm date for opening has been set.

2013 RECAP
Combined values in the three cities during 2013 were $203.037 million, compared to $157.32 million during 2012. The 2013 value is above the $201.079 million in 2011.

Fort Smith closed 2013 with the largest share of valuations, logging $177.687 million (a one-year increase of about 30.24% from $136.428 million in 2012), while Van Buren was the next largest with $17.067 million (a one-year increase of 38.96% from $12.282 million in 2012). Greenwood posted an additional $8.283 million, the only city to show a decrease from the previous year's total of $8.609 million (a decrease of 3.79%).

The gains in the Fort Smith market were largely from industrial construction projects at Chaffee Crossing, the construction of Mercy's new orthopedic hospital along Phoenix Avenue and various municipal construction projects across the city.

There were fireworks at Thursday's (Feb. 6) meeting of the Sebastian County Election Commission as Chairman Lee Webb addressed the need to avoid mistakes in the upcoming May primary and November general elections.

Webb highlighted past mistakes of the Sebastian County Clerk's office, an office lead by Sharon Brooks. Brooks, a Republican, who announced Jan. 30 she would seek re-election to a third term later this year.

"In the past, we've had some poll book issues that I really want to try to get addressed," Webb said. "They were all fixed for these elections that we're going to talk about."

Webb brought up various mistakes dating back nearly two years, according to documentation provided to the media:
• May 22, 2012 Primary: Illegible pages;
• June 12, 2012 Runoff: Missing precinct at the Mansfield polling site;
• June 12, 2012 Runoff: Missing ballot designations, which are required for runoffs;
• Sept. 18, 2012 School Board Election: Missing precinct in Lavaca school books;
• Nov. 2, 2012 General Election: Sections missing from Greenwood Church of the Nazarene election roster book and polling place book;
• Dec. 10, 2013, Greenwood Special Election: Precinct designations not in alphabetical order; and
• Dec. 10, 2013, Greenwood Special Election: Delayed poll book delivery.

Brooks immediately took issue with Webb's assertion that the issues needed to be addressed, adding that any mistakes were fixed without any impact to the elections in question.

"If this was a problem back then, why wasn't this brought to our attention? We work with the (election) coordinator, and the coordinator should work with us. …We have not known of any of these problems."

In discussing some of the past issues, Webb brought up an issue with the Fort Smith School Board, in which precincts were placed within the wrong school district. But according to Brooks, the issue was not with her office.

"It was during the redistricting process and we talked to (Fort Smith School District Superintendent) Dr. (Benny) Gooden. They have to give us their boundaries, their maps. The maps hadn't been given to us in time."

Following the adjournment of the Election Commission meeting, Brooks went into further detail defending her office against accusations of mistakes, explaining that again that all issues were caught and addressed before it could affect elections. She also said she and her staff were able to coordinate with the Fort Smith School District once the district provided maps of precincts.

Brooks said she has worked closely with Election Coordinator Jerry Huff in the past and would continue to in the future to ensure that mistakes are either not made or are caught prior to poll books or ballots making their way to polling sites.

"I'm not sure what his reasons are. I would think if there are any problems, that they would come to us and talk to us. …I would hope that we continue to work (together), because we're here as a unified body here."

She said voters should have confidence in her office's ability as May 20 and November 4 approach.

For his part, Webb said he was upholding his responsibility to Sebastian County voters by bringing the issue up in a public meeting and making sure the matter was dealt with four months prior to the May primary election.

"It's not an issue once we find the problems and get them fixed. Fortunately we had found all the problems before they get to the polling sites, with the exception of one. Which ultimately the poll books are not the Election Commission's responsibility, but when the Election Commission feels the responsibility to the voters to have everything correct and we have to go back and double check every poll book that we send out because of the inaccuracies that we've had the last two years — which we never had prior to that, never had an issue, and these are just the ones that we found — and we feel that it's our duty to the voters and the poll workers to have everything right."

In other business, the Commission:
• Heard a proposal from Webb that would eliminate 13 polling sites from the current roster, saving the Election Commission about $13,000 each election. Should the proposal be approved at a later meeting, the number of polling sites would be about 31, though the figure could change based on a variety of factors; and

• It was announced by County Judge David Hudson that David Mansell has been hired to replace Jerry Huff as Election Coordinator. Mansell's hiring occurred following a November 2013 meeting that nearly ran afoul of Arkansas' open meetings laws after Hudson attempted to hold an executive session that included individuals, such as Brooks, who were actually barred from participating in the executive session by state law. It was only after protest by The City Wire that Hudson limited the meeting to himself, the Election Commission, and individual applicants, following .C.A. § 25-19-106, section 2a, which states, "Only the person holding the top administrative position in the public agency, department, or office involved, the immediate supervisor of the employee involved, and the employee may be present at the executive session when so requested by the governing body, board, commission, or other public body holding the executive session."

News this week that the U.S. State Department had released its fifth and latest environmental impact study on the Keystone Pipeline project, which would build an oil transport route from Canada to the Gulf Coast, has many politicians across Arkansas demanding action.

The controversial pipeline, which will pass through Oklahoma and bypass Arkansas entirely, would be 875-miles long and transport as much as 830,000 gallons of crude oil per day, according to the State Department's website.

U.S. Sen. Mark Pryor, D-Ark., has stood up in support of the pipeline, bucking several members of his own party in an election year where he is facing U.S. Rep. Tom Cotton, R-Dardanelle, in his bid for a third term in the U.S. Senate.

“We’ve waited years now for the President to approve the Keystone XL Pipeline. We have the studies, we have the support of the states along the route, and we have the backing of a bipartisan coalition in Congress,” Pryor said. “Mr. President, let’s build the Keystone XL Pipeline.”

Pryor, and nearly every other supporter of the project, have touted the pipeline as a jobs creator and a driver of the national economy.

In an e-mail earlier this week, Cotton's campaign quoted a figure from The Washington Post, which quoted a report stating that the pipeline would create 42,000 jobs.

Executive Vice President Kelly Robbins of the Arkansas Independent Producers and Royalty Owners Association said should the Keystone Project receive final approval this year, it is very likely that Arkansans could be put to work on construction of the pipeline itself, a prime reason Arkansas politicians have jumped in the fight.

"Bald Knob used to be a hub of numerous pipeliners," he said in reference to the small city northeast of Searcy. "There's still a lot of expertise (from) pipeline workers in Arkansas who will work on this pipeline, whether welding or other parts of that construction."

He said those workers are likely to spend their pay when they "come home, whether for a week or two at a time or spending their wages back here at home."

Kathy Deck, director of the Center for Business & Economic Research at the Sam M. Walton College of Business at the University of Arkansas, said while construction of the pipeline (if approved) would create jobs, it still remains to be seen whether any of that would actually impact Arkansas. Beyond Arkansans leaving the state temporarily to work on building the pipeline, Deck said what economists will look for in evaluating any impacts will be unintended results of the pipeline construction.

"Infrastructure has the benefit," she said. "Think about those construction impacts. We're thrilled they're here, but the value of the infrastructure itself should be very durable and should facilitate economic impact for a long time, whether highways, pipelines, or airports. Those economic impacts get spread for a long time and have unforeseen impacts on other sectors of the economy."

Even if Arkansans do not know someone working on the pipeline itself, Robbins said all in Arkansas would eventually feel the impacts of the pipeline, should it ever be built.

"The more (oil) we can produce nearby instead of paying to transport it in by more expensive means halfway across the world" he said. "All of those costs of doing business, the most savings we will have, that will pass on to the consumers. I don't believe this will be any different from that."

Gov. Mary Fallin, R-Okla., said she is ready for the project and the jobs that would come to Arkansas' western neighbor as a result and is urging approval of the project, pleading with President Barack Obama in a press release earlier this week.

“The Keystone pipeline project is important to our nation’s energy security as well as the individual economies of our states,” said Fallin. “In Oklahoma alone, the pipeline represents a billion dollar investment with the potential to create thousands of jobs. We’ve waited long enough for this to be approved. It’s time for President Obama to let common sense prevail and give American workers the green light on this shovel-ready project.”

The upcoming nasty politics of the private option, the Fianna Hills Country Club project, and a governor’s disdain for Whirlpool’s marbles movement are part of the Feb. 7 Friday Wire for the Fort Smith region.

NOTES & ANALYSIS
• Get ready to rumble
Consider yourself warned all you who have found some measure of relief that Arkansas politics have not yet devolved to the putrid depths of chaos stirred feverishly by the shallow and sophomoric fecal flingers who have slimed their way into leadership positions in Washington D.C.

Your warning comes with two words: “Private option.”

It seems that in 2013 the Arkansas Legislature passed a plan – the private option – that all but completely altered how Obamacare would be administered in Arkansas with respect to Medicaid funding. There is no need to detail the particulars, because all one needs to know is that this plan had, at some point, a connection to Obamacare.

Arkansas’ upcoming political filing period, 2014 fiscal session and May 2014 primary will be dominated by who is and who is not for funding of the private option plan. There will be a side who suggests that anyone supporting private option probably helped Obama pick out the pens he used to sign Obamacare into law. There will be a side who suggests that any questions related to funding of private option or tweaking the private option plan will be akin to pulling the plug on grandma and personally torching to the ground the rural hospital near you.

The greasy spot in the middle of the nuclear political battlefield will be what remains of the shrinking number of Arkansas elected officials who seek reasoned alternatives outside limitations of line-in-the-sand politics.

“Cry ‘Havoc,’ and let slip the dogs ... “

ICYMI
Following are a few stories posted this week on The City Wire that we hope you didn’t miss. But in case you missed it ...
• Moving forward on the Fianna Hills Country Club project
Plans to drastically alter the appearance and business model of the Fianna Hills Country Club are continuing to move forward, with plans for a $20 million investment in the property.

• Local tax revenue trend
Sales tax collection for the city of Fort Smith were down 0.69% for the 2013 reporting year, ending two years of collection gains and coming in 1.16% below budget estimates. However, the year ended on a positive note with the December report showing gains in city collections and the city’s portion of the countywide 1% sales tax.

• Hostile takeover ‘standstill’
The hostile takeover effort against Van Buren-based USA Truck by Knight Transportation is over. At least for now. The two trucking companies announced Tuesday (Feb. 4) the settlement of litigation filed Oct. 10, 2013, by USA Truck against Knight.

NUMBERS ON THE WIRE
• $3.482 billion: Year-to-date (July 2013-Jan. 2013) gross tax revenue collected by the state of Arkansas, 2.1% above the same period in the previous fiscal year.

• $574.5 million: Estimated reduction in state revenue that would happen under a proposal by Mike Ross to change Arkansas’ income tax code. Ross, a Democrat, is running for election as Arkansas Governor, and will likely face GOP candidate Asa Hutchinson in the November general election.

• $1.7 billion: Estimated hit to the U.S. air travel industry in January as a result of winter storms, with an economic impact that could reach $5 billion.

OUTSIDE THE WIRE
• The long-term joblessness problem
In 28 states, a third or more of the unemployed have been without a job for six months or longer, leaving them with no unemployment insurance safety net following the expiration of extended benefits in December.

• Pryor breaks with Obama on minimum wage
President Barack Obama held two meetings this week plotting strategy to maintain the Senate Democratic majority, while also pitching an issue that could put a vulnerable incumbent at risk: a minimum wage increase. Senator Mark Pryor, whose home state of Arkansas is headquarters of Wal-Mart Stores Inc. (WMT), says he will oppose raising the minimum wage.

• Signing with The Tide
Signing day came and went without Alabama ever being threatened to fall from its place atop the college football recruiting pecking order. Coach Nick Saban and his staff in Tuscaloosa received national letters of intent from 19 players on Wednesday, not including eight early enrollees who arrived on campus in January. The Crimson Tide's 27-man signing class marks the third consecutive year in which it finished No. 1 in the ESPN Class Rankings.

WORD ON THE WIRE
“You know, when Whirlpool takes their marbles and goes to Mexico, I mean, we need policies that punish the heck out of companies that take their business, their manufacturing and take it for cheap labor outside this country. That’s another problem on the national level that I detest.”
– Arkansas Gov. Mike Beebe when asked about the state’s economy and prospects for jobs recovery

"Let's look at it as a math equation. We know (President) Barack Obama is immensely unpopular in Arkansas. We know Obamacare is unpopular at this point. If the Republicans and outside groups can equate that program and Obama with Pryor, I don't see how he has much luck."
– Will Watson, a Democratic consultant with Natural State Strategies in Fayetteville, about the U.S. Senate race between U.S. Sen. Mark Pryor, D-Ark., and U.S. Rep. Tom Cotton, R-Dardanelle

“Middle class and lower income consumers are having a tough time, paying higher taxes this year and Mother Nature isn’t doing anyone any favors. Budgets are tighter and there is less fuel in the tank to move this economy forward.”
– Rich Yamarone, chief economist with Bloomberg Brief, about the financial impact of U.S. winter storms on the American consumer

Retailers, despite a slew of layoffs and store closure announcements in recent weeks are expected to see modest sales growth of 4.1% in 2014, up from 3.7% growth last year, according to the National Retail Federation. Online sales are expected to rise between 9% and 12% this year, when compared to 2013.

“Measured improvements in economic growth combined with positive expectations for continued consumer spending will put the retail industry in a relatively good place in 2014,” said NRF President and CEO Matthew Shay. 

He said the looming debt ceiling debates, increased health care costs, and regulatory concerns remain as risks for consumers and retailers. But, he said, the NRF believes economic tides will change in 2014.

“As the industry tackles important issues in 2014, such as immigration and tax reform, we will continue to push our nation’s leaders to support policies that promote growth and create jobs for hardworking Americans,” said Shay.

A number of factors contributed to NRF’s rosy outlook. They factor in early estimates of GDP growth of 2.6%, a faster pace than the 1.9% rate for 2013. They also expect to labor market to add 185,000 jobs per month and continued improvement in the housing sector.

Rich Yamarone, chief economist with Bloomberg Brief, told The City Wire this week that he expects a tough year for retailers. He said the middle class continues to be hit with higher taxes, more expensive insurance costs and this winter they are shelling out a lot more just to keep warm.

“I see optimistic projections for GDP growth being made, but I have to ask myself where  this growth is going to come from. I don’t see it,” he said.

Wal-Mart Stores Inc., the nation’s largest retailer posting around $465 billion in annual sales last year, has already lowered its earnings expectations for fiscal 2014. The downward guidance was based on weaker-than expected first quarter numbers, which include the holiday shopping season that can be as much as 30% of total annual sales industrywide.

The retail behemoth shaved 26 cents off its fourth quarter earnings related to store closings in Brazil and China and Sam’s Club layoffs and management restructuring. This 26-cent reduction is on top of an 11-cent charge to the $1.50 to $1.60 per share earnings expected by the retailer in the fourth quarter.

Wal-Mart sales were impacted more than company officials expected from reductions in federal food stamp payments. Bill Simon, CEO of Walmart U.S., told reporters on multiple occasions that the retailer did not expect any material impact from the cuts. But the company issued an earnings warning on Jan. 31.

“Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.,” Charles Holley, chief financial officer noted in the release last week (Jan. 31). “First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect Nov. 1 is greater than we expected. And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter. Sam’s Club was also impacted by the weather throughout the quarter.”

Even with the lower earnings warning given by Wal-Mart, Wall Street analysts said the news was something it could live with.

“Despite the lower guidance, we view Wal-Mart’s January quarter performance as better than other retailers, and remain constructive on shares due to their “safe haven” status (dividend yield and excellent operations), as well as its attractive valuation, helped by the January stock sale (especially retail) this year,” notes Budd Bugatch, analyst with Raymond James & Associates.

He lowered his fourth quarter estimate to $1.59 from $1.64 per share, also shaving a nickel off the annual earnings prediction as well, to $5.10 from $5.15 following the company’s release.

Bugatch expects Wal-Mart will post $474.93 billion in fiscal 2014 sales for the year ended Jan. 31. His fiscal 2015 sales revenue estimate for Wal-Mart is $492.13 billion, an increase of 4.25% from the prior year. This is a little more optimistic than the NRF sales growth estimate for the same time period.

Allens Canning business went on the auction block earlier this week with Sager Creek Acquisition Corp. winning the bid and agreeing to pay $124.781 million for the bankrupt business. Little is known about Sager Creek, a recently formed Delaware-based corporation, according to the court filing.

The president of Sager Creek, James Athanasoulas, is the managing director of Sankaty Advisors, a unit of Boston-based Bain Capital. Sankaty Advisors is a secondary lienholder listed among Allen’s creditors. The amount owed was not disclosed.

The $124.781 million price tag is subject to increase or decrease for the actual amount of “First Priority Obligations,” other pending claims and fee along with the $3 million break-up fee required by the court. The sale be must authorized and approved by the bankruptcy court in a hearing set for Tuesday, Feb. 11, in Fayetteville. A secondary bid was recorded by Atlanta-based McCall Farms in the amount of $124.606 million, according to the filing.

There were a number of assets excluded from this proposed deal such as the stadium suite at Arvest Ballpark in Springdale, an airplane hanger at the Siloam Springs Municipal Airport, frozen re-pack facility and processing plant in Montezuma, Ga., and five residential properties each located in Siloam Springs.

Other personal items also excluded from the deal included a desk in the CEO’s office once belonging to Earl Allen, various sports and personal memorabilia located in the corporate offices of Nick, Josh and Rick Allen, and various historic photographs of the family business displayed in the corporate headquarters.

The stalking horse bidder, New York-based Seneca Foods Corporation, walked away from the deal to acquire Allens a second time this past week as the fruit and vegetable company was outbid for the Siloam Springs-based canned food business.

Seneca entered a bid at $148 million after combing through Allen’s records. Early reports indicated the winning bidder, Sager Creek, offered the court $159.98 million for the assets up for grabs. Subsequents details in the court filing late Friday, (Feb. 7) indicated the purchase price to be $124.781 million by Sager Creek, with McCall Farms backup bid of $124.606 million.

This is the second failed attempt by Seneca to close a deal with Allens in three years. Seneca said in December that Allens canned food business would fit into the company’s long-term growth plans.

Allens and Seneca tried to merge their operations in June 2011, but walked away from the deal in September 2011 when the businesses could not agree on terms.

Given that Sager Creek principals are venture capitalists/private equity investors and not manufacturers like Seneca or Allens, it’s possible the business could be dismantled and sold off or infused with cash and sold for a higher price.

Candidates for statewide elective office descended on Fort Smith on Saturday (Feb. 8) talking unreasonable tax cut plans, Obamacare and the role of the lieutenant governor's office.

Prior to the Ronald Reagan Dinner, hosted by the Sebastian County Republican Women, former U.S. Rep. Asa Hutchinson, who is seeking the Republican nomination for governor, took aim at Democratic candidate Mike Ross' tax cut proposal presented to the public this week. The plan called for a phased-in tax cut for all tax brackets at a total cost estimated at $574.5 million.

In describing the differences, Hutchinson said the tax cut proposal from Ross is not a reasonable plan that could work within Arkansas’ budget.

"Our plan reduces the income tax rate for those in the middle income category in Arkansas and the revenue loss is about $100 million for our state. Mr. Ross released his plan and there's two things. One, there's no start date to it, so if you have a plan to reduce taxes, you really need a start date and he does not have that. It's just really a promise to the future. And secondly, his really would cost us $500 million plus, which is not a reasonable plan to begin with of recurring revenue to have that kind of loss to the state that would hurt education, that would hurt essential services that we have."

Even with the price tag of Ross' plan well over a half billion dollars, Hutchinson said his opponent's tax plan does nothing to lower tax rates or create jobs within the state of Arkansas.

"Our goal is to ultimately reduce the high individual tax rate in Arkansas from 7% down, and that's not his objective. His objective is simply to index the rates to keep them at the same high percentage rate that we have now. And so there's no job creation benefit, we're still not competitive to our surrounding states. So two different objectives. Two different costs. Mine has a start date, his does not."(A brief video interview with Hutchinson can be viewed at the end of this story.)

And while Hutchinson may have been a vocal skeptic of Ross' tax cut proposal, at least one Republican candidate for lieutenant governor said he was excited at the level of cuts Ross was proposing and said even if the state's top two constitutional officers continue to hold different political affiliations, the plan showed that Ross is willing to entertain Republican-friendly policies.

"As you know, recently candidate (Mike) Ross has suggested his own income tax reduction plan and I'm very, very excited that he's into that policy arena and I'm also excited about the level of income tax reduction he thinks we need in Arkansas," said Rep. Charlie Collins, R-Fayetteville.

Without going into specifics, Collins said he would want big changes made to the proposal, though he said the plan itself was on the right track.

"While I would dramatically restructure the plan overall, I think with a couple of those parameters — (primarily) reducing income taxes to the tune of $575 million a year — we've got a lot that we can work on together to get some great progress for Arkansas."

Collins sidestepped a question about the possibility of retiring U.S. Rep. Tim Griffin, a Little Rock Republican, exploring a race for the lieutenant governor's office, instead talking about what he hoped to accomplish in the largely ceremonial position.

"I think the relationships I've built in the (State) House and the (State) Senate, that I can help be a very effective liaison between the executive branch and our (possible) next Republican (governor) of Arkansas and both the House and the Senate."

He explained in detail, as well, why he was seeking the office versus running for a third term in the House from his Fayetteville district.

"I think with a statewide platform, I can help build and champion and get more support for this message of economic freedom (and) making our state more competitive with the states around us," explaining that moving from the House to the lieutenant governor's office would allow him to take a jobs creation message across the state instead of having a limited voice as one of 100 representatives.

U.S. Rep. Tom Cotton, R-Dardanelle, who has made eliminating Obamacare a central message in his race for U.S. Senate against incumbent Democrat U.S. Sen. Mark Pryor, addressed a CBO report released earlier this week that projects 2 million fewer full-time employees in the workforce by 2017 as proof that the new health care law is hurting Arkansas workers. But instead of focusing simply on jobs, Cotton said the report shows that the legislation is leaving millions without coverage even after the bill's passage in 2010.

"It confirms our worst fears that we had about Obamacare. For instance, it projects that there is going to be the equivalent of 2.5 million job losses over the next ten years because of the impacts of Obamacare in places like Fort Smith, or like my hometown of Dardanelle, or all across America. It also confirms the botched rollout of the law is going to significantly drive down the number of people who are enrolled, which is going to drive up the cost to the taxpayer in terms of paying higher premiums or the bailout of insurers. And finally, it says that in 10 years, we still going to have 30 million Americans uninsured. That's the exact number the President was using five years ago to sell Obamacare. So after all the trillions of dollars of new spending and new taxes and canceled plans and loss of access to doctors, we're still going to have over 30 million Americans uninsured."

Cotton took time to layout what he is proposing for changes to the law during the next few years, should he be elected to the Senate.

"In the short term, we have to focus on laws that stop the immediate harms of Obamacare. For instance, the legislation we passed in the House in November that would allow people to stay on their plans by grandfathering those plans into the future. Or to prevent people from having to pay the income tax penalty. They can't get insurance under Obamacare because they can't' afford it. So those are the kind of short term measures we can pass."

Once President Barack Obama leaves office in January 2017, Cotton said he and his colleagues in Congress would be able to implement long-term solutions.

"In the long-term, though, we do have to repeal it because it is a fundamentally flawed law, but we have to replace it with market-based reforms and empower patients and doctors that address the problems of the pre-Obamacare system  — the high cost of health insurance and the lack of access, especially for people with pre-existing conditions."

Cotton said the way to tackle such problems was with more choice for consumers, including the ability for buyers to purchase insurance outside of their home state. He also proposed encouraging the increased use of Health Savings Accounts (HSAs) and tackling the high level of medical malpractice lawsuits. He also proposed creating a high-risk pool so "people with pre-existing conditions can get coverage in their state and then transition that coverage to employer-based coverage or individual market-based coverage, all of which would encourage competition. That would increase access and quality and it drives down prices."

Plenty of eyes are watching the outcome of a formal complaint by the National Labor Relations Board against the nation's largest private employer, Wal-Mart Stores Inc. But, the retail juggernaut is standing its ground and challenging the validity of the compliant filed last month.

The retailer said it acted within its rights to discipline workers who failed to adhere to the company's attendance policy, according Wal-Mart' recent response filing reviewed by The City Wire.

The complaint alleged three violations of NLRB rules.
• During two national television news broadcasts and in statements to employees at Walmart stores in California and Texas, Walmart unlawfully threatened employees with reprisal if they engaged in strikes and protests.

• At stores in California, Colorado, Florida, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, North Carolina, Ohio, Texas and Washington, Walmart unlawfully threatened, disciplined, and/or terminated employees for having engaged in legally protected strikes and protests.

• At stores in California, Florida, Missouri and Texas, Walmart unlawfully threatened, surveilled, disciplined, and/or terminated employees in anticipation of or in response to employees’ other protected concerted activities.

Wal-Mart denied the allegations in the filing. In the response, Wal-Mart argued the "intermittent job actions" described in the original complaint was difficult to distinguish from absenteeism. The retailer said it warned employees two and three times for missing scheduled work days and employees were repeatedly told the company would enforce its attendance policies.

Wal-Mart claims the walkouts were orchestrated by advocacy groups, supported and publicized by the United Food & Commercial International Workers Union. The "strikes" taking place at Wal-Mart were not traditional in the sense that workers walk off the job, while their union delegates negotiate for higher wages, better working conditions or some other demand. In the Wal-Mart incidents the workers protest at designated stores or outside the home office for a short time period.

Experts said while workers typically do have the right to strike, it is unclear if the walkouts at Wal-Mart fit the criteria and are covered by the 1935 National Labor Relations Act. 

"Walmart does not believe Congress created intermittent strike leave to serve as a prop for union campaign messaging at the expense of customer service, operational efficiency and the co-workers who have to cover for employees," the company noted in the Jan. 27 response.

The retailer claimed the strikes are intended to disrupt staffing and customer service. Wal-Mart also argued that it never gets notice from Our Walmart about which employees will strike or which stores or departments will be affected. The retailer claims these tactics are not protected by law.

Some legal experts have said the NLRB is moving into uncharted territory exploring the intermittent-strike issue with this case.

Three Arkansas-based retailers— Wal-Mart, Sam’s Club and Dillard’s — were sitting high on the 18th annual list of Brand Keys 2014 Consumer Loyalty Engagement Index (CLEI).

Retailers are finding that winning favor among fickle, demanding consumers is no easy feat, and maintaining that loyalty is even harder, according to Robert Passikoff, president of Brand Keys, a New York-based consumer marketing firm.

Passikoff told The City Wire that Bentonville-based Wal-Mart continues to dominate the discount category moving ahead of Target, following the massive data breach which occurred during the height of the holiday season. He said Target was resembling a wobbly table in the midst of a marketing shift from “cheap chic” to “always onsale.”

“When the data breach hit Target, it knocked one of the legs out from under the wobbly table. It’s likely going to take three quarters or so, for Target to repair the damage with its customers, who are shopping elsewhere in the meantime.” Passikoff said.

Despite the love/hate relationship with Wal-Mart, Passikoff said the retailer continues to engage loyalty from its customers who have come to depend on the low price guarantee.

“Coupons and discounts won’t save a retailer today and they certainly won’t differentiate it,” Passikoff said.

He adds that Wal-Mart has done a good job merchandising “believable brands” that consumers can see as “value” in their purchases.

In the crowded department store category, Passikoff said Macy’s garnered the highest loyalty ranking in the survey. But, the much smaller Little Rock-based Dillard’s also scored high marks, ranking just below Macy’s, according to the index results.

“In the department store category, brands are the buzz that resonate with consumers but it’s the value proposition of those brands that most encourages consumer loyalty,” he said.

Perhaps Macy’s does the best job helping its customers make an emotional connection to the brands it sells, but Passikoff also said Dillard’s scores high in emotional connections and perceived value among its customer base.

In the warehouse club category, Sam’s Club ranked ahead of Costco and B.J.s for brand loyalty engagement in 2014. Sam’s Club is known as a “house of brands,” and it’s the value associated with the top name brands that helps the Wal-Mart subsidiary maintain high levels of customer loyalty engagement, the expert said.

Costco ranked a close second to Sam’s Club in the 2014 loyalty index. But a real differentiator between the two competitors is that the Costco experience is mostly a brick and mortar trip. Sam’s Club continues to engage its members using online and mobile connections and in the past year has offered special coupons for instant savings on branded products. 

Passikoff said the entire retail sector will continue to face operating challenges as consumer demands escalate. He calls this phenomenon “zappofication” – a term Passikoff coined several years ago to describe escalating consumer expectations.

“It came from the online retailer Zappos. Most think they are a shoe company but they are really in the customer service business. Zappos figured out they could sell more shoes and make their customers very happy if they offered reduced shipping costs and free returns for unwanted merchandise. Now that has become the online industry standard,” Passikoff said.

He said there will always be someone bigger and willing to up the ante to win favor with consumers. In the 2014 index, Amazon.com ranked the highest among online retailers for customer loyalty and engagement, followed by Ebay.com, Overstock.com and Zappos.