Kyle Kellams: Let's get this first day of August started with Michael Tilley, who's joining us on the phone from his office in Fort Smith. Michael, welcome back to the program.
Michael Tilley: Thanks for having me. I think it's about one hundred and fifty-two degrees outside.
Kellams: I think that's what it was showing—one hundred and fifty-two. That's what I'm going with.
Michael Tilley: Okay.
Kellams: All right. Well, we'll round up to the nearest one hundred and fifty. How's that?
Michael Tilley: Okay.
Kellams: Well, we got so many numbers to dig into this week, starting with home sales in the Fort Smith metro. Down almost eight percent in June. Tell me a little bit about what we know about that. And then I have a follow-up question.
Michael Tilley: Okay. Well, I think what we know is that it's kind of what we've talked about before where—um, well, let me quickly run through the numbers. Like you said, we—uh, the home sales in the metro [are] down 7.6 percent. The value of those home sales are down almost four percent. Uh, this is in the first six months. Uh, the average home price, however, uh, is up four percent. Um, and these numbers in the first half of 2025 are up against 2024, in which home sales were up 6.6 and the value of home sales were up 14 percent. So before anyone panics, you know, they're up against pretty tough comparisons.
Um, and I guess to answer maybe more directly your question, what we're hearing—um, there's no one primary factor that's driving home sales or driving a decline in home sales. First, I think, um, what we may be seeing is part of a return to normal, uh, following that blip that happened during and immediately after COVID. You know, if you look at 2021, [it] was a record year. We had 4,400 homes sold in the metro. Um, in 2020 was the record before that, 3,978. And then it's just kind of moderated back toward around 3,500 homes. Home sales. So maybe it's a return to normal.
Also, we have these relatively higher interest rates that are still kind of keeping people on the sidelines. I mean, if you're in a four percent mortgage, it's a tough call to move to a six percent or a seven percent mortgage.
Also, another thing we're hearing is there's not enough homes on the market—um, whether new or existing. And we're also seeing in the Fort Smith metro, uh, a rise in these nicer new apartment complexes and duplexes that encourage, you know, the generation that maybe when you start hitting 25 or 30, you go buy your home—well, it’s encouraging them to maybe stay in a home longer or, excuse me, stay in an apartment or a duplex longer. So those are some of the factors, uh, that we're hearing.
You know, it'll be interesting. The Federal Reserve, of course, this week declined to lower rates. So that is not going to be an incentive immediately to boost home sales. Um, but it's been—you know, we're not hearing anybody panic. No, Realtors are clamoring. It's just, um, I don't want to say it's completely a return to normal. Um, when you start approaching eight percent, if it starts getting close to ten percent, then there might be some cause for concern. But, um, it's not—it's not—I guess my point is, it's not falling off a cliff, and it doesn't seem to be close to doing that.
Kellams: Well, you've already answered my follow-up question, which was—
Michael Tilley: I'm sorry.
Kellams:Well, no, no, that's good. I was going to say, is this—could this be read as a return to normal? And you've addressed that. So let's move on.
All right. Fort Smith sales tax revenue in the June report up a little under two percent. That’s good news, right?
Michael Tilley: Right. And, um, it had kind of been trending in the wrong direction. This is not a complete reversal, but, um, the city’s share of the Sebastian County sales tax was over two million. That was up about a half a percent for the year. That countywide tax is down about 1.8—getting close to two percent. That’s not, um, that’s not a big dip.
And this is somewhat—um, somewhat of a similar story to the home sales story, in that there may be kind of a return to normal trend. Uh, for example, uh, the annual revenue from the one percent street tax grew more than 30 percent between 2020 and 2024. Uh, that’s a healthy rate of increase. So you had inflation. You had high rates of consumer spending driving that. We’ve seen inflation moderate, although evidence is emerging that maybe the tariffs are causing inflation to pick back up. And we've also seen evidence that consumers are pulling back somewhat on non-discretionary spending.
But, um, you know, again we've—the city of Fort Smith has had several years of really pretty significant and even some record-setting years of tax growth that, just like with home sales, that can’t continue. It’s going to moderate at some point.
And I would like to make a quick note on the sales tax. And I—I’m not even sure I should do this, but there’s a small group of folks in Fort Smith who point to sales tax decline as a sign of gloom and doom—you know, the end of the world. But, um, macroeconomic conditions have more to do with a sales tax increase or decrease than—than local or micro conditions. And a moderation from significant recent growth is not a sign of economic collapse. So those folks kind of need to relax a bit.
Kellams: Well, speaking of macroeconomics, if you're in the freight business, macroeconomics matter a lot. And, uh, you know, Arcbest is in the freight business and their quarter income and revenue numbers—down a little bit.
Michael Tilley: Yeah, down a little bit. It’s not a surprise. I mean, most consensus—the consensus estimate was going to be this way. And it’s—Arcbest is not a—they’re not unique. The whole freight industry, whether you’re in the shipping or logistics side, it's on both. It’s been—it’s been a tough business.
So yeah, the company, their net income in the first half of the year is almost 29 million. That’s well below the 44.6 million in the same period of 2024. Um, revenue in the first half, it was about 1.9—just under 2 billion. It's also below the 2.1 billion [in the] same period in 2024.
These numbers are not—again, they're not “uh-oh gosh” numbers. Um, and part of what we’re seeing—a couple of points—part of what we’re seeing is American Trucking Associations’ report in June and May. They showed a truck tonnage index decline. So this freight recession is—is somewhat ongoing. And what that results in is there’s still activity. People still need shipping and logistics, but there’s just a weaker demand. So you get companies like Arcbest can’t charge as much for those services.
For example, Arcbest reported—there’s a kind of key index, especially in the less-than-truckload industry in which Arcbest is in. It’s called the billed one-hundred weight. So their billed one-hundred weight number was $48.54 in second quarter, down 3.1 percent. Their revenue per shipment was down 4.3 percent.
However, their daily tonnage shipped was up 4.3 percent and shipments per day was up five point—almost six percent. So they're still active, but they're just not able to get that same rate that they used to get. So that’s, um, that’s lowering the overall revenue.
And so just to reiterate—and at risk of oversimplifying—um, demand for shipping is weak. That reduces prices—reduces prices that shipping and logistics companies can charge. And also these less-than-truckload shippers like Arcbest, they benefited for decades from shipments in the manufacturing sector, but that continues to be weak. And the company even mentioned it in this recent report, that there's weak demand in the manufacturing sector. So that does not help Arcbest.
But—and we'll see—the tariff impacts. That’s a lot of volatility with tariffs. You know, whether products are being pulled in ahead—does that help business? Is it going to reduce—reduce business in the back half? There’s a lot of volatility—volatility around tariffs. So we're going to watch—we'll watch how that plays out with Arcbest.
Kellams: Finally, if you're going to build a new prison, you're probably going to need water for this prison. There is a land purchased north of Charleston, a little bit more than 800 acres. The plan from the state is to build a prison there. How are they going to get water there? Will it come from Fort Smith? What do we know?
Michael Tilley: Well, we don't know a lot. That’s kind of the story that we had this week. Um, we know that Fort Smith city officials met, uh, earlier—met—had at least one meeting with state officials, uh, to provide water to this planned 3,000-bed prison, which is in nearby Franklin County. But they've had three meetings that were set by the state and then canceled by the state.
And what the state is wanting—state officials right now are testing that property for water wells and that kind of thing. Um, it'll be interesting. And most people don’t think they will find enough water wells—I mean, to provide the capacity and the pressure you need for that size of a prison.
The only other city that has it in the area is Fort Smith. Um, but there was—we had a report recently that essentially said Fort Smith doesn't now have the capacity or the treatment capacity—transmission capacity and treatment capacity, those are the words I’m looking for—to provide that. And the city will need to make significant expansions to that capacity to provide that.
So, you know, is that going to be five years, ten years out? We don’t know. We don’t know what the state’s asking for. We don’t know what the state’s willing to provide—money to Fort Smith to make that happen sooner. Um, we don’t know when. We don’t know because this has been a little bit under the radar. Hell, we didn’t even know the first meeting had happened until some folks kind of let the cat out of the bag.
And the city even facing a court hearing related to a potential Freedom of Information Act violation related to those discussions. So let’s hope the city and the state officials will be a little bit more open with this discussion. After all, a water system is a public enterprise. Um, a prison and criminal justice should be a public enterprise, and we’ll be spending public dollars on all of that. So let’s hope the public has a chance to know about what’s going on.
Kellams: Well, when you mentioned significant upgrades, that sounds like significant money.
Michael Tilley: Yeah, it's—it could be 200 million or more. I have been—yeah, yeah. I’m not talking 20 or 30 million. I mean, it's a lot of money. Now, that's what the city of Fort Smith has put in their 10-year plan. I don't know how much it would take. Again, we don't know because we're not getting a lot of information, but we don't know how much it would take to adequately meet what the prison needs. But, um, you know, hopefully if this continues and the state continues to push for wanting Fort Smith water, we’ll learn more about that.
Kellams: All right. We’ll learn more about more as we continue our conversations with Michael Tilley. Read about all that we’ve talked about at talkbusiness.net, updated daily. Michael, thank you so much for your time.
Michael Tilley: You're welcome, sir.
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