Fort Smith tax revenue down, but decline rate lessens

No one is jumping for joy, but improvements are appearing in the rate of decline with Fort Smith and Sebastian County sales tax collections.

Still, the loss of revenue to the city of Fort Smith general fund for the first four months of 2010 is $254,053 compared to the same period of 2009.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.646 million in April, down 2.5% from the same period in 2009. The collections were 2.54% below budget estimates. (Because the state of Arkansas has a two-month delay in reporting collections back to the cities, the city of Fort Smith — for budgeting purposes — has historically reflected the collections on a one-month delay. Which is to say, the tax collections remitted to cities in May are from taxes collected in March and transferred by merchants to the state in April. However, the city records the May remittance from the state of taxes collected in March on its April report.)

For the first four months of 2010, each of the 1% taxes have collected $6.263 million, down 5.71% from the same period in 2009. That year-over-year rate of decline has dropped from 7% for the first two months of 2010 and 6.79% for the first three months of 2010.

The city’s portion of the one-cent countywide sales tax was $1.308 million in the April report, down 3% from the same period in 2009. For the first four months of 2010, the city has collected $5.049 million on its portion of the countywide tax, down 4.79% from the same period in 2009. The countywide year-over-year rate of decline has dropped from 5.6% for the first two months of 2010 and 5.39% for the first three months of 2010.

Deputy Fort Smith City Administrator Ray Gosack said city officials are relieved to see the improving trend but are still firming up plans for proposed budget cuts based on what the general fund looks like in June.

“The good news is that the rate of decline is slowing, but the bad news is that it’s still less than what we’ve budgeted,” Gosack said. “It’s not enough (improvements) yet to help us avoid that (budget cuts).”

The countywide tax collection is critical because the revenue is a little more than 40% of the city’s general budget of roughly $40 million. A majority of the general fund budget general supports fire, police and other critical city functions.

Areas under review for budget cuts are travel and training expenses and a reduction of city contributions to the employee wellness fund. That fund balance is just north of $6 million, Gosack said.

The April report from the city, posted Thursday (May 27) afternoon, supports comments posted Thursday morning as part of The Compass Report. In the report, economist Jeff Collins said the first quarter of 2010 saw moderate improvements in Fort Smith regional sales tax collections.

“Locally, current year-on-year tax collections at the county level indicate retail activity was weak but improving,” Collins said in the report. “While there is a lag in sales tax collection reporting by the state, the discernible trend is clearly positive. This is a fundamental change from data for last quarter.”

• PAST SIX MONTHS
Countywide sales tax collection
April 2010: $1.308 million
March 2010: $1.160 million
February 2010: $1.140 million
January 2010: $1.439 million
December 2009: $1.156 million
November 2009: $1.048 million

Fort Smith sales tax collection
April 2010: $1.646 million
March 2010: $1.429 million
February 2010: $1.398 million
January 2010: $1.789 million
December 2009: $1.446 million
November 2009: $1.409 million

• PREVIOUS ANNUAL COLLECTION INFO
2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2009: $37.554 million
2008: $41.226 million
2007: $37.858 million
2006: $36.840 million

Fort Smith portion of 1% countywide sales tax
2009: $15.04 million
2008: $16.61 million
2007: $15.15 million
2006: $14.71 million