Finally! … Fort Smith sales tax collections up in May

The 1.47% gain in April sales tax collections in Fort Smith are not likely to stem the need for city budget cuts, but it is a refreshing change of pace and the first month in 2010 that reflects an increase over the same month in 2009.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.555 million in May, up 1.47% from the same period in 2009. The collections also were up 1.47% compared to 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 June are from taxes collected in April and transferred by merchants to the state in May. However, the city records the June remittance from the state of taxes collected in April on its May report.)

For the first five months of 2010, each of the 1% taxes have collected $7.819 million, down 4.36% from the same period in 2009. That year-over-year rate of decline has dropped from 7% for the first two months of 2010, 6.79% for the first three months of 2010, and 5.71% for the first four months.

The city’s portion of the one-cent countywide sales tax was $1.308 million in the May report, up 1% from the same period in 2009. For the first five months of 2010, the city has collected $6.306 million on its portion of the countywide tax, down 3.67% 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, 5.39% for the first three months of 2010, and 4.79% for the first four months.

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.

City Finance Director Kara Bushkuhl reported that the county collections directed to the city are down $240,559 compared to actual receipts in 2009 and is down$300,480 compared to the revised budget for the first five months of 2010.

Tax collection declines resulted in City Administrator Dennis Kelly moving June 23 to seek budget cutting ideas from city employees. A memo Kelly sent to employees set out a series of meetings between June 28 and July 8 to seek their input on how to cut the budget. City employees were asked in the memo to rank cost-cutting options in order of most preferred to least preferred and encouraged them to list ideas not on the list. The choices include letting the city make up the shortfall by reducing the amount paid for employee benefits, requiring employees to take unpaid days off, possibly once a month, taking a pay cut, or by eliminating positions through layoffs.

Information gathered during the meetings and from the surveys will be used to package a plan Kelly will then present to the board.

Some members of the Fort Smith board of directors have been critical of the process, saying that employee pay and benefit cuts should be a last resort move.

2010 SALES TAX COLLECTIONS
Countywide sales tax collection
May 2010: $1.256 million
April 2010: $1.308 million
March 2010: $1.160 million
February 2010: $1.140 million
January 2010: $1.439 million

Fort Smith sales tax collection
May 2010: $1.555 million
April 2010: $1.646 million
March 2010: $1.429 million
February 2010: $1.398 million
January 2010: $1.789 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