Fort Smith sales tax collections up again in June report

Two consecutive months of sales tax collection gains are welcome but not likely to be enough to allow the city to backtrack on $1.53 million in budget cuts.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.578 million in June, up 5% from the same period in 2009. The collections also were up 4.99% 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 July are from taxes collected in May and transferred by merchants to the state in June. However, the city records the July remittance from the state of taxes collected in May on its June report.)

For the first five months of 2010, each of the 1% taxes have collected $9.397 million, down 2.9% 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, 5.71% for the first four months, and 4.36% for the first five months.

The city’s portion of the one-cent countywide sales tax was $1.262 million in the June report, up 4.09% from the same period in 2009. For the first six months of 2010, the city has collected $7.568 million on its portion of the countywide tax, down 2.46% 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, 4.79% for the first four months and now down to 2.46% for the first six 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.

“It is encouraging to see two consecutive months of modest increases,” Deputy City Administrator Ray Gosack said when asked about the June report. However, he said the city’s financial problems remain.

“We are probably not going to see the pressure come off of our budget this year. I think the hope is now that it may help with next year’s budget,” Gosack explained.

The Fort Smith board of directors on July 20 approved budget cuts of more than $1.53 million to address a growing shortfall in revenue. The biggest part of the budget cut involves a $1,176,470 reduction in payments into the city’s health and wellness fund. The fund has a more than $6 million surplus and “there is sufficient money” to afford the temporary reduction, City Finance Director Kara Bushkuhl told the board during their Tuesday evening regular meeting.

A hiring freeze on 10 vacant positions will pull another $353,610 from the budget, and no longer providing meals at board study sessions will save an estimated $1,700 a year.

2010 SALES TAX COLLECTIONS
Countywide sales tax collection
June 2010: $1.262 million
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
June 2010: $1.578 million
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