July ends three straight months of sales tax gains

Consumers were unable to keep up the pace through the hot summer, with July sales tax collections in Fort Smith ending three consecutive months of year-over-year gains.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.535 million in July, down 3.09% from the same period in 2009. The collections also were down 3.79% 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 September are from taxes collected in July and transferred by merchants to the state in August. However, the city records the September remittance from the state of taxes collected in July on its August report.)

For the first eight reporting months of 2010, each of the 1% taxes have collected $12.56 million, down 2.09% 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, 4.36% for the first five months and 2.9% for the first seven months.

The city’s portion of the one-cent countywide sales tax was $1.23 million in the August report, down 4.48% from the same period in 2009. For the first eight reporting months of 2010, the city has collected $10.114 million on its portion of the countywide tax, down 2.38% 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 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. To date, the revenue from the countywide tax is $246,119 less than in 2009.

Budget problems resulting from a decrease in sales tax collections, franchise fees and other revenue streams have resulted in 2010 budget cuts.

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, according to City Finance Director Kara Bushkuhl.

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 (with % comparison to 2009 month)
August 2010: $1.23 million (-4.48%)
July 2010: $1.315 million (0.2%)
June 2010: $1.262 million (4.09%)
May 2010: $1.256 million (1.09%)
April 2010: $1.308 million (-3.03%)
March 2010: $1.160 million (-4.90%)
February 2010: $1.140 million (-2.33%)
January 2010: $1.439 million (-8.05%)

Fort Smith sales tax collection
August 2010: $1.535 million (-3.09%)
July 2010: $1.627 million (3.99%)
June 2010: $1.578 million (5%)
May 2010: $1.555 million (1.47%)
April 2010: $1.646 million (-2.56%)
March 2010: $1.429 million (-6.28%)
February 2010: $1.398 million (-3.23%)
January 2010: $1.789 million (-9.77%)

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