Census impact: Fort Smith revenue decline to hit in 2012

A relative decline in Fort Smith population is likely to reduce the city’s annual tax and turnback revenue by at least $340,000 beginning in fiscal year 2012.

The calculation, from Fort Smith Finance Director Kara Bushkuhl, shows that the city’s about $40 million general fund for 2011 would have been reduced by $283,493 if the Census figures were applied.

Fort Smith’s population grew by 7.4% between 2000 and 2010, according to figures released Feb. 10 by the Census Bureau. Population in Arkansas grew from 2,673,400 in 2000 to 2,915,918 in 2010, a 9.1% increase. Sebastian County’s population as of 2010 was 125,744, up 9.3% in the decade.

Because state and county rates of growth are higher, the city in 2012 The will receive less from the general state revenue turnback, gasoline tax turnback and the countywide sales tax.

“If the state does not increase the amount of funds available for distribution to cities for both the general and the gasoline tax turnback revenues, then the city could realize a decrease in funding of approximately $20,000 in the General Fund and $58,500 in the Street Maintenance Fund,” Bushkuhl explained in her note to City Administrator Ray Gosack.

The city may also see a $58,500 reduction in state funding for the city’s street maintenance program.

According to Bushkuhl’s report, revenue to the city has averaged 69.8% of the total distribution of the Sebastian County 1% tax. However, the city’s 2010 census population is now about 68.6% of the county’s 2010 census population. Countywide tax proceeds in 2010 totaled $21.348 million, with the city’s share reaching $14.892 million.

“If the new city population had been applied to the 2010 county sales tax revenue, the city would have received $246,622 less than actual. If the new city population were applied to the 2011 county sales tax for the entire year, the estimated decrease from the 2011 Budget estimate for the city’s share ($15,326,500) would be $263,493,” Bushkuhl noted.

The reduced revenue will come from a general budget from which police, fire, parks and administrative services are funded.

Reduced revenue will follow several years of budget cuts resulting from recession-induced lower tax collections.

The city made $1.43 million in budget cuts during 2010. The biggest cut was a $717,000 reduction in payments to the city’s health & wellness fund. The cuts in 2010 and pushed forward into 2011 also include a decrease of about 28 full-time positions, and a $790,000 proposed cut to payments into the health & wellness fund.

The general fund projected ending balance for 2011 is 8.9% of the total budget, down from the desired goal of 15%.

City expenditures approved for 2011 total $224.55 million, about $16 million less than estimated expenses in 2010 and almost $50 million less than expenses in the 2010 budget approved in December 2009.

Bushkuhl advised that the Fort Smith Board of Directors and city staff will soon have to account for reduced revenue.

“If I am correct, the new census population will be applied on a go forward basis.  Therefore, the total reduction will not be applied for 2011. However, the total reduction will have to be considered in future years. The city’s share of the county sales tax represents 39% of the city’s General Fund revenue and this will be a large decrease in funding for it,” Bushkuhl wrote.