Downward trend continues for Fort Smith tax revenue

The good news is that Fort Smith tax revenue collections are consistent. The bad news is that the trend line is moving in the wrong direction.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.622 million in the September report, down 1.33% from the same period in 2012.

The collections in the September report were 4.27% 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 October are from taxes collected in August and transferred by merchants to the state in September.)

For the first nine reporting months of 2013, each of the 1% sales taxes generated $14.757 million, down 1.21% compared to $14.937 million in the same period of 2012. The year-to-date collections are also 4.09% below budget estimates. The dip in collections has resulted in city officials seeking 4% budget cuts from all departments.

Collections in 2012 of the two 1% taxes totaled $39.21 million, slightly ahead of the $38.683 million during 2011. The 2011 collections were 3.9% above 2010 collections.

Fort Smith’s share of the county 1% sales tax in the September report is $1.279 million, down 1.09% compared to September 2012. The collection was down 3.51% compared to the revenue estimate.

For the first nine months of 2013, the countywide tax has generated $11.679 million for Fort Smith, down 0.33%% compared to 2012 and down 2.12% compared to budget forecasts.

The countywide tax generated $15.279 million in 2012, just ahead of the $15.15 million in 2011, but lower than the peak collection of $16.61 million in 2008.

The countywide tax collection is critical because the revenue is a little more than 40% of the city’s general budget of roughly $42 million. A majority of the general fund budget general supports fire, police and other critical city functions.

LEAKAGE ISSUE
The September report indicating a continued downward trend in tax collections comes a day after the Fort Smith Comprehensive Steering Committee received a draft vision statement that included language about “leakage” of retail activity out of Fort Smith and the metro area.

The presentation, conducted by officials with Philadelphia-based Wallace, Roberts and Todd, suggested that a significant amount of commercial activity flows out of Fort Smith to other parts of the region or to other regions.

General merchandise was among the highest, with $272.9 million flowing to other areas. In all, the leakage taking place in the Fort Smith MSA is estimated to be $812.8 million, according to WRT.

By comparison, overall tax revenue in Arkansas is up for the first three fiscal months of 2013 (July 2013-Sept. 2013). Total revenue during the period was $1.5 billion, up 4.3% compared to the same period in 2012 and up 2.2% over the forecast.

Arkansas sales and use tax collections – considered a measure of consumer confidence and spending – totaled $567.3 million in the first three months, up 6.3% compared to the same period last year and 1.7% above forecast.

PREVIOUS ANNUAL COLLECTION INFO (Fort Smith)
2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2012: $39.210 million
2011: $38.683 million
2010: $37.229 million
2009: $37.554 million
2008: $41.226 million
2007: $37.858 million
2006: $36.840 million

Fort Smith portion of 1% countywide sales tax
2012: $15.279 million
2011: $15.15 million
2010: $14.89 million
2009: $15.04 million
2008: $16.61 million
2007: $15.15 million
2006: $14.71 million