Fort Smith sales tax collections indicate a slow Christmas

Sales tax collections for the city of Fort Smith were down in both city and county sales taxes for a period that included the typically busy Christmas shopping season.

Each of the city's 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.456 million in the February report, down 2.74% from the same period in 2013.

The collections in the February report were 4.76% 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 February are from taxes collected in December and transferred by merchants to the state in January.)

Collections so far in the 2014 reporting period of the two 1% taxes were $3.342 million, while the same period in 2013 saw collections of $3.426 million. The same period in 2012 saw $3.634 million and $3.315 million in 2011.

Total collections in the year 2013 of the two 1% taxes were $38.937 million. 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 February report was $2.583 million, down 2.55% from last year's total during the same period of $2.651 million. The collection was down 3.01% compared to the revenue estimate.

The countywide tax generated $15.353 million for Fort Smith during 2013, up 0.49% compared to 2012 and down 1.99% 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. The dip in collections compared to budget estimates has resulted in city officials seeking 4% budget cuts from all departments.

POSSIBLE BUDGET CUTS
It was April of last year when discussion of budget cuts came to the forefront, with the city requesting a total cut of 4% from all city departments.

Deputy City Administrator Jeff Dingman said no discussions of budget cuts have taken place yet, as the sales tax report was just released late Tuesday (March 25).

He said while there is concern with the city's pair of 1% sales taxes showing declines in revenue, the city's real concern would be the countywide sales tax due to it's impact on the city's general budget.

"The county could (require us to trim budgets). It doesn't look great, but it certainly could be worse. But we haven't talked about the timing of when we might evaluate it for the purposes of budget reductions."

Dingman said it would take more time before the city administration makes recommendations for possible budget cuts, adding that it was too early to even know what those cuts could be.

"With just two months here in the bank, I don't know that we're ready to start making those decisions at this point. Like I said, we did it in April and May time frame (last year)," he explained. "As far as a set benchmark where we say we need to change something, I don't know that we have a set threshold."

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2013: $38.937 million
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
2013: $15.353 million
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