Year-to-date Fort Smith tax revenue up, but below estimates

While the first five months of 2014 have shown generally sluggish sales tax receipts, June's figures released by the city of Fort Smith on Aug. 1 show a marked improvement. But the city's finance director told city directors in an e-mail that the reason behind the increase is not yet known.

The city's sales taxes (1% for streets and 1% combined for water and sewer projects and fire and parks and recreation) collected $3.691 million in the June report, 12% higher than budgeted.

Overall for the first six months of the year, revenue from the city's sales tax collections are 1.49% above last year's totals for the same period and 0.92% below this year's projected budget.

The total in the June report represents a overall drop in all sales tax receipts of 0.44% below budget. (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 June are from taxes collected in April and transferred by merchants to the state in May.)

Collections so far in the 2014 reporting period of the city's sales taxes were $20.054 million, up from collections of $19.759 million in the same period of 2013. The same period in 2012 saw $20.026 million with $19.273 million in 2011. The city sales tax for fire and parks did not begin collecting revenues until November 2012.

Total collections of the Fort Smith city sales taxes in 2013 was $38.938. Collections in 2012 totaled $39.21 million, just ahead of the $38.684 million collected in 2011. The 2011 collections were 3.9% above the 2010 revenues of $37.23 million.

Fort Smith's share of the countywide 1% sales tax in the June report was $1.428 million, up 13.94% from June 2013 when the city's share of the county sales tax revenues was $1.253 million. The figure was also 13.41% above revenue estimates of $1.259 million.

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 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.

In her email to the Board of Directors, Finance Director Kara Bushkuhl that she believed the spike in sales tax revenues for the month to not necessarily be because more shoppers were hitting the mall or big box stores.

"It appears that this is some kind of adjustment but I have no information over what period it would cover or for what reason.  Other cities are experiencing varied fluctuations like Fort Smith is seeing," she wrote.

Bushkuhl added that her office had reviewed information in an attempt to narrow which sector may have been responsible for the spike, but again said it could not be determined.

"When reviewing the NAICS (North American Industry Classification System) code information for the first 6 months, there does not appear to be any large fluctuations in the four largest categories that comprise 39% of the total city sales tax paid.  The four largest categories are: general merchandise, full service restaurants, building materials, and grocery."

In addition to county and city sales taxes being above target, Bushkuhl said franchise fees were up, as well. But she noted that could change depending on the weather.

"The franchise fees for the 1st two quarters are above last year and above budget expectations.  Electric is up 10% and natural gas is up about 12% over last year.  This may not hold for the 3rd quarter if we continue to see cooler temperatures in August and September as we have in July."

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