Fort Smith sales tax revenue ‘erratic,’ remains slightly above budget estimates

Fort Smith sales tax collections ended 2015 on a good trend but the first four reporting months of 2016 are pushing a thin margin for the city’s pocketbook, with collections that support the city’s general fund less than 1% above the budget estimate.

The city reported Tuesday (May 31) that revenue in the April report – which reflects February commerce – from the 1% street tax was $1.72 million, down 7.13% compared to the April 2015 report. Year-to-date revenue is $7.172 million, or 1.2% above the same period in 2015.

Fort Smith’s share of the countywide 1% sales tax for the first four reporting months is $5.609 million, up 3.2% compared to the same period in 2015 and 0.5% above the budget estimate. Revenue in the April report totaled $1.355 million, down 4.4%. It is the first month in the reporting year to post a decline. Revenue from the countywide tax funds a majority of the city’s general fund budget, with much of that paying for police, fire and other essential city services.

City Finance Director Jennifer Walker said in her report that revenue can be “erratic” and she does not yet advise budget changes.

“The total revenue to date is $315,817 less than the original budget estimate. City sales tax tends to be somewhat erratic month to month, but 2016 is trending below budget and forecasts year-to-date. Finance is recommending no change to budget at this time, but we will closely monitor the trends and evaluate budget adjustments in July if the trend continues,” Walker noted.

The countywide tax revenue generated $16.09 million in 2015, the first time above the $16 million mark since 2008 when collections were $16.61 million. The $465,284 in revenue above 2014 collections helped with city funding issues, especially in addressing what continues to be a estimated shortfall in the city’s contribution for police and fire employee pensions.

Tax revenue from the city’s 1% for streets and 1% for water/sewer bonds and fire and parks totaled $40.198 million in 2015. It is the second consecutive year the revenue topped $40 million, but is below the record $41.226 million collected in 2008. (See tax collection history at the end of this report).

WATER, SEWER SYSTEM REVENUE
With the estimated $480 million federal order to upgrade the city’s sewer system, water and sewer system revenue has become a more closely-watched revenue report. For the first four months, revenue totaled $16.072 million, up more than 44% over the $11.145 million in the same period of 2015. Of that increase, $4.55 million was from increased sewer charges.

Most of the revenue gain is from a rate increase approved in early 2015 by the Fort Smith Board of Directors to help cover the costs of the federally mandated work. The new rates began May 1, 2015, and were estimated to raise the average monthly residential bill from $19.63 to $47.91 by January 2017.

Water usage during the first four months is down 2.84%. Water usage in 2015 was up 3.85% over 2014, ending three consecutive years of usage declines. Following are the percentage changes in water usage in the previous five years.
2015: 3.85%
2014: –5.53%
2013: –8.34%
2012: –0.43%
2011: 1.96%

PREVIOUS ANNUAL SALES TAX COLLECTION INFO
Fort Smith 2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2015: $40.76 million
2014: $40.198 million
2013: $38.938 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
2015: $16.09 million
2014: $15.625 million
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