$19.84 million in Fort Smith roof permits for hail damage, more expected; work could boost city tax revenue

by Aric Mitchell ([email protected]) 202 views 

Image from early minutes of the hail storm that hit Fort Smith in April.

What does a hailstorm cost? While there are a number of variables that go into the answer, Fort Smith is starting to get an idea with close to $20 million in roofing repairs having been logged by the city since May 2.

According to Jimmie Deer, a building official with the city of Fort Smith, the hailstorm that struck the city for about 30 minutes on the afternoon of April 29 has resulted in an estimated $19.845 million in roofing repairs alone on 2,272 permits. This total includes permit filings through July 15, and much more roof repair work is expected to be permitted.

From that total, the city has collected $124,134.50 in permit fees, and City Finance Director Jennifer Walker estimates it could result in additional revenue to the city on the sales tax side – a plus since every little bit helps amid underperforming numbers for the first portion of 2016.

Through April, the city’s 2% sales tax collection was 5.5% below the budgeted estimate of $9.258 million and off 0.2% in actual year-to-date comparison. Furthermore, Fort Smith’s portion of the 1% countywide sales tax collection through the first five reporting months has seen a slight increase in year-to-date actuals, but is trending down at 1.3% below the estimated $6.92 million. In dollar amounts, the deficits between actual and estimated are approximately $509,000 on the city sales tax side and about $87,000 on the city’s portion of the countywide sales tax.

There is precedent for a bump in sales tax revenue because of storm damage. Collections of the city’s 1% sales tax for the street program generated a record $20.613 million in 2008, $1.684 million more than the $18.929 million in 2007 and more than the $18.777 million in 2009. Collections of the 1% tax did not again reach above $20 million until 2014 with $20.099 million.

At the time much of the bump in revenue was credited to not only repair work from hail and wind damage that hit the area in early 2008, but also collections from spending by non-resident work crews who stayed in the area for many weeks – if not months.

While Walker acknowledged the city could see a bump in sales tax revenue, she was hesitant at assigning specific numbers, commenting to Talk Business & Politics on Monday (July 18) that sales tax collections resulting from roof repairs brought on by the hailstorm cannot be estimated “on the total value of the construction permits because the labor is not taxable, only the materials used in construction … and we don’t have that information.”

“However,” Walker said, “if we roughly estimate that three percent of total construction cost is sales tax (I’m basing this on my own roof replacement estimate), then the City could receive up to $125,000 in city sales tax and up to $65,000 in county sales tax. Because not all roof construction is total replacement, the City will more likely receive $150,000 or less in sales tax.”

Walker said her estimate is for all of 2016.

Fort Smith-based State Farm agent Arvid Bean estimates the current surge in permitting for roof repairs will continue for another “three to six months” as companies typically file for permits on the individual jobs as they go, after first conferring with a claims adjuster on the agreed-upon value.

Bean and State Farm data analyst Kip Davis said in Arkansas homeowner claims were at approximately 3,600 for the company while in Oklahoma the number was around 1,000. Davis said State Farm could not provide dollar estimates because they wouldn’t present an accurate depiction and they are still working through the claims anyway, but dividing the average valuation on a permit as issued by the city of Fort Smith by the total number of permits – using Deer’s numbers – the total is approximately $8,734.76 per permit.

Extrapolating that figure to State Farm’s claims numbers, brings the total cost to $40.179 million in homeowners claims alone.

But that number would not account for the amount in auto damages incurred, which Bean says is every bit as formidable as what the company is looking at on the homeowners side. The numbers as provided by Davis back that up with 5,000 auto claims in Arkansas and another 1,300 in Oklahoma.

A 2014 article in Auto Trends magazine put the average cost of repairing hail damage on a personal passenger vehicle at around $2,500, so taking State Farm’s numbers as an example, that would add approximately $15.75 million to reach a total of $55.929 million in hail damage repair costs in the Fort Smith metro. To be clear, those totals are based on a combination of data from the city and State Farm and do not come from the insurer.

And while State Farm is the largest property and casualty company in the U.S. with $50.8 billion in net premiums written, according to A.M. Best, it is but one insurance company. It does not account for totals from other insurers and only offers a glimpse of what other property and casualty companies – and their customers – are seeing.

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