June report shows Fort Smith sales tax revenue remains below budget estimates

Fort Smith sales tax revenue continues to fall short of budget expectations for 2016 with June seeing only a 0.4% bump in revenue, which is 4.9% below budget estimates for the month, according to a Tuesday (July 26) memo from city Finance Director Jennifer Walker.

Walker said city sales tax revenue to date is 0.1% below last year and 5.4% below budget. The total year-to-date revenue is $602,393 less than the original budget estimate. The June report reflects taxes collected on April transactions.

“If this trend continues, the impact will be $1.2 million,” Walker said, adding that it would mean hits of $600,000 to the street sales tax fund, $450,000 to the bond fund, $75,000 to Parks sales tax and $75,000 to fire sales Tax, with no impact on the General Fund that is used for police and fire pensions.

In 2015, the Fort Smith Board of Directors voted to return benefits under the so-called LOPFI pension plan back to the levels in place in 2004. That action saved the city an estimated $477,000 in this fiscal year with $516,000 possible by year 2026. Even so, additional spending reductions and revenue increases totaling approximately $2.1 million annually are needed to keep the LOPFI contribution fund solvent beyond 2030.

A reduction of any kind to the city’s General Fund would only further depress those efforts, and on the city’s portion of the countywide sales tax, that negative trend is exactly what Walker’s most recent sales tax report shows. The city’s portion of that tax now sits at 0.9% below year-to-date budget estimates, or $77,158 less than expected.

“Finance will continue to watch the sales tax trends throughout the third quarter. If this trend continues, the impact to the General Fund will be approximately $175,000,” Walker said.

On a positive note, June’s numbers for the countywide share were 3.5% more than last June and 0.8% above budget. The city’s share of countywide sales tax to date in 2016 is 1.8% above last year, but 0.9% below budget estimates.

MID-YEAR REPORT CARD
According to mid-year Financial Statements through June 30, 2016, the city’s working capital fund used to fund infrastructure projects – like water and sewer systems, for example – is showing $52.742 million in revenue (43.8% of the budget) versus $47.53 million in expenses (43%), a $5.211 million surplus.

However, this figure does not account for a deficit to the general fund of close to $3 million with $18.286 million in revenues (38.9% of the budget) versus $21.248 million in expenses (43%).

That said, comparisons to last year’s actuals are ahead of schedule with the 2% sales tax collection used for streets, water/sewer bonds, and fire and parks hitting $21.005 million in actual collections. This is 51.53% of 2015’s actual collections of $40.76 million.

On the county side, $8.215 million has been collected thus far, pacing just north of 51% of 2015’s $16.09 million in actuals.

PREVIOUS ANNUAL SALES TAX COLLECTION INFO
Fort Smith 2% sales tax collection (1% for streets; 0.75% for water/sewer bonds; 0.25% for fire and parks)
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