Fort Smith sales tax revenue down less than predicted in April report

Though April sales tax revenue for Fort Smith came in lower than what was budgeted for the year, the drop was not as great as expected.

The city’s share of the Sebastian County sales tax totaled $1.421 million in the April sales tax report, down 1.55% compared to April 2019 and 1.7% below the budget estimate. The money from the city’s share of the countywide tax goes to the city’s general fund budget to among other things, pay for police, fire and other essential city services.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $1.776 million in the April report, down 3.4% from $1.839 million in April 2019 and 6.99% below the budget estimate.

City Administrator Carl Geffken said in April the city expected tax revenues to dip by 80% in April because of the economic environment caused by the pandemic, but noted the dip could range between 20% and 80%. He told city directors at the April 7 board meeting he estimated a 22% reduction in city sales tax revenue this year because of the pandemic.

“We are all very happy that the sales tax figures are only down approximately 7% in April,” Geffken said. “However, when I did the first projection, the prevalent information predicted a short, sharp shock with estimated reductions of 80% in April and May, and 50% in June and July.”

Geffken said the 22% reduction revenue in 2020 could still happen.

“No one wants the economic impact from the COVID-19 virus to extend for a long period but if the sales tax collections are below estimates for the remainder of the year, the overall, annual reduction in sales tax revenues could approach 22%. One month does not set a trend, and we will be updating our projections at the end of next month so we can have the sales tax collections for April and May,” he said.

Geffken has asked each city department to cut 10% of their budgets in order to make up for the potential lost revenue. He said there will be no cuts in personnel and there will be no furloughs.

Revenue from the city’s portion of the countywide tax for the first four reporting months of the year was $5.844 million, up 2.4% compared with the same period in 2019. Revenue from the 1% tax in the first three reporting months was $7.308 million, up 0.6%.

The April sales tax report shows the city’s share of the 1% Sebastian County sales tax is up 3.2% from March and the 1% tax for the city up 2.96%. However, in 2019, the 1% Sebastian County sales tax jumped by 11% from March to April and the 1% tax for the city jumped by 9%.

In 2019, Fort Smith’s share of the 1% Sebastian County sales tax was $17.265 million, up 2.1% over 2018, and up 5.66% over the city’s budget estimate. The 2019 total was $397,183 more than city officials budgeted to spend within the general fund budget. The 1% street tax generated $21.73 million in 2019, up 1.4% over 2018, and up 6.5% over the budget estimate. The 2019 total was $579,260 more than city officials budgeted to spend on the street tax program.

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2019: $21.73 million
2018: $21.503 million
2017: $21.204 million
2016: $21.156 million
2015: $20.308 million

Fort Smith portion of 1% countywide sales tax
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million
2016: $16.58 million
2015: $16.09 million