2020 sales tax revenue in Fort Smith likely to exceed budget estimates

Fort Smith’s portion of the Sebastian County 1% tax has generated $11.997 million in revenue for the city so far this year, up 4.85% from 2019, according to the city’s August report. Year-to-date collections from the tax is up 3.12% over the budget estimate.

Year-to-date revenue from the 1% city street tax totaled $14.938 million through August, up 2.42% compared with the same period in 2019, and 2.42% — $384,763 — above the budget estimate for the first eight months of the year.

The August report, which measures June transactions, shows the city collected $1.603 million from its portion of the countywide tax, up 8.79% from the budget estimate and 8.97% compared with revenue from the same time frame in 2019. Revenue from the tax supports the city’s general fund, which includes fire, police and other critical services. The August report shows the 1% street tax revenue at $2 million, up 10.33% from the budget estimate and up 10.32% compared with the same period in 2019.

Because of the COVID-19 pandemic, many thought the city would face a large shortfall in the 2020 budget. In April, Geffken told city directors that sales tax revenues for April and May were expected to be 20% of what the city would normally collect. Collections in June and July were expected to be 50% of what the city would normally collect, he said. In total, Geffken estimated a 22% reduction in city sales tax revenue because of the COVID-19 pandemic. To prepare for the reductions, city departments were asked to trim 10% from each of their budgets.

Fort Smith’s sales tax took the biggest hit in March, according to sales tax reports. Pandemic-related closings began in mid-March and continued through April, with openings beginning in May. The April report, which reflects revenues from February, showed a 1.55% decrease in the city’s share of the 1% Sebastian County sales tax from April 2019 and a 3.4% decrease in the 1% city street tax from April 2019.

April numbers, while down, also were better than experts predicted. The city’s share of the countywide tax in the May report, which showed tax revenues from March, was $1.38 million, down 1.67% from May 2019. Revenue for the 1% street tax in the May report was $1.693 million, down 4.3% from the May 2019 report.

The June and July reports, which showed sales tax revenue from April and May, reported revenues from the city’s portion of the countywide sales tax and the 1% street tax for both months was higher than the same time frames in 2019.

Vice Mayor and Director Kevin Settle and Director Lavon Morton agree that the positive August sales tax gives hope for a brighter financial year for the city.

“Based on the sales tax revenue in the latest report through August 31, which reflects revenue in excess of budget in each of the last three months and for the year through August, I am no longer concerned that sales tax revenue will fall below budget for the 2020 year,” Morton said.

Settle said in the city’s mid-year budget review study session in August that the city was taking the correct approach with the budget, noting that with Fort Smith primarily being a manufacturing town, it seemed to be weathering the pandemic better than many.

“As we continue to see the positive trend for sales tax revenue, then yes I am becoming more confident that we will make or exceed our budget projections,” Settle said of August’s sales tax report. “I am quite happy to see the positive news and hope to continue this moving through the remainder of the year.”

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