Though many thought 2020 would cause a deficit in revenues for the city, Fort Smith’s share of the 1% Sebastian County sales tax in 2020 was $18.246 million, up 5.7% over 2019, and up 5.52% over the city’s budget estimate.
The city’s share of the countywide tax is important because the revenue provides money for the city’s general fund budget, with much of that budget paying for police, fire and other essential city services. The 2020 total was $953,824 more than city officials budgeted to spend within the general fund budget. The tax has posted year-over-year gains for the past five years, but 2020’s jump was the largest seen during that time period.
“This was good news and continued the trend we saw beginning in (the second quarter). I think it is further proof that our economy was strong despite the pandemic and partial shutdowns as a result,” said Director Neal Martin. “I think people stayed local and bought local and that is reflected in these numbers. 2019 was a strong year and to beat those numbers is very good news for the city.”
When the COVID-19 pandemic first hit in March, predictions for sales tax revenue was that it would take a dive. In April, City Administrator Carl Geffken told city directors that sales tax revenues for April and May were expected to be 20% of what the city would normally collect because of the pandemic and state-regulated closures of restaurants, bars and other business. 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.
“The higher than anticipated sales tax revenues for 2020 is surprising considering the impact of COVID-19 on certain parts of the overall economy,” said Director Lavon Morton. “The local economy appears to be good in most categories, with the exception being restaurants, entertainment venues and related businesses, which continue to suffer from COVID-related issues and restrictions.”
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 revenue 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.
“Higher than anticipated sales tax revenues have placed us on a firm footing as we begin 2021. We should all be grateful for the thoughtful sacrifices, planning, and budgetary decisions that were taken during the early stages of the pandemic. As more people receive vaccinations and we begin to defeat COVID, we should anticipate an exciting second half of 2021 filled with more prosperity and growth for our community,” said Director and Vice Mayor Jarred Rego.
The December report, which measures October’s transactions, shows the city collected $1.6 million that month from its portion of the countywide sales tax, up 5.77% from the budget estimate and up 5.96% compared with revenue from the tax in December 2019.
Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $22.66 million in 2020, up 4.02% over 2019, and up 6.08% over the budget estimate. The 2020 total was $1.298 million more than city officials budgeted to spend on the street tax program. The December report showed the 1% street tax revenue at $1.976 million for the month of December, up 10.55% from the budget estimate and up 3.29% compared with the same period in 2019.
The 1/4 cent sales tax for fire and parks generated $5.67 million in 2020, above the $5.43 million in 2019, and 3.8% above the budget estimate. The total above the budget estimate was $207,526.
Martin said though sales tax revenues for 2020 were good, they should not affect the 2021 budget because the city has to be conservative in its spending since it is still dealing with a lot of unknowns.
“However I do feel we will have a strong 2021. We are coming off two really good years from a revenue perspective, and the city is breaking records in building activity. We’ve already seen two large job announcements in 2021 with large dollar investments in buildings and equipment,” Martin said. “I hope I’m correct, but I think we will break more records in 2021 as more and more companies and individuals see what our city has to offer and what our workforce can bring to their business.”