Sales tax revenue in Fort Smith continues to beat budget estimates

When it comes to sales tax revenue, 2021 has started off strong. The February sales tax report shows that both the city’s share of the 1% Sebastian County sales tax and the 1% tax for city streets rose more than 15% from the same time last year.

Fort Smith City Director Neal Martin said being up 15% for the month of February shows that the Fort Smith economy remains strong.

“We have been on a streak of around 10 months of higher than expected revenues, so I feel good about how we are doing as a city,” Martin said.

The city’s share of the Sebastian County sales tax totaled $1.586 million in February, according to the report, up 15.6% compared to February 2020. In the 2021 budget, the city budgeted $1.372 million for the month, which is what the city made from the tax in February 2020, so the revenue is up 15.6% from the budget. Numbers in the February report reflect January transactions.

In January, the city’s portion of the 1% county sales tax was $1.863 million, up 11.26% from January 2020. So far this year, the city has collected $3.449 million from the tax, a 13.2% increase from the $3.046 million collected in the first two months of 2020. 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.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $1.967 million in February, 15.09% more than the $1.709 million in February 2020. Again, the budget estimate was what the city made in February last year, so the revenue is 15.09% above the budget estimate. In January, the city collected $2.319 million from the tax, up 10.57% from the $2.097 million in January 2020. So far for the year, the city has collected $4.286 million, up 12.6% from the $3.806 million collected in the first couple months of 2020.

“We are very happy to have sales tax collections to come in 15% over budget.  We budget conservatively to ensure a healthy fiscal condition in the general fund and those programs funded by sales taxes,” City Administrator Carl Geffken said. “These funds primarily go toward our Parks Department, Fire Department, Police Department, Streets and Drainage, and the repayment of debt for the Utility Department. As an example of how we utilize the additional revenue, the City has funded the additional work for the Parrot Island expansion while maintaining our current list of projects.”

The Fort Smith Board of Directors voted March 16 to fund a new slide at Parrot Island Waterpark. The city and Sebastian County Quorum Court each previously voted to contribute $250,000 toward the expansion of Parrot Island Waterpark with a new slide following the completion of the FlowRider amenity. The $250,000 for the expansion was included in the city’s 2021 budget. However, in order to build the slide needed for the city, another $220,833 is needed, Deputy City Administrator Jeff Dingman told the March 16. The city’s total share of the slide expansion project is expected to be $470,833, Dingman said.

In 2020, Fort Smith’s share of the 1% Sebastian County sales tax was $18.246 million, up 5.7% over 2019, and up 5.52% over the city’s budget estimate. 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.

The 1% street tax 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 city’s Finance Department compared the tax revenues for this month in 2021 with the same month in 2020 and found that the majority of the increase is due to an increase in sales tax collection from retail sales, Geffken said.

“We will be contacting the Department of Finance and Administration to ask if more specific details about our sales tax collections can be provided,” he said.

City Director Lavon Morton said that based on the way things look now, the city should exceed the budgeted sales tax collected again this year.

“The sales tax numbers are very good. It is also likely that the recently passed American Rescue Plan will result in some additional consumer spending, which, coupled with an improving economy, could help sustain a healthy level of sales tax revenue for the city,” Morton said.

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2020: $22.66 million
2019: $21.73 million
2018: $21.503 million
2017: $21.204 million
2016: $21.156 million

Fort Smith portion of 1% countywide sales tax
2020: $18.246 million
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million
2016: $16.58 million