Year-to-date share of countywide sales tax up 17% in Fort Smith

Fort Smith’s sales tax revenue stayed strong in May. Though it dipped a little from April, revenues are much higher than the same period in 2020. Sales tax revenues have consistently come in higher than estimated and higher than the corresponding month 12 months ago.

The city’s share of the Sebastian County sales tax totaled $1.683 million, according to the city’s May sales tax report, the third highest for the year. Collections were $1.946 million in April and $1.863 million in January. May’s revenue was up 21.92% compared to May 2020. Numbers in May’s report reflect April transactions. In the 2021 budget, the city budgeted $1.381 million, the same amount the sales tax generated in May 2020, so the revenue is up 21.92% from the budget.

“This is great news for the city and shows continued strength. 2021 has been a fantastic year for the city with three big job announcements/expansions, the foreign fighter mission announcement, the ACHE Research Institute, etc. Continued strength shows that companies and citizens are investing locally,” said Fort Smith City Director Neal Martin. “Because boards of the recent past were able to get our reserves healthy, it allowed the city to provide $5 million for the runway expansion from the foreign fighter” center.

So far this year, the city has collected $8.474 million from its portion of the county sales tax, a 17.27% increase from the $7.226 million collected in the first five 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.

“The continued strong sales tax collections will certainly help the city’s budget. I expect the increase over 2020 sales tax revenue to continue for several months at a smaller percentage increase as the reopening surge levels out. All in all, very good news for Fort Smith,” said Director Lavon Morton.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $ 2.205 million in May, a 30.23% increase from the $1.694 million in May 2020. Again, the budget estimate was what the city made in May last year, so the revenue is 30.23% above the budget estimate. So far for the year, the city has collected $10.667 million, up 18.5% from the $9.002 million collected in the first five months of 2020.

“If we have a surplus (in revenue) this year, and it looks like we will, we need to be smart about how it is used. I think our board has a focus on our city and will use it in the best manner possible,” Martin said. “There are a lot of things around water/sewer that need to be looked at, especially if the federal government continues its overreach into forcing our citizens into more unprecedented rate increases.  We are dealing with the sins of the past, but we need relief from the federal government.”

After years of failing to maintain water and sewer infrastructure to federal standards, the city entered into a federal consent decree with the U.S. Environmental Protection Agency (EPA) and U.S. Department of Justice in late 2014. The consent decree required the city to make an estimated $480 million worth of sewer upgrades over the course of 12 years. Over the past six years, the city has spent approximately $127 million in capital costs for required improvements, said Fort Smith Director of Utilities Lance McAvoy at Board of Directors study session held June 22. The city spent about $200 million on storage tanks and equalization basins to reduce wet weather sanitary sewer overflows, which are the basis for the consent decree requirements.

If the city has to do what is demanded of the consent decree within the timeframe set to be in full compliance, it will cost the city well over $600 million in capital cost because of additional areas found that have to be fixed within a certain timeframe and inflation, McAvoy said. If no other funding can be found, such as a sales and usage tax, bond issues, grants or federal funding, it would take an increase in sewer rates to fund the work, McAvoy said. That rate increase would need to be about 11% annually for the continuation of the decree.

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.

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