Fort Smith sales tax revenue up more than 15% through July report

Fort Smith’s sales tax revenue had another strong month with revenue 9% higher than this time last year. The city’s share of the Sebastian County sales tax brought $1.79 million to the city’s coffers in July, 9.77% higher than the $1.63 million in July 2020, according the city’s July’s sales tax report.

Numbers in July’s report reflect June transactions. In the 2021 budget, the city budgeted $1.63 million, the same amount the sales tax generated in June 2020, so the revenue is up 9.77% from the budget.

In the first seven months of the year, the city has collected $11.993 million from its portion of the county sales tax, a 15.37% increase from the $10.395 million collected through July 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.

“Simply put, Fort Smith has a strong economy. People are working hard and spending their dollars locally,” said Jarred Rego, city director and vice mayor. “On average, our revenues have come in nearly 10% over what we’ve anticipated. Seeing these higher-than-anticipated numbers allows us to operate on a more accurate budgetary footing as we plan for the year to come. Also, it ensures that there is more money available to be spent on pillars of the community like public safety, parks, and water projects.”

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $2.23 million in July, a 9.9% increase from the $2.01 million in July 2020. Again, the budget estimate was what the city made in June last year, so the revenue is 9.9% above the budget estimate. So far for the year, the city has collected $15.072 million from the tax, up 16.49% from the $12.938 million collected in the first seven months of 2020.

Director Neal Martin said the July sales tax report shows the city doing well in 2021, noting increased local spending and internet sales tax might be the primary factors for the higher numbers.

“(The strong tax revenues) will definitely help with larger projects, but we still have to budget conservatively. I want to see a longer period of time of increased revenue before we change things too dramatically. We need to give our employees raises and take care of the things we might not have been able to in the past, while being very careful how we spend the dollars the citizens have entrusted in our care,” Martin said.

Though increased sales tax revenue is good for the city, it does not help pay for work needed on through the consent decree. After years of failing to maintain water and sewer infrastructure to federal standards, the city entered into a federal consent decree with the United States Environmental Protection Agency (EPA) and U.S. Department of Justice (DOJ) 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. In June, Fort Smith Director of Utilities Lance McAvoy told board members that because of inflation and the actual state of the city’s sewer system, that number could be closer to $650 million. He said he did not have an exact estimate because there are still too many unknowns about work needed.

The sales taxes the city collects are 1% for streets and drainage that are overseen by the Department of Engineering, 0.75% to pay off bonds that were issued for water and sewer, and 0.25% that is split 50/50 for the pire and parks departments, said City Administrator Carl Geffken. Fort Smith receives over 70% of the countywide sales tax because the distribution of that tax is based on the city’s population to the total population in Sebastian County. The $18.3 million budgeted in 2021 from countywide sales tax goes to the city’s general fund and the majority of the general fund supports the Police and Fire Departments budgets which are $17 million and $12 million, respectively.

“None of the sales tax revenues help pay for the consent decree work. The 1% for streets and drainage pay for the paving of city-owned streets, a portion of the widening of Zero Street, major drainage projects, and new or renovated intersections and traffic lights, such as the new traffic light at Phoenix and 46th Street,” Geffken said.

However, the 0.75% sales tax that pays off bonds did pay for water and sewer work and by issuing bonds, the city receives the funds up front and pays the bondholders over time, Geffken said.

The 0.25% sales tax that is split 50/50 between the fire and parks departments pays for the staff at Fire Station 11 and has permitted the purchase of a new pumper or ladder truck each year (before the price increases in the past years). The funds for the parks department pays for things such as the Riverfront Bike and Skate Park, the Greg Smith River Trail, the expansion at Parrot Island Waterpark, the trail system, the splash pad and shade structures at Martin Luther King Park and Tilles Park, the Wilson Park playground and basketball courts, and parks upgrades, Geffken said.

“As for the sales tax figures, the July figures do show that the City is doing well and will probably have another year of increased collections. When I look into the details as far as we are permitted, the collections are up across the board. We did not budget for any increase in 2021 in case the higher collections in 2020 were an anomaly but they have remained at the higher level. We think the higher sales tax collections point to the well balanced economic activity in Fort Smith that weathered 2020 well and has grown in 2021. The mix of manufacturing, healthcare, service, and tourism industries in Fort Smith have performed well and have continued to grow in 2021,” Geffken 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.

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