Fort Smith’s sales tax revenue had another strong month with the city’s share of the Sebastian County sales tax totaling $2.089 million up 16.88% compared to July 2021, according to the city’s July sales tax report.
Because city administration used 2021’s sales tax revenues in the first part of the year to budget 2022’s sales tax collection, revenue from the tax is also 16.88% higher than the $1.787 million budgeted for the month. July’s report reflects sales tax collections from May.
The countywide sales tax generated roughly $13.56 million in the first seven months of the year, 13.07% higher than the $11.993 million generated through the sales tax through July 2021. The city’s share of the countywide tax is closely watched 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 July sales tax revenue report is another strong report. The July report is more evidence of a strong local economy driven by consumer spending,” said Fort Smith City Director Lavon Morton, noting that inflation also contributes to the higher revenue. “I believe the local Fort Smith economy will continue to be strong for the foreseeable future and sales tax revenue should follow a strong economy.”
Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $2.508 million in the July distribution, up 12.52% from the $2.229 million reported in July 2021. Through July, the city has collected $16.591 million from the street sales tax, about 10% more than the $15.074 million collected through the same time period last year.
Director Neal Martin said he believes a combination of inflation and a strong local economy are leading to the sales numbers looking really good.
“This doesn’t really change much at this time in terms of our planning. I still like to stay conservative while addressing the pressing needs of the city. Budgets will stay the same for now,” Martin said. “However, inflation is hitting the city just like it is for consumers. Costs are rising significantly for materials. This is one of the reasons the Consent Decree is so problematic for our city. Initial cost estimates are nowhere close to the massive inflation hikes we are seeing now.”
In a May 24 election, Fort Smith voters extended two sales tax extensions that will pay for federally mandated sewer system improvements, an across-the-board police pay increase of 23.87%, fire department needs, and ongoing and future parks improvements.
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 and the federal 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. Because of inflation and the state of the city’s sewer system, that number was estimated to be closer to $650 million at the start of 2022.
In 2021, Fort Smith’s share of the 1% Sebastian County sales tax was $21.055 million, 15.4% more than 2020 and up 18.14% over the city’s budget estimate. The 2021 total was $3.23 million more than city officials budgeted to spend within the general fund budget. The tax has posted year-over-year gains over the past several years, but 2021’s jump was the largest seen during recent years.
The 1% street tax generated $26.134 million in 2021, up 15.4% over 2020 and 17.42% over the budget estimate. The 2021 total was $3.877 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
2021: $26.134 million
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
2021: $21.055 million
2020: $18.246 million
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million
2016: $16.58 million