Fort Smith tax revenue up almost 10% in 2022

Fort Smith sales tax revenue posted another record breaking year in 2022. According to the December sales tax report, Fort Smith’s share of the Sebastian County sales tax was $23.553 million in 2022, 9.6% higher than 2021 and up 9.05% from budget estimates for the year.

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 2022 revenue was $1.955 million more than city officials budgeted to spend within the fund budget and $2.06 million, more than the tax brought the city in 2020. The tax has posted year-over-year gains for the past five years with 2021’s revenue coming in 17.8% more than 2020.

City Administrator Carl Geffken said the report shows good revenue growth for Fort Smith, but it is smart for the city to keep a close eye on the revenues and not budget for too high an expected increase.

“I believe the December 2022 sales tax report shows that the sales tax revenues will return to normal, historical growth patterns and not the 7% to 15% growth we have experienced (the past few years). I think we should expect a small amount of sales tax growth in 2022, assuming we do not enter a recession, followed by additional sales tax growth once we (hopefully) receive approval for the foreign military sales project,” Geffken said.

The city adjusted monthly budgeted sales tax revenues in the fall, bringing the budget closer to what actual revenues were.

The December sales tax report, which measures October’s transactions, shows the city collected $2.032 million from its portion of the countywide sales tax, down 0.15% from the adjusted budgeted amount for the month, but 1.7% higher than the $1.998 million collected in December 2021.

“The December Sales Tax Report shows that the increase in the monthly budgeted sales tax revenues in the last quarter of 2022 is in line with actual collections. The increases in sales tax collections is a benefit to the City, and we chose not to budget the increase in sales tax collections in case the higher revenues were a one-time phenomenon and not a consistent increase. By the last quarter of 2022, a little over two years since we first experienced the higher collections, we decided to incorporate the higher revenues into the city’s budget. This allowed the city to budget those funds,” Geffken said.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $28.65 million in 2022, up 7.4% over 2021, and up 7.65% over the budget estimate. The December report showed the 1% street tax revenue at $2.481 million for the month of December, up 1.3% from the previous year but down 0.58% from the budget estimate.

“Sales tax collections, while still at a good rate only slightly less than budget, have definitely leveled off in the last three months of 2022. Current levels are very close to 2021,” said City Director Lavon Morton. “Hopefully, collections in 2023 will continue to be at least at 2022 levels. It is likely that inflation levels and increases in interest rates have finally slowed consumer and business spending at least in some areas, thus impacting sales tax collections.”

“It was good to see the full year of data to reflect on how good 2022 actually was. We eclipsed numbers from 2021 and show a positive trend year over year. We must continue to be cautious as we move forward,” said City Director Neal Martin. “I look forward to having the Sales Tax Review Committee begin their work to look at our Sales Tax revenues now that the 1% sales tax extension was passed in 2022. Being clear with our revenues and how the money is being spent is another level of transparency we owe the voters of Fort Smith, and I look forward to them coming together for oversight.”

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2022: $28.65 million
2021: $26.667 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
2022: $23.553 million
2021: $21.49 million
2020: $18.246 million
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million
2016: $16.58 million