Fort Smith sales tax revenue slows in back half of 2023

Fort Smith sales tax revenue dropped in December even below budget estimates, but the city still managed to end 2023 with tax revenues above those in 2022.

According to the December sales tax report, Fort Smith’s share of the Sebastian County sales tax was $24.648 million in 2023, 4.6% higher than 2022 and up 3.38% 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 2023 revenue was $806,742 more than city officials budgeted to spend within the fund budget and $3.158 million more than the tax earned for the city in 2021. The tax has posted year-over-year gains for the past five years with 2022’s revenue coming in 9.6% more than 2021.

“The decline for December was minimal. The overall collections for 2023 were excellent and exceeded the budget in all categories,” said City Director Lavon Morton. “While the rate of increase over the prior year may slow in 2024, I am confident that collections will fully support the budgeted expenditures.”

Even with tax revenues continuing to show gains year after year, December 2023 did not have as much revenue as the city anticipated or as high as 2022. The December sales tax report, which measures November’s transactions, shows the city collected $2.016 million from its portion of the countywide sales tax, down 0.71% from the budgeted amount for the month and 0.74% less than the $2.031 collected in December 2022.

City Administrator Carl Geffken said he has discussed in past months that sales tax collections in the last six months of the year will see flat growth. December’s numbers confirm that, he said.

“The City sales tax figures were 0.14% less than budget and about the same percent behind December 2022’s collections,” Geffken said. “Given higher interest rates and the impact that has on the economy, the flat growth in sales tax collections was expected.”

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $29.924 million in 2023, up 4.23% over the budget estimate. The December report showed the 1% street sales tax revenue at $2.446 million for the month, down 1.37% from the previous year and down 0.14% from the budget estimate.

“A Fort Smith business owner recently told me that the price for steel and wood is coming down, which is the direct impact of slower demand thereby lowering prices. This cooling of the economy will hopefully result in a soft landing which will then allow interest rates to be lowered,” Geffken said.

He said it is important to remember the foreign military sales project, which should bring significant growth to Fort Smith.

“Once the construction is started, the Fort Smith economy will have another growth period,” Geffken said. “Overall for 2023, sales tax collections increased between 3.4% and 4.2% above budget. This is still healthy growth. 2024 may start off slowly, but with future interest rate decreases and the FMS project, we should see new sales tax growth.”

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2023: $29.924 million
2022: $28.65 million
2021: $26.667 million
2020: $22.66 million
2019: $21.73 million
2018: $21.503 million
2017: $21.204 million

Fort Smith portion of 1% countywide sales tax
2023: $24.648 million
2022: $23.553 million
2021: $21.49 million
2020: $18.246 million
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million