Fort Smith’s 2024 sales tax revenue slightly below 2023 record levels

by Tina Alvey Dale ([email protected]) 103 views 

While Fort Smith sales tax revenue rebounded slightly in December, like they did in the previous month, the 2024 totals still fell below what was budgeted for the year, which is just slightly below what were record collections in 2023.

According to the December sales tax report, Fort Smith’s share of the Sebastian County sales tax was $24.493 million in 2024, 0.95% lower than 2023 and 0.3% higher than the 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 $72,651 more than the city officials budgeted to spend within the fund and $155,520 less than the tax earned for the city in 2023. Until 2024, the tax had posted year-over-year gains for the past five years with 2022’s revenue coming in 4.6% more than 2021.

“The December report indicates that the city fairly accurately predicted sales tax collections for 2024. We have been accustomed to seeing overall growth in sales tax revenues the last few years. If you’ll recall, 2023 was one of the strongest years we’ve ever had in sales tax collections and building activity,” said Interim City Administrator Jeff Dingman.

The December sales tax report, which measures November’s transactions, shows the city collected $2.047 million from its portion of the countrywide sales tax, down 0.95% from what was budgeted for the month, but up 1.5% from the $2.016 million collected from the tax in December 2023.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $29.516 million in 2024, down 1.04% from the budget estimate. The December report showed the 1% street sales tax revenue at $2.497 million for the month, up 2.08% from the $2.446 million collected in December of the previous year and up 0.64% from the budget estimate.

“Due to purchasing building materials, goods & services for both new construction and redevelopment, sales tax revenues are boosted by building activity. We’ve had a few years with significant building projects in the city that generated materials sales at unusually high levels. I believe the fact that those slowed in 2024 to a more normal level resulted in the lack of growth in sales tax revenues. 2024 sales tax revenues coming in very similarly to 2023 without the benefit of that record-breaking building activity indicates to me that consumer spending is still strong, even if not quite as much of that spending was on materials & equipment to support record-breaking building activity,” Dingman said.

Fort Smith issued $235.776 million in building permits in 2024, down 46.8% compared with the $442.856 million in 2023.

Also, the similarity in the overall collections for the year also could be an indicator that inflation on the prices of goods and services nets a higher percentage of sales tax collections, which is not ideal, he said.

“Similar revenues as the previous year with higher prices at the root are cause for concern, as then the dollars collected don’t go as far for the city, either, as we purchase goods and services. We will pay attention to this going forward as we work through 2025 and make future projections,” Dingman said.

Looking at the other funds, the 0.25% sales tax dedicated to the fire department and parks department generated $7.379 million in 2024, down from the $7.456 million collected in 2023. The city also collects a 0.75% sales tax that is split with 0.625% going to consent decree work and 0.125% going to the police. That tax generated $18.448 million for consent decree work, down from the $18.642 million collected in 2023, and $3.69 million for the police, down from the $3.728 million collected the previous year. All the taxes were down 1.04% compared with 2023.

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2024: $29.516 million
2023: $29.924 million
2022: $28.65 million
2021: $26.667 million
2020: $22.66 million
2019: $21.73 million
2018: $21.503 million

Fort Smith portion of 1% countywide sales tax
2024: $24.493 million
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