Fort Smith sales tax revenue up in February report

Sales tax revenue for the city rebounded in the second month of the 2020 after a decline at the start of the year. The February sales tax report shows the city’s share of the 1% Sebastian County sales tax up by more than 7% and 1% tax for the city up more than 7.5%.

The city’s share of the Sebastian County sales tax totaled $1.371 million in the February report, up 7.85% compared to February 2019, and 7.3% above the budget estimate. The money from the city’s share of the countywide tax goes to the city’s general fund budget to among other things, pay for police, fire and other essential city services.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $1.709 million in the February report, up 7.55% from $ 1.589 million in February 2019 and 7.95% below the budget estimate.

February sales tax numbers are typically the lowest for the year, but with the state of the city and state during the COVID-19 pandemic, that might not be the case in 2020.

“The year started off well, however, those numbers are going to come down because of the situation we are facing,” said City Director Lavon Morton (Ward 3).

Countywide sales tax revenue to the city in the first two months of the year is $3.046 million, up 2.7% from the same period in 2019. Revenue from the 1% street tax totaled $3.805 million, up 1.8% compared with the same period in 2019.

Arkansas legislative leaders are polling support for a single piece of legislation for a special session that would begin Thursday (March 26) to fill budget holes caused by the economic fallout from the COVID-19 coronavirus. Gov. Asa Hutchinson announced Monday that the state faces a $353 million budget shortfall for the last three months of this fiscal year caused by falling government revenues and by his coming decision to extend the filing deadline for individuals from April 15 to July 15.

Morton said Fort Smith’s sales tax revenue also will be affected by the impact of COVID-19 on small businesses in the city and county.

“We are aware of that and are trying to do what we can to help us deal as best we can,” Morton said. “We are looking forward and anticipating as best we can. Then we can take whatever action is appropriate.”

City Director Neal Martin (at-large) said he was pleased with February’s numbers.

“I was pleased to see these numbers. Based on all the positive data I was seeing in the last few months of 2019, I was concerned about the lower than expected numbers in January.  It was good to see those numbers rebound in February and beat our estimates. It shows the Fort Smith economy is strong and continues to gain steam,” Martin said.

He also voiced concerns with how COVID-19 might impact March and future months.

“My guess is that revenue might shift a little bit with all the buying done to prepare for the virus (food, supplies) and be offset by a drop in discretionary spending elsewhere. We need to watch closely the next few months to get a good gauge on how the rest of the year will turn out,” Martin said. “Regardless, I feel the Fort Smith economy is strong and will continue to gain steam even if we have a short term drop in the second quarter.”

In 2019, Fort Smith’s share of the 1% Sebastian County sales tax was $17.265 million, up 2.1% over 2018, and up 5.66% over the city’s budget estimate. The 2019 total was $397,183 more than city officials budgeted to spend within the general fund budget. The 1% street tax generated $21.73 million in 2019, up 1.4% over 2018, and up 6.5% over the budget estimate. The 2019 total was $579,260 more than city officials budgeted to spend on the street tax program.

PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 1% sales tax collection for streets
2019: $21.73 million
2018: $21.503 million
2017: $21.204 million
2016: $21.156 million
2015: $20.308 million

Fort Smith portion of 1% countywide sales tax
2019: $17.265 million
2018: $17.043 million
2017: $16.691 million
2016: $16.58 million
2015: $16.09 million