Positive Fort Smith sales tax revenue trend continues into 2021

Sales tax revenue for the city of Fort Smith started 2021 on the same trajectory it showed through most of 2020, up from the year before. The January sales tax report shows the city’s share of the 1% Sebastian County sales tax was up more than 11% more than January 2020 and the 1% tax for city streets was up more than 10% from the same time last year.

The city’s share of the Sebastian County sales tax totaled $1.863 million in the January report, up 11.26% compared to January 2020. Because the budget estimate was what the city saw in January 2020, that share was also up 11.26% from the budget estimate.

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.

Fort Smith’s 1% street tax – used for maintenance and new construction on streets, bridges and drainage – generated $2.319 million in the January report, up 10.57% from the $2.097 million in January 2020. Again, the budget estimate was what the city made in January last year, so the revenue is 10.57% above the budget estimate.

The January report reflects November transactions.

In 2020, Fort Smith’s share of the 1% Sebastian County sales tax was $18.246 million, up 5.7% over 2019, and up 5.52% over the city’s budget estimate. The 2020 total was $953,824 more than city officials budgeted to spend within the general fund budget. The tax has posted year-over-year gains for the past five years, but 2020’s jump was the largest seen during that time period.

The 1% street tax generated $22.66 million in 2020, up 4.02% over 2019, and up 6.08% over the budget estimate. The 2020 total was $1.298 million more than city officials budgeted to spend on the street tax program.

“Seeing January’s figures shows that we are off to a very good start to 2021 and that the higher revenues that started in 2020 are continuing. I think this is due to several factors: new businesses moving to Fort Smith, Arkansas’ and Fort Smith’s ability to balance social distancing/mask wearing with keeping our businesses open, the continued benefits of the internet sales tax, higher home sales in Fort Smith, and homeowner’s desire to improve/remodel their homes while quarantining and/or working from home. Several of these factors are directly related to COVID and we don’t know the impact to our revenues once the quarantining, working from home, shopping from home, etc. go back to the pre-COVID normal.  If we could have access to detailed sales tax data, we could analyze it so we could plan better,” said City Administrator Carl Geffken.

When the COVID-19 pandemic first hit in March 2020, predictions for sales tax revenue was that it would take a dive. In April, Geffken told city directors that sales tax revenues for April and May were expected to be 20% of what the city would normally collect because of the pandemic and state-regulated closures of restaurants, bars and other business. In total, Geffken estimated a 22% reduction in city sales tax revenue because of the COVID-19 pandemic. To prepare for the reductions, city departments were asked to trim 10% from each of their budgets.

The continued strong numbers have city directors cautiously optimistic about the city’s finances in 2021.

“Sales tax collections are off to a very good start for 2021. Hopefully this trend will continue for the future.  If it does, the City will have all the funding needed to meet the budget requirements for expenses and capital for the year, as well as some funding for unexpected events, which we had in both 2019 and 2020,” said Director Lavon Morton.

Geffken agreed with Morton that if the trend in sales tax collections continue, the city’s revenues will do very well and the surplus will offset unforeseen expenses.

“This is good that the city is experiencing this revenue growth. The city remains strong. I’m happy about these numbers and it continues to show strength. If I remember correctly, there were some ups and downs in the beginning of 2020 before the local economy really took off around April. I want to see comparisons of the second and third quarters before I feel 2021 is going to be as good as we hope,” said Director Neal Martin.

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