Fort Smith sales tax revenue on four-month decline

Fort Smith sales tax collections continue to run in the wrong direction, with the February report showing a 5.5% decline for the city’s 1% taxes compared to the 2012 period. The report marked four consecutive months of declines in tax revenue collections.

Each of the city’s 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.497 million in the February report, down 5.53% from the same period in 2012.

The collections in the February report were 8.41% below budget estimates. (Because the state of Arkansas has a two-month delay in reporting collections back to the cities, the city of Fort Smith — for budgeting purposes — has historically reflected the collections on a one-month delay. Which is to say, the tax collections remitted to cities in March are from taxes collected in January and transferred by merchants to the state in February.)

For the first two reporting months of 2013, each of the 1% sales taxes generated $3.426 million, down 5.73% compared to the 2012 period and 8.2% below the budget estimate.

Collections in 2012 of the two 1% taxes totaled $39.21 million, slightly ahead of the $38.683 million during 2011. The 2011 collections were 3.9% above 2010 collections.

However, the revenue trend began to decline during the fourth quarter of 2012. City Finance Director Kara Bushkuhl has already warned that budget cuts may be needed in 2013.

Fort Smith’s general fund at the end of 2012 was $5.975 million, down $722,144 less than estimated once prepaid expenditures are accounted for. Overall, city revenue during 2012 was $329,000 below estimates.

Most impacting the city’s general fund is the revenue received – or not received – from the city’s share of the countywide 1% sales tax. The countywide tax collection is critical because the revenue is a little more than 40% of the city’s general budget of roughly $42 million. A majority of the general fund budget general supports fire, police and other critical city functions.

Bushkuhl said Thursday that department heads have been asked to submit cuts of up to 4% for any budgets funded by the general fund. She said specifics on the proposed cuts will be presented to the Fort Smith Board of Directors during their April 9 meeting.

Fort Smith’s share of the county 1% sales tax in the February report is $1.187 million, down 4.37% compared to February 2012. The collection was down 6.76% compared to the revenue estimate.

For the first two months of 2012, the countywide tax has generated $2.651 million for Fort Smith, down 5.34% compared to 2011 and down 7.57% compared to budget forecasts.

Several years of high unemployment in the Fort Smith area is the likely factor pushing tax collections lower. The number of unemployed in the Fort Smith metro during January was estimated at 11,480, according to the U.S. Bureau of Labor Statistics. The annual monthly average for unemployed in 2011 was 11,413, up compared to the 2010 monthly average of 11,156 and the 2009 average of 10,091. The 2008 monthly average was 6,884.

January was the 48th consecutive month the Fort Smith metro jobless rate has been at or above 7%, and was the second consecutive month the rate has been above 8%.

PREVIOUS ANNUAL COLLECTION INFO
2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2012: $39.210 million
2011: $38.683 million
2010: $37.229 million
2009: $37.554 million
2008: $41.226 million
2007: $37.858 million
2006: $36.840 million

Fort Smith portion of 1% countywide sales tax
2012: $15.279 million
2011: $15.15 million
2010: $14.89 million
2009: $15.04 million
2008: $16.61 million
2007: $15.15 million
2006: $14.71 million