Fort Smith, Sebastian County sales tax slide continues

Fort Smith sales tax collections continue to see double-digit declines, with the city’s portion of the one-percent countywide tax down more than 12% on July purchases.

The city’s two 1% sales tax programs (street improvements and water/sewer system improvements) each collected $1.584 million in July, down 13.5% from the same period in 2008, and down 3.27% from estimated budget collections. (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 back to the cities in September are from taxes collected in July and transferred by merchants to the state in August.)

“For the first eight months of 2009, the city sales tax is down 7.72% compared to last year,” noted City Finance Director Kara Bushkuhl in a memo to city board members and staff. “When comparing year to date budget figures, the city sales tax is 4.59% lower than projections. The actual revenue reduction for the street sales tax budget and for the sales and use tax bond budget is $617,301 each.”

Fort Smith tax collections on June purchases were down 14.96%, and were down 8.68% on May purchases.

Jeff Collins, an economist with Springdale-based Streetsmart Data and primary researcher of The City Wire’s “The Compass,” said consumers aren’t yet convinced that the worst of national recession is over.

“The real issue is, ‘How long with the current consumer sentiment continue to impact Fort Smith?’ I think that there has been such a lack of positive news, that there is a pervasive sense that this is something unlike anyone has ever seen,” Collins explained. “But that Fort Smith is not bad as everyone else is good. This is happening everywhere. This is broad.”

Collins said “depressed consumer sentiment” will continue even after people begin to hear of improving economic conditions. He said consumer retail behavior will be the “concrete evidence” that consumers believe economic conditions have improved.

“That’s why it’s so important to watch those (sales tax reports),” Collins said.

The city’s portion of the 1% countywide sales tax on July purchases totaled $1.288 million, down 12.4% compared to the same period in 2008. The collections were 2.99% lower than budget estimates. For the year, the county sales tax proceeds are down 6.88% from the same period in 2008, are below budget estimates by 3.84%.

Bushkuhl said in the memo that actual year-to-date revenue loss to the general fund budget from the lower countywide sales tax is $413,365. The countywide tax revenue — which generated $16.61 million in 2008 — is a significant portion of the city’s $40 million-plus operating budget, and much of that is used to support fire and police operations. The city has estimated 2009 collections from the countywide tax could be $600,000 less than 2008.

However, the July 2009 city tax collections were 2.6% above those in July 2007, and the countywide July 2009 tax collections were 2.9% above July 2007. There has been conjecture that the county and city tax declines reflect a 2008 that saw millions of dollars in repair work to commercial and residential structure damage resulting from April and June storms.

PREVIOUS COLLECTION INFO
2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2008: $41.226 million
2007: $37.858 million
2006: $36.840 million

Fort Smith portion of 1% countywide sales tax
2008: $16.61 million
2007: $15.15 million
2006: $14.71 million