City’s July sales-tax take tops projection

FORT SMITH — Despite hardships from the ongoing coronavirus pandemic, Fort Smith reported a second-consecutive month of higher-than-expected sales-tax revenue.

The city’s July sales tax report was released Wednesday. Much like in June, and in contrast to what was reported for April and May, revenue for July not only surpassed the amount estimated in the budget but also what the city took in during the same month in 2019.

City Administrator Carl Geffken said Wednesday that the city is “incredibly happy” and surprised at the performance of the July sales tax receipts, which reflect business activity in June. He believes that it demonstrates the strength of the economy in the Fort Smith area.

However, Geffken said the city remains cautious because sales in June could have been affected by the $1,200 federal stimulus checks that people received in April. Also, those who were unemployed were still receiving weekly $600 payments through the federal Coronavirus Aid, Relief, and Economic Security Act at that time.

“Unfortunately, as I’ve stated before, we’re still in a time where there’s nothing we can look back upon to try to gauge performance of the economy and sales tax collections, et cetera,” Geffken said. “So we’re not going to assume that, just because everything has worked out so well so far, that it will continue to do so.”

Geffken also raised concerns about various changes related to pandemic — such as the stimulus checks and additional unemployment payments — masking the pandemic’s actual impact on the economy and the collection of sales taxes.

“As much as there are indicators that are immediate, there’s also things called lagging indicators,” Geffken said. “My point is we’re still in uncharted territory, so we’re not going to count our chickens before they’ve hatched … because we do not want to get caught short, and then be placed in a problematic situation.”

Geffken previously said estimates for the city were an 80% reduction in sales tax revenue in April and May, a 50% drop in June and July, and a return to normal in August. This would signify a reduction of 22% in sales tax revenue for 2020.

The probability of the city seeing such an overall reduction decreases as the year progresses, according to Geffken. April’s sales tax report saw a revenue reduction of only about 7%, with Geffken estimating that the city had an overall decrease of about 2.5% in May.

Fort Smith’s current tax rate is 9.75%, 2% of which is for the city. Of that amount, 1% is dedicated to streets, drainage and bridges; 0.75% is for redemption of sales and use tax bond issues; and 0.25% is for Fire Department and parks operations, as well as capital projects, according to the city’s finance department.

Of the remainder, 6.5% goes to the state and 1.25% to Sebastian County. The latter is split between 1% for public safety, public library, parks capital maintenance, senior citizen programs, downtown development and projects, public transit and privilege license replacement; and 0.25% for the University of Arkansas at Fort Smith. Of the county’s 1%, Geffken said Fort Smith receives 70% to 75%.

Wednesday’s sales tax report states that the city’s 1% sales tax brought in $2,028,023, which translates to 8.8% more than what was expected for July, $1,864,000.

Meanwhile, the county sales tax brought in $1,628,380 for the city, or 11.39% over what was budgeted for it; the 0.75% tax drew $1,521,017, or 9.66% over budget; and the 0.25% tax got $507,006 for an excess of 9.59%.

These taxes have also exceeded what was budgeted for them year-to-date, according to the report. For the city, with seven months under its budget belt, its 1% sales tax has taken in a total of $12,938,076, or 1.24% more than the total budgeted amount for those months.

For the same period, county sales tax revenue has totaled $10,395,630 for a 2.37% surplus. The 0.75% tax brought in $9,703,557, or 1.45% more than budgeted. Meanwhile, the 0.25% tax garnered $3,234,519, or 1.41% more.