FORT SMITH -- Despite hardships brought by the ongoing coronavirus pandemic, the city reported a second consecutive month of greater-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 budgeted but also what the city brought in during the same month in 2019.
City Administrator Carl Geffken said Wednesday the city is "incredibly happy" and surprised at the performance of the July sales tax receipts, which reflect business activity in June. He believes this demonstrates the strength of the economy in the Fort Smith area.
However, Geffken said the city remains cautious because sales in June could have still been affected by the $1,200 federal stimulus checks people received in April. Those who are unemployed were also still receiving a weekly $600 payment through the federal Coronavirus Aid, Response, and Economic Security Act at that time as well.
"... 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 consequences of a possible lag, or a delay from the onset of the covid-19 pandemic and all the changes that came with it, such as the stimulus and additional unemployment payments, to actually seeing the pandemic's effect in 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 said the initial estimates for the city were an 80% reduction in sales tax revenue in April and May, a 50% reduction in June and July, and a return to normal in August. This would signify an overall reduction of 22% in sales tax revenue for 2020.
The probability of the city seeing such an overall reduction goes down as the year progresses, according to Geffken. April's sales tax report saw a revenue reduction of only about 7%, with Geffken estimating 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 this 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 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 took 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-t0-date, according to the report. With seven months under the city's 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 $9,703,557, or 1.45% more than budget. Meanwhile, the 0.25% tax garnered $3,234,519, or 1.41% more.