Editor’s note: This story is a component of The Compass Report. The quarterly Compass Report is managed by The City Wire, and sponsored by Arvest Bank. Supporting sponsors of The Compass Report are Cox Communications and the Fort Smith Regional Chamber of Commerce.
The first quarter of tax collection reports delivered welcome news for Fort Smith City Directors and city staff who needed a bump in revenue to stabilize the city’s more than $42 million general fund budget.
The city has in the first three reporting months of 2015 collected $5.236 million on its 1% street tax program and the same amount on a 1% tax divided between bonds, Fire Department and the city’s Parks Department. The amount is up 5.22% compared to the same reporting period in 2014, and is 6.07% above the budget estimate.
The city’s 1% street tax program collected $1.634 million in the March report, essentially unchanged compared to March 2014. (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 April are from taxes collected in February and transferred by merchants to the state in March.)
Collections during 2014 of the Fort Smith’s 1% sales tax for the street program topped $20 million for the first time since 2008. The 1% tax generated $20.099 million for the January-December reporting period, up 3.24% over 2013, and was above the budget estimate by 0.78%. However, collections for the past five years have been inconsistent. Revenue from the city’s street tax was down 0.87% in 2010, up 3.9% in 2011, up 1.36% in 2012, and down 0.69% in 2013.
The city’s portion of the countywide 1% sales tax generated $1.255 million in the March 2015 report, down 2.95% compared to March 2014, and up 2.66% below budget estimates. For the first reporting quarter of the year, the city’s portion of the countywide tax revenue is $4.014 million, up 3.54% compared to the same period in 2014. The revenue for the first two months is also 3.84% above the budget estimate.
Countywide tax collections are critical because they fund a majority of essential services within the city’s general fund budget.
LOWER FUEL COSTS AND CONSUMER SPENDING
Reduced spending on fuel could be driving more consumer spending in the Fort Smith area. Economists have said lower fuel prices are likely to fuel an uptick in consumer spending. With crude oil prices expected to remain below $60 a barrel for the remainder of 2015, the average U.S. household will spend about $700 less on gasoline in 2015 compared with 2014 as annual motor fuel expenditures are on track to fall to their lowest level in 11 years, the U.S. Energy Information Administration (EIA) said in its most recent short-term forecast.
The EIA said average household spending in 2015 is estimated to be $1,817, down from $2,513 in 2014. The federal agency estimates the 2016 spending will increase to $2,058.
“Between 2003 and 2008, average annual household expenditures on gasoline rose steadily by about 15% per year, to $2,715 in 2008. The economic recession in 2009 resulted in a 27% drop in gasoline expenditures, with both lower prices and reduced consumption. Since then, gasoline expenditures rose through 2012 and fell in both 2013 and 2014,” the EIA noted in its April 10 report.
PREVIOUS ANNUAL COLLECTION INFO
Fort Smith 2% sales tax collection (1% for streets; 1% for water/sewer bonds)
2014: $40.198 million
2013: $38.938 million
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
2014: $15.625 million
2013: $15.353 million
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