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 four reporting months of sales tax collections in Fort Smith have the city on a track that could top record collections posted in 2008. Collections of the 1% sales tax in the April report was up 8.81%, and the city’s portion of the countywide 1% tax was up 7.38%.
The city has in the first four reporting months of 2015 collected $7.089 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 6.14% compared to the same reporting period in 2014, and is 6.98% above the budget estimate.
“This is great news. (W)ould be great if this trend continues through 2015. Will be interesting to see the Steel Horse Rally effect on May numbers,” City Director Mike Lorenz noted in an e-mail response to City Administrator Ray Gosack who sent the numbers out Friday (May 29) morning.
The Steel Horse Rally, held May 1-2 in downtown Fort Smith, attracted between 8,000 and 10,000 motorcycles to the area, with attendance estimated around 30,000.
The city’s 1% street tax program collected $1.852 million in the April report, up 8.81% compared to April 2014, and up more than 12% compared to April 2013. The amount was up 9.64% over the budget estimate. (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 May are from taxes collected in March and transferred by merchants to the state in April.)
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.
BETTER CITY FINANCES
Gosack told The City Wire that broad improvements in the regional economy has helped boost tax collections.
“I believe that increased business activity, capital investment by the private sector, and jobs gains are stimulating retail sales in the Fort Smith area. There’s approximately 3,000 more jobs in our area economy this year compared to last year, commercial building permit activity is 60% higher than it was last year, airport enplanements continue to increase, and our local sales tax revenue is 4.5% - 6.0% higher than last year. All of these positive trends bolster consumer confidence, which typically translates into more retail spending,” Gosack noted.
Indeed, the number of jobs in the Fort Smith metro area was an estimated 113,464 in March, up 3,111 jobs compared to March 2014. The number of employed in the metro area is down 9.5% compared to the revised high of 125,426 in June 2006 – or 11,962 fewer jobs than the peak metro employment.
Gosack also said the positive trend in revenue for the first four months of the year obviously improves the city’s budget outlook.
“The additional revenue will help the city government achieve the financial goals set by the board of directors. Some of our budgeted contingencies haven’t been as high as we’d like; the increased sales tax revenue will help us build those contingencies and strengthen our financial position,” he said.
The city’s portion of the countywide 1% sales tax generated $1.419 million in the April 2015 report, up 7.38% compared to April 2014, and up 7.67% over the budget estimate. For the first four reporting months of the year, the city’s portion of the countywide tax revenue is $5.433 million, up 4.51% compared to the same period in 2014. The revenue for the first four months is also 4.82% above the budget estimate.
Countywide tax collections are critical because they fund a majority of essential services within the city’s general fund budget.
CONSUMER SPENDING FACTORS
Many economists have said lower gasoline costs are putting more money into consumer pockets which should translate into higher consumer spending – the lifeblood of the U.S. economy. U.S. pump prices have fallen for a year or longer. And, in spite of recent increases to a U.S. average of $2.70, consumers are still paying a dollar less than a year ago, according to the U.S. Department of Energy.
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.
A recent Bankrate.com survey suggested that consumers are spending 40% of savings from lower gasoline prices on necessities such as groceries and rent. The survey found that 23% of Americans saved (19%) or invested (4%) the extra savings. Just 14% of respondents in the Bankrate survey reported spending their gas savings on dining out or a vacation.
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