FORT SMITH -- Although the city of Fort Smith's sales tax revenue for April was down from what was budgeted for the month last year, the drop was not as severe as what the city previously projected due to the coronavirus pandemic.
The city released a link to its sales tax report for April on Tuesday. In an email to reporters in April, City Administrator Carl Geffken said the city was starting with an assumption that sales tax revenue would dip 80% that month, although this decrease could range between 20% and 80%.
Geffken said on Wednesday that while he was pleased that April's reduction in revenue amounted to only about 7%, it also means that the city will be prepared and "in a better place" for potential reductions throughout the rest of the year.
The city's initial estimates were an 80% reduction in both April and May, followed by a 50% reduction in June and July, and a return to normal in August, according to Geffken. This meant a 22% overall reduction in sales tax revenue this year.
"If the early months don't achieve that 80% reduction, we could still have reductions in August through December," Geffken said. "So what that overall 22% reduction means is that we are prepared ... to miss almost 25% of our sales tax revenues over the course of 2020."
Geffken said during an April 17 city of Fort Smith news conference he had asked all city department heads for a 10% "across the board" budget cut, which at that point had finished being reviewed.
Earlier in April, Geffken said he, along with city Finance Director Andrew Richards and Deputy City Administrator Jeff Dingman, were reviewing these cuts, which will be presented to the city board of directors at a future date.
On Wednesday, Geffken said these proposed cuts are being compiled.
"All the departments have curtailed their spending as if the cuts have been implemented already," Geffken said. "So we should be, touch wood, in a good position to weather the impact of the covid-19 virus."
The Board of Directors must approve the budget cuts before they can be implemented, Geffken said.
Fort Smith's current tax rate is 9.75%, 2% of which is for the city, Geffken has said. Of this amount, 1% is dedicated for 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 webpage for 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%.
The Fort Smith sales tax report for April states that the city's 1% sales tax brought in $1,776,485 that month, which is 6.99% less than the budgeted amount of $1,910,000. Similarly, the city's 0.75% tax saw $1,332,364 in revenue while its 0.25% tax took in $444,121, which represented 6.96% and 3.89% shortfalls respectively. Meanwhile, revenue from the county sales tax came out to 1.7% below budget at $1,421,357. The numbers for each of these taxes are also lower than what they brought in during April 2019.
Tim Allen, president and chief executive officer of the Fort Smith Regional Chamber of Commerce, said on Friday that he was surprised that the sales tax revenue came in better than the city's initial projections for April. The outcome tells him that business owners, specifically those of restaurants and small businesses, have adapted quickly enough to keep the money and the business during the covid-19 pandemic, although not everyone has been successful in that process.
"The other day, I was going through a fast food place, and I asked the manager, I said, 'How's business,'" Allen said. "And he said, 'It's up.' So as I processed that information ... the experience dining restaurants are probably taking some of the worst hits because people are just not dining in like they used to, but they're doing creative things through [the app] Waitr and deliveries and catering. The money is still flowing. It's just flowing a different way, I believe."
State Desk on 06/01/2020