Sales tax collections surge ahead of decline

City sales tax collections were up significantly in January and February, but the city acknowledged a revenue crunch is coming.

The size of the contraction is uncertain, as it takes 60 days for the state revenue agency to remit monthly collections to the city.

“We were on track to have a record year prior to the coronavirus,” City Manager Bill Burrough said in the city’s weekly newsletter. “Unfortunately, we’ll see significant declines for the months ahead. It is difficult to forecast when the information takes almost 60 days to receive, however, we are projecting as best we can.

“We have budget restrictions in place and will most likely see additional restrictions as we move through the next couple of months.”

The 19.01% year-over-year increase in February collections of the city’s 1.0% general fund sales tax followed a 9.71% gain in January, putting the first two months of collections 14.31%, or $276,916, ahead of last year’s pace. February’s total surpassed last year by $181,885.

The $2,212,100 collected during the first two months is 6.0% ahead of the 2020 budget’s $14,070,359 revenue forecast. March and April collections were projected to exceed last year by 4.60% and

12.22%, respectively, surpassing 2019 by $203,479. Collections surpassed $14.2 million last year, the strongest year in the 25 years of collection history maintained by the city’s finance department. Most of the gains came over the final six months of the year, a period that coincided with the mandate requiring online retailers and e-commerce facilitators such as Amazon and eBay to collect state and local sales taxes. Collections grew 11.41%, or

$785,610, compared to the last six months of 2018 and beat the annual revenue forecast by 4.80%, or $653,111.

The city also collects a 0.50% sales tax for the police and fire funds.

January and February collections of the countywide 0.50% sales tax for Garland County’s general and solid waste funds were also up, posting 7.09% and 15.85% gains over last year. The $1,531,223 collected during the first two months was $157,214 more than last

year, when the tax raised close to $10 million over 12 months.

The 8.97% drop in February collections of the 3.0% tax the Hot Springs Advertising and

Promotion Commission levies on prepared food and lodging inside the city hinted at the upcoming revenue squeeze. Restaurant and lodging collections were down 9.11% and 8.47%, respectively.

Unlike the city and county, which rely on the state Department of Finance and Administration to collect their sales tax levies, the ad commission collects its tax directly from businesses. Earlier this month the commission announced a 90-day deferral on monthly remittances retroactive to February.