Greenwood sees sales tax revenue loss in 2024
GREENWOOD — The City Council may have to rebudget for 2024 after a slower than expected start in sales tax collections.
Thomas Marsh, city finance director, said at Monday’s council meeting Greenwood saw a drop in sales tax revenue for the first time in five years. City sales and use tax revenue for the first two months of this year was down 0.68% from the same two months of 2023 — from $620,545 to $616,325.
In the past four years, revenue had increased for the same two-month period by at least 9% from the previous year, according to city data.
The city, therefore, will not have as much money as officials had predicted and planned in their budget for this year. Initial budget projections show $6.4 million in combined city and county sales and use tax, but the current trend indicates $6.2 million as the actual anticipated revenue for 2024.
In order to meet the projected growth rate for 2024, sales tax collections would need to increase an average of 5.5% over the next 10 months, according to the city’s sales tax revenue report published Feb. 28. Marsh said he expects the negative trend to continue and plans to take any unexpected growth as it comes rather than plan for growth and end up with the city in debt.
“We always can curtail what we’re doing as far as projects go and put them off for another six months or a year,” Mayor Doug Kinslow said.
Marsh concurred that if the negative trend continues, department heads will need to evaluate their capital plans for the year and determine what can be pushed into 2025. These departments include planning, administration of justice, sidewalk, police, fire, animal control and parks and recreation.
The City Council will determine and potentially revise revenue streams in April. Department heads then will evaluate their plans with the new budget and determine what can stay in the 2024 budget and what will carry over for 2025. The postponed projects will become the top priority for that year.
Greenwood’s sales tax revenue growth had been in gradual decline since hitting a peak of 16% in 2020. Marsh said pandemic online shopping, new sales tax laws benefiting cities and government
stimulus checks caused this peak. Revenue growth declined after big businesses began to reopen and people started shopping in person outside Greenwood.
Before the covid-19 pandemic, Greenwood saw an average yearly growth rate of around 3% in sales tax revenue year to year. Marsh said this remained the expectation as the pandemic boost faded.
“There was no indication that all of a sudden the bottom was gonna drop out and we would be well below budget,” Marsh said. He speculated consumers became more reluctant to spend on nonessential items.
“We’re not sure if it’s due to the fact that everybody’s sales tax is dropping because there’s not a lot of purchasing going on or if it’s because our census did not grow as much as other cities’ did, so now they’re getting a bigger piece of the pie,” Marsh said.
County sales and use tax revenue increased by 2.15%, and that money is distributed among cities in the county.
In February, Arkansas issued a press release saying the state saw a drop in sales tax revenue of 2%, consistent with Greenwood’s drop. The release told officials to prepare for a drop in consumer spending in 2024 statewide.
Despite this, Kinslow said he remains hopeful the negative trend will end.
“My personal prediction is that within the next six months we’re gonna see an increase again,” Kinslow said. “It’s just that weird time of the year with elections when people take a step back to just try to figure out what’s going on before they spend a lot of money.”
The city expects to see an increase in tourism with the solar eclipse on April 8, which could bring a boost in sales tax revenue. Greenwood lies just within the path of totality.
During Monday’s meeting, Greenwood resident Brian Richard said the financial report taught him that if residents want quality improvements from the city, they should spend money within city limits.
“Amen,” Kinslow said in response.