by Marty Cook
Posted 1/27/2014 12:00 am
Updated 6 months ago
Fort Smith Mayor Sandy Sanders held up a newspaper article from early spring of 2013 with a headline that said the mayor was optimistic about his city’s economic future.
“I’m still optimistic,” Sanders said, smiling.
Fort Smith took a hard hit in the recession and lost a bounty of jobs when Whirlpool ceased operations in the city in 2012. There have been a number of job announcements for Fort Smith throughout the past year, but those announcements haven’t helped tax revenue. And declining sales tax receipts have caused some budget constriction.
Now, city leaders and supporters say, Fort Smith is fighting to find its place in a post-industrial world.
Sanders said the drop in sales tax revenue wasn’t a surprise because officials had seen the shaky forecast coming. The city brought in about $1.4 million less than projected in 2013 from city and county sales taxes, he said.
“Spending can be pushed until the next year,” Sanders said. “There are different ways you can address any shortfall. We had seen the trends coming. In April we adjusted the budget at that time so the departments knew we were estimating shortfalls so they began to adjust their spending.”
Sanders said the health of Fort Smith’s economy, like many other local economies, is tied to the national economy. While Sanders said city and business officials are working hard locally to spur growth, some of the city’s challenges are out of Fort Smith’s hands.
“It’s reflective of the nationwide recession,” Sanders said. “With the economy as sluggish as it is, we were very modest in preparing our 2014 budget. At the first quarter, we’ll take a look to see if anything has picked up, has anything improved.
“Our recovery is slower than we would like. It’s going to be pretty steady until the national economy turns around.”
Deputy City Administrator Jeff Dingham said sales tax revenue generates about 60 percent of the city’s operating fund. Tax revenue is still in flux because of the loss of jobs, the decrease in wages from new jobs and tighter spending habits.
“Retail sales are the last piece to recover from recession,” Dingham said. “We’re getting good jobs, but they’re in the $15-$18 [hourly] range instead of the $20-$25 range. We’re doggone glad to have them, but the sustainability of those jobs is more volatile.”
The city is doing what it can to attract new jobs — “We don’t care if it’s one job or 1,000 jobs,” Sanders said — and in late 2013 started a focused “buy local” program. Sanders said if more people bought locally it would help Fort Smith tax revenue.
“The local stores are what really continue to support the economy,” he said.
Sanders and Dingham said that not only would buying locally help, but a change in Internet regulations would, too. There is federal legislation that would force online retailers to collect sales tax that right now is the responsibility of the online purchaser.
Not surprisingly, many online purchasers do not fill out the paperwork to pay sales tax, Sanders said. The absence of that revenue stream is a hammer blow to local governments.
“That’s reality right now,” Sanders said. “We’re facing that right now. I think that is part of the shortfall. People are buying online right now and the taxes aren’t coming in.”
Steve Clark, the founder of ProPak Logistics, based in Fort Smith, is one area businessman who’s seeking to help propel downtown redevelopment. (See New ProPak HQ.)
The city’s recovery is a matter of the city fighting through the transition from a highly industrialized city to one that relies on a variety of industries, he said.
Richard Griffin, the chairman of the Central Business Improvement District, agreed with Clark.
“We’ve hit a hard bump,” Griffin said. “For 100 years, this was an industrialized city. Whirlpool had 5,000 workers five years ago. We’ve taken our hits. We’re a very resilient community. We’re not going to be a highly industrialized town, but it [economic recovery] won’t happen overnight.”
Sanders said the strengths that made Fort Smith a successful industrialized town are the same ones that will eventually see it thrive in a post-industrialized environment. The city has great workers and a great educational asset in the University of Arkansas at Fort Smith, which gives companies a ready outlet to recruit and train new workers, he said.
Sanders said that when city officials meet with outside business leaders about the possibility of investing in Fort Smith, the city’s selling points are well-received.
“That has been one of the challenges, that people think ‘Oh, the economy is still bad and nothing is really happening,’” Sanders said. “When you stop and start to add up all the announcements, you realize we’ve added 1,000 new jobs. And it’s a nice blend of new companies coming in as well as old companies expanding.”
One of the important questions to answer — one Clark said he was interested in learning especially — was how long will it take for these new jobs to translate into local economic recovery. Some national economists, such as Bloomberg Brief’s Richard Yamarone, who spoke at the Business Forecast Luncheon in Rogers on Jan. 16, believe the national economy is still as risk for a slide back into recession.
Sanders said he didn’t think the answer could be predicted because many local workers who find a job after a long period of unemployment will not immediately begin to spend money. Sanders estimated that many of these newly re-employed will instead use their paychecks to pay down past debt rather than contribute to the local economy by buying a new car or going on a shopping spree at the mall.
“Their discretionary income is going to be all over the map,” Sanders said.
Clark said the important fact is that Fort Smith has begun the transition to its post-industrialized world. No one quite knows what the future will look like either, he said.
“We are moving to post-industrial, and we have to figure out what it is going to be,” Clark said. “Change doesn’t come until you’re forced to change. There is no reason to think that the momentum that has begun won’t continue. Nothing says we won’t be vibrant in the future.”