Friday, February 27–Food Tax Drop Clinches Expansion

OCEAN CITY – You can’t deny how far a penny has taken the town of Ocean City, and the town collectively is hoping that half of that will take it just as far.

The decision to lower the 1-percent food and beverage tax by a half percent was seemingly the clinching clause in the motion that was approved in a 5-2 vote by City Council on Tuesday, approving plans to expand the Roland E. Powell Convention Center.

“You got me on board with the lowering of the food tax by a half percent,” said Councilman Jim Hall, a harsh critic of the original upgrade proposal two months ago but voted for the motion this time around. “By lowering this tax, you are basically giving something back to the people that say ‘hey, we eat here too, and we go out to dinner here locally all year’. Going to the half percent (tax) gives the restaurateurs who really were up in arms over the 1 percent years ago a little benefit, and the people that live here a little benefit as well.”

The food and beverage tax was instilled in 1995 by House Bill 695, which allowed Ocean City to implement a 1 percent tax on food and beverage sales within the resort that would be the funding mechanism to help pay for the town’s share of the $29.4 million expansion to the Ocean City Convention Center.

The bonds that were purchased in 1995 and funded by the earnings from the food tax since then will ironically be paid off next month, which is seven years earlier than required in the 20-year bond.

Bill Herbst, owner of La Hacienda restaurant, was one of the most vocal opponents of the food tax when it was proposed in 1995, but has since come on board with the new plans to upgrade the convention center to include 20,000 square feet of new exhibit space and a 1,200-fixed seat performing arts center.

“I don’t see how anyone can argue the needs for a performing arts center in this town, because the biggest complaint that you hear is that there isn’t enough things to do in Ocean City,” said Herbst. “I thought they were just going to argue the merits of the expansion project, but when they said they could do it while cutting the food tax, I thought that it was great and couldn’t see how anyone could be against it.”

Councilman Joe Hall was skeptical that the new expansion to the convention center would not provide enough “net gain” to make the project essentially worthwhile or perhaps fiscally responsible in these economic times.

Yet, the fact that the food and beverage tax gives the town of Ocean City an exclusive funding mechanism to pay for its part of the new expansion, estimated at $10.4 million within 10 years, according to Lucey’s projections.

The other big intangible in this was the decision of the Maryland Stadium Authority to contribute up to $4.1 million toward the project.

“They see this as a winning project, and they see Ocean City as a valuable revenue source for the state of Maryland,” said Mayor Rick Meehan on the MSA’s unanimous vote to support the project. “They want to help invest in the future of our town.”

Leighton Moore, owner of Seacrets and a former Ocean City councilman, claimed that he was the one to come up with the idea in 1993 for the 1 percent food tax and ironically was the first to publicly call for a cut in that same food tax by a half percent.

Moore called Tuesday’s decision one of the biggest in the town’s history.

“What we did (Tuesday) is almost as big as the original expansion that we did to the building in 1995. To fix the building structurally was a necessity back then, but putting a cultural addition on now is just as big, said Moore. “This performing arts center is going to be the crown jewel of convention hall.”

The food and beverage tax, according to Finance Director Martha Bennett Lucey, has brought in $2.1 million in each of the last three years, and is confident that funding the new project, even by cutting the tax in half, will be no problem at all.

“We are only going to have to buy bonds for between $5 and $6 million, so I am fully confident that cutting the food tax in half, we will easily have the adequate means to pay off these bonds in a timely fashion,” she said.

Herbst said that his only disappointment in Tuesday’s decision was that it wasn’t a unanimous one.

“I thought there should have been seven votes for it rather than five, said Herbst. “Every other municipality in the state wants a food and beverage tax like we have and we are very lucky that we have it.”

Joe Hall admits that some businessmen in the town have less cynicism than he does in these financial times, and his decision more than likely mirrors that.

“Generally, I think business people in Ocean City are a bit more optimistic than I am, but I’m trying to be very grassroots and stick up for all the taxpayers of Ocean City,” said Hall.

Lucey said that the decision to lower the tax by a half percent was a “very good one” as she stressed that a town should never tax more than it absolutely has to. Moore said the expanded center will be enjoyed by the public more so than the small incremental tax break that comes with the decision.

“This decision is paramount. It’s everything,” said Moore. “You have to do something to stay fresh and viable in today’s market, and yes, it’s expensive, but it’s the only thing that works. When this is done, the naysayers will admit they were wrong.”

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