A Difficult Balancing Act With Budget

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With little fanfare this week, City Manager Dennis Dare presented his proposed $80 million budget to his boss, the Ocean City Mayor and Council. Although little was said at this week’s meeting, the budget will now go under the microscope as the town’s elected officials hear the details of each department’s spending plan over the next few weeks and could potentially make even deeper cuts.

Budgets, particularly those involving millions of dollars spread out over multiple departments, can be confusing business, particularly when trying to determine an individual impact on property owners. In our view, the best way to figure out how a government budget will affect you is to simplify it into dollars and cents.

Dare’s budget calls for increasing the town’s property tax rate from the current 38 cents per $100 of assessed valuation to 41 cents. On the surface, that’s a tax increase. However, analysis shows residential property owners will be paying less in taxes next year than they did this year, as a result of declining property values.

Let’s use the example of a house in Caine Woods valued at $300,000 currently. This property owner’s municipal tax bill for the current year came to $1,140, using the existing tax rate. Under Dare’s proposed 41-cent tax rate, assuming the average 15.5 percent decline in property values reported by the state assessment office, the new municipal tax bill would be $1,039, a 8.8-percent decline.

It’s a different story on the business side, as commercial property values on average jumped 17 percent, meaning they will be paying a considerable amount more in taxes. For simplicity’s sake, based on a commercial property valued at $1 million last year, the new assessment value will come to $1.17 million. That means this commercial property owner will have to stomach paying $1,025 more next year, a 26.9-percent increase, in municipal taxes alone.

Whether a resident or a business owner, expenses are topping priorities these days. That’s why the amount of taxes we pay should be a major concern. In times when finances are a worry for many, nobody wants to pay more for anything, especially taxes. Unfortunately, commercial property owners will be doing just that, but that has more to do with questionable rises in property value than the town’s tax rate.

On the residential side, it’s important to point out tax bills will largely fall, thanks to decreasing land values. Many will argue city government can save residents even more money by cutting the town’s tax rate further below the constant yield. Elected officials seemed to acknowledge they might be able to save residents more money through further cuts, but they made no promises and believe the city manager’s budget is a responsible one. All that will play out over the next month or so.

The balancing act facing city lawmakers is simple, but the solutions are often clouded by complexities unique to being a resort destination. They need to make cuts in expenditures where possible and help residents and businesses the best they can by keeping the tax rate as low as possible. All the while the tourist should know nothing of it.

To remain a viable vacation destination, our visitors should come here and see no decline in services offered, no difference in the cleanliness of the resort and continue to feel as safe as they always have. If tourism is our number one industry, and there is no disputing that, this should be the council’s guiding light over the next month as they mull through a complicated process full of big numbers.

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