Ocean City Council Begins Budget Review

OCEAN CITY – Before taxpayers get up in arms over the possibility of the city raising the tax rate for the FY 2010 budget, the numbers seem to show that City Manager Dennis Dare’s hands were essentially tied and he was virtually left with no other choice.

Dare presented the proposed budget for the next fiscal year, which begins July 1, at Monday night’s City Council meeting, and though the numbers look about as grim as the rest of the economic picture in this country, Dare said that the raise in the local rate doesn’t necessarily mean an across-the-board hike in the tax bill.

The council remained quiet throughout Dare’s speech as he outlined plans to raise the property tax rate from 38 cents per $100 of assessed valuation to 41 cents, 5 percent below constant yield rate, which would bring in the same revenue as last year.

In essence, in order for the town to bring in the $46 million in tax revenue brought in last year, the tax rate would have to be raised to 43.2 cents.  Setting the number at 41 cents will create a $3.7 million decrease in tax revenue from last year, but should ease the burden on taxpayers, who saw their property values decrease by an average of 15.5 percent this year.

According to Dare, the tri-annual property assessments equated to an overall 12.2 percent drop (from $11.78 billion to $10.66 billion) and that drastic drop will equate to $4.2 million less in tax revenue collected by the town.

To further drive the point home, or to perhaps put it in layman’s terms, Dare gave a striking visual for just how much property assessments fell.

“The assessed value went down $1.1 billion. Do you want to know what that looks like?,” queried Dare on Tuesday. “Take a drive down to 48th Street and Coastal Highway and look at the new Gateway Grand. One billion dollars is about six or seven of those developments.”

Despite what many would assume to be a hike in their tax bill to go along with a rise in the tax rate, Dare said that in many cases, it’s just the opposite.

“A $100,000 house paid 38 cents per $100 this year, or $380 in taxes,” explained Dare. “The state assessor says your property is now worth 15.5% less, or $84,500, but next year, at 41 cents per $100 of assessed value, taxes will be $346.45, so the tax rate may go up, but the tax bill goes down in this example by $33.55 or 8.8 percent.”

Dare also noted that residents with the Homestead Tax Credit may see their tax bill go up as it was held to the 3 percent increase over the years, and some residential properties actually went up in value, but those who saw big decreases in their assessments will see similar decreases in their tax bill.

Mayor Rick Meehan called the budget a “fair proposal” and one that “showed the town’s commitment to relieving the burden on our taxpayers while still providing the services that Ocean City residents and visitors expect.”

Meehan hinted, however, that even more reductions could be made during the budget hearings, which started on Wednesday, in hopes to lower the tax rate.

“We’ll keep pace and chart everything as we go through the budget hearings,” said Meehan. “I think Dennis has done everything that he can, but I think we might be able to make a few more cuts.”

Councilman Joe Hall was vocal in his efforts to keep the constant yield rate at a level that wouldn’t be too much of a burden to property owners, and coincidentally, the 2-cent difference in tax rate virtually mirrored his plea several months ago.

“I think Dennis took to heart the message and I think he’s started us in the right place,” said Hall, “but where we end up six weeks from now after the budget hearings, is the crucial position.”

The $3.7 million less in tax revenue from the $79.75 million proposed General Fund budget is essentially a shrinking of town government by 4 percent, and Dare said that the town has no room for error.

“This budget is tight, and we are going to have to learn to say no,” said Dare. “Besides once a week trash pick up this winter, there will not be as many Christmas decorations downtown.  There will not be any street paving, or capital improvements of any kind this year, Boardwalk trams will start later in the spring and stop earlier in the fall, and July 4th celebrations have been trimmed slightly, but only in some cases, will the public notice the changes.”

Dare said that since the budget has increased about 6 percent annually the past several years, the 4 percent decrease creates about a 10 percent swing. He stressed that the tax rate was only raised to produce the same amount of revenue due to the drop in property values.

The city still has its hiring freeze in place, and the Fraternal Order of Police signed off on an agreement to forgo its yearly step raises that were set in place in the collective bargaining agreement on Monday, saving the town roughly $335,000.

Still, Dare has been vocal in saying that visitors that come to Ocean City “do not and should not have to be concerned with our fiscal crisis,” citing that essential services still must be kept at the same level despite across the board cuts and overall “belt tightening.”

“As long as we are giving the tax payers some relief and providing necessary services that our residents and guests have come to expect, then we are on the right track,” said Hall, “but we’ll get into the nuts and bolts of what all these numbers really mean during the budget hearings.”

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