Risky is an appropriate way to describe the Ocean City Mayor and Council’s unanimous decision to set the town’s property tax rate at 39.5 cents per $100 of assessed valuation.
Last month, after a number of significant rounds of cuts, City Manager Dennis Dare presented a roughly $80 million budget, suggesting the council increase the town’s property tax rate from the current 38 cents per $100 of assessed valuation to 41 cents, considerably below the constant yield level.
Thanks to pulling $500,000 out of the city’s retiree health insurance account, the council was able to move some money around, resulting in the reduced property tax rate. That’s all well and good and appropriate for these times. However, that decision does not come without peril, although the council seems comfortable with the decision as evidenced by the 7-0 vote.
The major point to remember here is whatever money was withdrawn from this critical fund must be replaced by this time next year. Since the town is planning to transfer this $500,000 into its General Fund operating account, that means this time next year that money will need to come back out. The thought process among the town’s elected officials seems to be that’s doable, pointing to a potentially significant amount of savings with a change in the town’s solid waste management.
If that happens as predicted, all will be fine. If the projects savings are not realized, the council will find itself in a big hole next year. It’s worth pointing out the town’s current budget woes are here to stay for at least the next three years, due to the declining property assessments. The state reassess resort properties once every three years, and the amount of money the town is due to receive in tax revenue remains unchanged for the most part during that span. Every three years, it either increases or declines significantly depending on which direction town property values head. They have fallen drastically in recent years, resulting in a major drop in tax revenue and a serious deficit between expenditures and revenues.
With all the cuts made over the winter, employees accepting pay freezes, new limits on general services and this week’s withdraw from the retiree account, Ocean City has essentially balanced its budget. The bottom line is residential property owners will pay considerably less in city taxes with this budget after the council’s decision this week.
Whether the council’s move to further reduce the tax rate beyond Dare’s recommendation was astute will not be known till next year, but we think this was a chance worth taking in these uncertain economic times.
Ocean City’s balancing act is keeping the town affordable to its residents, businesses and visitors, while continuing to offer sound infrastructure, attractive amenities and reliable services. This budget does a decent job of that.