Ocean City Plans Another Shot At Tax Differential

OCEAN CITY – In the past, a tax differential request to Worcester County has been no walk in the park for Ocean City, but the city is again taking another shot at reimbursement for services provided.

This week City Manager David Recor discussed with the Mayor and City Council a Fiscal Year (FY) 2014 tax differential request to the Worcester County Commissioners.

According to Recor, per Section 6-306 of the Tax-Property Article of the Annotated Code of Maryland, the Town is required to submit a “tax setoff” request to the Worcester County Commissioners 180 days within the passage of the county budget, which would be by the beginning of December.

“To protect ourselves, and to move forward, the letter to county should be sent no later than next Friday,” Recor said.

The council would seek a reduction of the tax rate for Ocean City property owners in lieu of the town receiving county grants in the amount of 3.6 million for fiscal year 2013.

Recor reminded the Mayor and City Council that a tax differential study was completed in 2007 that recommended a tax offset for Ocean City taxpayers from the county’s set tax rate.

“If I ask the county that we intend to move forward, of course the methodology [of the study] wouldn’t change, although both of our budgets have changed, both budgets have decreased,” Recor said. “We wouldn’t necessarily need to change the study although an update to the study would be necessary given the changes in our budgets.”

Councilman Joe Mitrecic made a motion to draft a letter for Mayor Rick Meehan to sign to put the county on notice that Ocean City plans to move forward with a tax differential. The letter will be sent to the county by next Friday. The motion also included an update on the tax differential study. Council Secretary Mary Knight seconded the motion and the council voted unanimously to approve it.

In October of 2007, Municipal & Financial Services Group (MFSG), a consulting firm in Annapolis that specializes in financial and management support for the public sector, submitted results of a study to identify and document the basis for a tax differential in Ocean City consistent with the requirements of section 6-306 that identified several county services and programs that are not offered or provided to Ocean City residents.

MFSG found the following county services or programs are not offered to Ocean City residents -- Tourism Department, Department of Public Works, Department of Recreation and Parks, Department of Emergency Services, Fire Marshal’s Office, Department of Comprehensive Planning, approximately 90 percent of the Department of Developmental Review and Permitting, approximately 80 percent of the Sheriff’s Office, 50 percent of the Department of Environmental Programs and 5 percent of Debt Service.

Those services and programs that are not provided within Ocean City accounted for $13,894,610 in Ocean City property taxes back in 2007.

MFSG concluded that a tax differential for Ocean City taxpayers for the fiscal year beginning July 2008 based on the $13,894,610 difference in services and programs would result in a 22-cent adjustment of the 70-cent county-wide property tax rate, having Ocean City property owners’ tax rate decrease to 64 cents per $100 of assessed value and 86 cents for the remainder of Worcester County.

The study included that Worcester County had been reluctant in granting the city’s requested tax differential and had instead responded with a variety of grants.

However, the grants only offset a small fraction of what the tax differential should have been, based on the fact that Ocean City constitutes more than 60 percent of the assessable real property tax base in Worcester County yet receives a disproportionately small share of County services and programs.

met with the Worcester County Commission on Dec. 4, 2007 requesting they grant Ocean City a tax differential with a copy of MFSG’s study in hand. He requested a second meeting with the consultants present, as well as forming a committee to discuss the issue in detail and make recommendations to the governing bodies.

The Ocean City Mayor and Council met with county staff on March 11, 2008 to discuss the tax differential, and while opinions differed on the percentages of county services and programs offered to Ocean City taxpayers, everyone agreed the methodology used in the report was correct.

As the county and the city could not come to an agreement before the passage of the fiscal year 2009 budget, the city requested grants to offset town expenditures.