SNOW HILL – In lieu of the traditional grant request, Ocean City leaders this week presented plans for a new funding formula that would gradually increase the level of funding the resort receives from Worcester County.
As an alternative to a tax differential, Ocean City officials asked the Worcester County Commissioners this week to consider a new formula that would increase the amount of county funding Ocean City receives during the next five years. Under the proposal, Ocean City’s grant from the county — which was $3 million this year — would jump to approximately $5 million in the coming fiscal year.
“This issue has been kicked down the road for far too long,” Ocean City Mayor Rick Meehan said. “We are determined to see that our Ocean City taxpayers are treated fairly. Our goal is to establish a formula to resolve the inequities and provide a substantial relief for our Ocean City taxpayers. We’ve taken the initiative to prepare a Memorandum of Understanding between Ocean City and Worcester County that will establish a formula to begin addressing this tax setoff beginning July 1, 2015 and extending through June 30, 2020. This is our formal request for the year beginning July 1, 2015.”
Meehan said 60 percent of the property tax revenue the county received came from Ocean City’s 28,000 taxpayers. Because of that, a study performed in 2013 by the Municipal and Financial Services Group identified and supported a $17 million tax differential — $14 million more than provided by the county’s annual grant to Ocean City.
“We’re not expecting $17 million, but we are expecting to move forward,” Meehan said.
Ocean City officials have pushed the idea of a tax differential for years with the argument that certain county services are not provided to resort residents because Ocean City already provides them.
Meehan said that because Worcester County historically did not support the tax differential, resort officials had come up with the funding formula proposed Tuesday instead. Currently, he explained, Ocean City received from the county roughly 4.5 percent of the taxes it paid, or $3 million. He comparison, he said the Town of Berlin received 22 percent of the taxes it paid, or approximately $702,000 in grants; while Snow Hill received 71 percent of its taxes back, or $629,000, and Pocomoke 24 percent, or $493,000.
“We support the other municipalities but we recognize an inequity,” Meehan said.
According to City Manager David Recor, the new formula for Ocean City would increase the amount it received from 4.5 percent to 7.5 percent in the coming budget year with phased-in increases over the next several years, ending with 19.56 percent.
“We believe that is a fair alternative,” he said.
Under the formula, Ocean City would receive a little more than $5 million in unrestricted grant funds in FY 2016, based on the city paying $67.37 million in total property and income taxes to the county. In FY 2017, the grant would increase to more than $7 million, based on current tax allocations from the city to the county. By 2020, Worcester County’s grant to Ocean City would be more than $13 million, again using current tax figures.
“Let’s be the leaders that we are here in Worcester County,” Recor said. “Let’s set the example. Let’s work together to develop a model for other communities in the State of Maryland to emulate.”
Commissioner Joe Mitrecic, a former City Council member who now represents Ocean City on the board, made the tax differential issue a priority in his campaign last year. He commended the town’s leadership for presenting the funding concept.
“We’ve talked about this for many years,” he said. “This is the first time a plan has been submitted to move in that direction.”
Commissioner Jim Bunting agreed and said county officials would consider the proposal, which they had not seen until Tuesday’s meeting, during the upcoming budget process.
“Maybe we’re finally tearing down that wall …,” he said.
Although Ocean City officials suggest the resort deserves a $17 million tax setoff, a report by Worcester County staff suggests otherwise. A memo from Harold Higgins, the county’s chief administrative officer, suggests the resort merits a differential in the $3 million range. According to Higgins there are just two services — the Fire Marshal and the Department of Development Review and Permitting — that Worcester County does not provide to Ocean City. The cost of those services is $2.2 million. Higgins says the fact that Ocean City provides its citizens with many of the same services, such as public works and recreation programs, the county offers is not double taxation.
“Should the Town of Ocean City opt to provide an enhanced level of service above and beyond that which is provided by the county, that is certainly their prerogative, but such enhanced services are not considered double taxation,” Higgins said in a February memo to the Worcester County Commissioners.
The MOU presented this week clearly shows there is a disagreement on the topic of “double taxation.”
“The Town’s requests for Tax Differential consideration have been supported by several comprehensive financial studies and detailed analysis prepared by The Municipal & Financial Services Group (MFSG), based in Annapolis, Maryland, which identified and confirmed a number of county services or programs that are not offered to, provided to and/or utilized by the Town of Ocean City and its residents including but not limited to the Worcester County Tourism Department, Department of Public Works, Department of Recreation, Department of Parks, Department of Emergency Services, Fire Marshal’s Office, Department of Development Review and Permitting, the Sheriff’s Office and the Department of Environmental Programs,” the memo read. “Worcester County has been resistant to engage in discussion and/or grant the Town’s requested Tax Differential and has instead responded by providing the Town with a variety of annual Restricted and Unrestricted Grants including Economic Development (Tourism), the Ocean City Development Corporation (OCDC), Recreation, Visitor’s Bureau and Undesignated Funding …these Restricted and Unrestricted Grants, while very much appreciated by the Town of Ocean City, equate to only a small fraction of the amount an actual Tax Differential should equate to because the Town of Ocean City constitutes nearly 60% of the Assessable Real Property Tax Base for all of Worcester County yet the Town of Ocean City receives a disproportionately small share of County services and programs.”