Thursday, September 6 – Council Unanimously Supports Room Tax Increase

OCEAN CITY – The ordinance outlining the plan recently presented by the Ocean City Hotel-Motel-Restaurant Association (OCHMRA) to increase advertising funds has taken another step forward this week with the Mayor and Council unanimously approving the ordinance on second reading.

Last month, the OCHMRA presented a plan it hopes will fuel the advertising fund that has remained stagnant over the past few years and revive tourism during the summer months.

The proposal calls for a .5 percent increase from 4 percent to 4.5 percent of gross room revenues, with 2 percent to be dedicated to the advertising budget.

The 2 percent dedicated to the advertising budget will be used specifically for destination marketing. The remaining 2.5 percent will be dedicated to the general fund.

To create a gradual increase of gross room revenues, the plan proposes a five-year growth plan, increasing from 1.4 percent the first year to 2 percent the fifth year. The percent of revenues dedicated will increase by about .2 percent each year until it reaches the total 2 percent revenue.

One week after the proposal was presented, the ordinance outlining the plan appeared before the Mayor and Council for first reading. The ordinance aims to increase the hotel rental tax from the current 4 percent to 4.5 percent. The ordinance states that the Mayor and Council will be asking the county to make the .5 percent increases with the plan becoming effective Jan. 1, 2008. After reviewing the ordinance on first reading at the last Mayor and Council regular meeting, it was unanimously approved.

This week, the momentum continued, with the ordinance being approved unanimously on second reading. The momentum did not come full force however, with several opinions of opposition being heard.

City Manager Dennis Dare presented the Mayor and Council with a memorandum prior to the meeting, outlining specific concerns with the ordinance.

Dare began the memorandum by addressing the potential outcomes of the ordinance.

“First, room tax revenue will grow. Secondly, expenses will grow in public safety and public works in many ways. So the key is for the revenue to grow as much as the resulting expenses,” the letter read. “In theory, the proposal brings us more expense in the new tourists and reduces our revenue over $2 million…. One has to assume that tripling an advertising budget will increase business and that effect has not been factored into the consideration of the OCHMRA proposal.”

The council began by addressing Dare’s letter as well as his concerns.

“Although I understand Dennis Dare’s comments and where’s he’s coming from, we’ll never know unless we give it a try,” Councilwoman Nancy Howard said. She pointed out that these issues and concerns could be addressed a year or three years from now, but that no one will know unless the ordinance is passed.

Councilman Jay Hancock voiced doubt that the ordinance will solve the major problems that the town is having with tourism.

“I just don’t think advertising alone is going to do it,” he said, adding that there are other areas that need work and need to be addressed.

“I think Ocean City has more positive things than negative,” Mayor Rick Meehan pointed out, explaining that the town needs to remind people of those positive things and do so competitively through advertising. “This is to be competitive, this is to remind people about Ocean City.”

The Mayor and Council and Dare were not the only ones weighing in on the ordinance.

Resident Ellie Diegelmann voiced her own doubt regarding the effectiveness of the ordinance.

“I think the quality is clearly lacking in service and products,” she said of the town. “I just think that this is not going to solve our problem.”

Despite Diegelmann’s doubts and the voiced concerns of others, the Mayor and Council stood firmly behind the ordinance.

“It’s really easy to sit back and second guess,” Councilwoman Mary Knight said of the concerns heard. “If you sat with these folks (OCHMRA) and saw what they did…then you would be fully in support of the proposal.”

Councilman Lloyd Martin agreed that the OCHMRA has put significant time and effort into creating a proposal that will work for everyone, not just the membership itself.

“They’re taxing themselves, they’re putting themselves on the line here,” he said, pointing out that the members of the OCHMRA have the most at risk with the ordinance.

Council President Joseph Mitrecic also showed support, saying, “I support this because we are woefully behind the times as far as our advertising.”

Mitrecic added that the council too had put significant time and thought into the ordinance.

“The council’s not just blindly giving this money to the OCHMRA,” he said.

With the full support of the council, the ordinance was passed on second reading.

Although the ordinance has passed the first level of scrutiny, the increase is far from being a done deal. The next step will be selling the ordinance to the county and garnering approval from the County Commissioners.

See tomorrow’s issue of The Dispatch for all the news of the week.