OCEAN CITY — When resort property owners get their reassessment notices in the mail later this month, most will see their values have declined as expected, but the level of decrease might not be as great as once anticipated.
Assessments of real estate values in Ocean City were officially completed last month and new notices are expected to be mailed out in late December. Most anticipated the values of their properties have declined significantly since the last time resort properties were reassessed three years ago during the back end of a six-year spike upward, but the level of decline does not appear to be as pronounced as once feared.
According to Robert Smith, director of the State Department of Assessment and Taxation (SDAT) for Worcester County, most residential property owners in Ocean City will see their values decline by an average of 12 to 15 percent since the last reassessment three years ago. For some, the changes will be even more pronounced, but others will see their values held fairly stable.
“The values are continuing downward as expected, but maybe not as much as the last three years,” said Smith this week. “The angle of decline is less steep than it was. We saw residential property values in the county decline by as much as 17 to 20 percent over the last few years, but Ocean City’s average decline this time around is coming in at 12 to 15 percent.”
Property values in Worcester are reassessed every three years on a rotating basis with the county divided into three large geographical areas. Residential and commercial property in Ocean City is reassessed in its own cycle, with the rest of the county divided into a vast northern section that includes Ocean Pines and Berlin, and a southern section that also includes much of West Ocean City in order to make the areas similar in size.
At the height of the development and construction boom five or six years ago, assessed values of property in the resort area and all over the county soared to heights never seen before. For example, six years ago, the average increase came in at 75 percent, or an average of about 25 percent in each of the three years of the cycle.
However, in the years since, a stagnant real estate market combined with a shaky at best and collapsing at worst economy has resulted in steadily declining property values in Worcester and across the state. Smith said despite the steady decline, property values in Worcester County in general, and Ocean City specifically, have not fallen past the pre-spike levels four, five or six years ago.
“We saw property values increase by an average of 78 percent during the boom period, which is unheard of,” he said. “Now, what we’re seeing is more of a correction. When we see decreases of 20 percent, 15 percent, or 12 percent, all of those decreases combined don’t add up to that huge spike several years ago.”
Nonetheless, even a 12-15-percent decline, while not as bad as it could have been, is reason for concern for local governments relying on property tax for their largest source of revenue. Because most areas of the county are more stable with year-round residents, property values tend to hold serve, so to speak. But because of its resort nature, real estate values in Ocean City are subject to greater swings.
In addition, a vast majority of the residential accounts reassessed in the current cycle in Ocean City are condominiums, most of which aren’t owner-occupied. For example, 35,000 residential properties were reassessed in Ocean City during the current cycle, while just around 1,000 commercial properties had their values adjusted.
Because of the sheer volume of properties reassessed in Ocean City in the current cycle, and their naturally inflated and less stable values, local officials have been waiting for the shoe to drop, so to speak, on the new property values in the resort. Local government officials warned during the last budget cycle the reassessment of Ocean City might create greater budget issues this year and the numbers appear to bear that out.
“I think Worcester County and Ocean City were hoping for a decline somewhere in the 10 percent range, but it’s coming in a little higher than that,” said Smith. “County officials and town officials are going to have some tough decisions to make because the property tax source is not going to produce the revenue they were hoping for. If they receive $1 million less than they planned for, they might be able to make that up, but if it comes in as much more than that, they are going to continue to struggle with their budgets.”
While residential property values declined by an average of 12 to 15 percent, commercial property assessments in Ocean City largely held their own, according to Smith. However, because of the comparatively low sample size, a stable commercial sector might not be enough to offset the declines on the residential side.
“Commercial property values in Ocean City aren’t going down at anywhere near the same rate as residential,” he said. “Less than half of the commercial properties saw their values decline, but there are so many fewer.”