OCEAN CITY — Lower Shore lawmakers this week briefed resort business leaders on a variety of issues that came out of the 2013 General Assembly session, including several that will likely impact the small business climate and the summer season.
Senator Jim Mathias and Delegates Norm Conway and Mike McDermott, along with county and municipal elected officials on Wednesday, provided the Ocean City Economic Development Committee (EDC) with a broad overview of the issues of local importance to emerge from the 2013 General Assembly session from the state budget to the gas tax and from offshore wind to the repeal of the death penalty. A recurring theme throughout the meeting was the state’s economy and the impact of certain decisions and votes on the local business climate.
Depending on the source, the news was either positive or tempered with concerns of recurring infringements on private sector business, increased taxes and regulations, and a drain on the local economy. Mathias said when he first took state office in 2006, the picture was much gloomier than it is now.
“Little did I know we would be facing one of the toughest economies in history with a $2 billion structural deficit,” he said. “We’ve largely erased that while protecting our AAA bond rating. Maryland is recognized for having the best public school system in America.”
Conway, the House Appropriations chairman, said the state’s economic picture was rosier than recent years, but had not fully turned the corner.
“There was a different feeling this year,” he said. “We talked about somewhat of an upturn in the economy, but when we looked at it closer, we knew we still had a long way to go.”
Conway said the legislature approved a balanced budget with a $300 million fund balance and another $767 million rainy day balance, if federal sequestration cuts hit Maryland particularly hard. He also said the General Assembly is ahead of schedule on tackling the state’s structural deficit.
“The goal became reducing the structural deficit by one third each year for three years and we’ve been able to do that,” he said. “We reduced it by 46 percent in the first year and it’s now down from $2 billion to $121 million. We’re now at the point where we can eliminate the structural deficit.”
Not all of the local delegates in Annapolis were ready to accept the rosy picture of the state’s recovering economy. McDermott said the session was rife with increased taxes, including the gas tax, and more regulations on the private sector.
“No wonder we’re bleeding jobs and losing business to other states,” he said. “The state needs more revenue and continues to look to the business community to find it.”
McDermott praised the initiative and ambition of the resort’s business community in the face of increased taxes and stiffer regulations.
“I applaud everyone in this room for being the backbone of what we do and conceiving and achieving,” he said. “The answer is not to put layer after layer of taxes and bureaucracy to prevent you from conceiving and achieving and creating jobs and stimulating the economy.”
McDermott said the taxation and overregulation was suppressing an economy ready to spread its wings again.
“This economy wants to fly and Ocean City wants to soar,” he said. “All we need to do is get the government to get out of the way. Ronald Reagan said the worst words to hear for business are ‘I’m here from the government and I’m here to help you.’”
Worcester County Commission President Bud Church also addressed the EDC on Wednesday and painted a rather glum picture of the county’s pending budget.
“Worcester County is in the middle of its budget session at a time of year I refer to as the beg-a-thon,” he said. “The truth is, we have $173 million in requests and $166 million in revenue, which leaves us about $7.4 million short.”
Church explained the county’s assessable tax base had declined from around $20.2 billion in 2009 to $15.1 billion in 2014, representing a drop of about $5 billion. Nonetheless, the county has been able to maintain services while holding the line on taxes to a large degree.
“The tax rate is the second lowest in the state, so Worcester County is doing some things right,” he said. “It’s a little disheartening that the county has had to absorb some of the fiscal responsibilities of the state.”
Church specifically referenced the $1 million that county now has to pay to support the state’s assessment office in Worcester, and another $1 million in teacher pensions that used to be the state’s responsibility.
“Our revenue dropped by $5 billion but the state continues to pass along $1 million here and $1 million there,” he said. “It makes it hard to pass a budget, but I promise you we are not going to raise taxes this year. We’re going to cut and cut and cut some more, just like we’ve always done. We’ve had one tax increase in 11 years.”
Church said while wearing his other hat as a Realtor, he has seen firsthand the impact of the state’s perceived tax burden on residents and businesses.
“There have been two occasions in the last week where people have walked into my office and said they want to sell their house and move to Delaware because the tax burden in Maryland is out of hand,” he said.
During the EDC meeting on Wednesday, the gas tax increase approved by the General Assembly was discussed extensively. The old adage goes when the price of gas goes up, Ocean City thrives because of its close proximity to the major metropolitan areas just a tank away. However, the gas tax increase is viewed as a deterrent to the local economy this time around.
“We were paying 24 cents in gas tax when gas was a dollar a gallon,” said McDermott. “At least now, the price has gone up to the point the percentage is lower. If we had enacted this gas tax in 1992, gas would be $10 a gallon now.”
Clarion Resort Hotel owner and former EDC chairman Dr. Lenny Berger said the gas tax would undoubtedly hurt the local economy.
“When the gas tax goes up, it affects everybody in this room,” he said. “When people pay more for gas, they have less disposal income to spend in your business. If businesses make more money, they raise more tax revenue, but they never seem to understand that.”
Also discussed on Wednesday was the importance, now more than ever, of investing in tourism advertising and marketing. Conway said Ocean City was ripe for targeting coastal areas to the north devastated by Super Storm Sandy last fall.
“Ocean City has to remember what happened,” he said. “You don’t want to benefit from somebody else’s misfortune, but we should encourage those folks to come to Ocean City. We do need to spend more for tourism. There’s no doubt about that.”
Ocean City Councilwoman Mary Knight said the resort’s marketing campaign somewhat reluctantly did just that and is already seeing the positive effects.
“We dedicated $1 million more toward advertising and we’re making a real push this year,” she said. “It started earlier when we targeted New York and New Jersey and even Pittsburgh and we’ve seen more hits on our website from those areas.”
Knight said early reports are indicating the directed marketing push is achieving the desired results for Ocean City.
“The Baltimore Business Journal has reported our condo rentals are up 40 percent,” she said. “We want them to fall in love with us and come back next year. We can check the zip codes and see if our concentrated advertising efforts are working.”