Council’s Room Tax Debate Called ‘Disruptive’ By City Manager

OCEAN CITY – A report on this summer’s key financial indicators sparked a debate this week among the resort’s elected officials who continue to be divided on all matters tourism related.
City Manager David Recor and Budget Manager Jennie Knapp brought up what they thought was good news of room tax increasing this summer at this week’s Mayor and Council meeting.
“The budget manager and I have been looking at some of our tax receipts, gross room tax, admissions tax and our food tax, and these metrics tell the real story in terms of our revenue and performance,” Recor said.
Knapp presented two graphs reflecting room tax collected by month from Fiscal Year 2009 (FY09) to FY13 and room tax, admissions tax and food tax collected from FY10 to FY13.
According to Knapp, room tax has increased every year since 2009.
“We have grown from just over $11 million in FY08 to almost about $12.9 million, almost $13 million for 2013. The budgeted amount for 2014 is $13 million,” she said.
The combination of food tax, admissions tax and food tax has also grown since FY10. The growth from 2010 to 2011 was 5.7 percent, 2011 to 2012 was 5.3 percent, and 2012 to 2013 was 3.5 percent. The total growth in the past four years is $13.4 million to $15.4 million.
Councilman Brent Ashley immediately questioned how room tax could be on the rise when Demoflush numbers have decreased. Demoflush estimations are based on wastewater flow from Ocean City provided by the Ocean City Wastewater Division and calculated by the OC Tourism Department.
Ashley asserted the rise in room tax with a low summer population must be due to hotel and condo rates increasing.
“That would account for the fact that June room tax is up this year, yes. It was only up .83 percent but we still had a 2.74 percent increase for the year as a whole…irregardless, we have grown by over $2 million since 2009,” Knapp said.
Mayor Rick Meehan remained optimistic and recognized visitors are choosing to spend their vacation dollars in Ocean City. He was also pleased to see FY 13 had met budget expectations and Knapp’s room tax estimation for the year.
“I know that has been challenged and it has been basically assumed or stated that we operate with smoking mirrors whereas the numbers prove themselves to be accurate,” the mayor said.
Meehan furthered he has had several conversations with hotel operators and condo rentals.
“A hotel operator, who also owns an amusement park and a number of hotels on the boardwalk pointed out to me that in July his revenue was up, his occupancy rate was up and his average room night cost was down, and it was because he is doing what you need to be doing in 2013,” the mayor said. “You need to promote, you need to market, and you need to make sure you have the price that people are going to pay to come here. Steam came out of his ears when I said it was because of a rate increase and he said, ‘no, it’s because occupancy is up’.”
Meehan also checked with Chris Mitchell of Coldwell Banker Vacation Rentals, which is one of the largest rental companies in Ocean City, and asked where its position stands compared to previous years.
Mitchell responded rentals are ahead of 2011 but a little behind from 2012 because of the weather in the early part of the summer season. He explained last-minute rentals are down because more people are weighing their time of vacation on the weather forecast.
Meehan added that Ocean City businesses that live up to visitors expectations are doing well but those who rely on overflow and haven’t kept up their product by investing in advancements probably are not.
“That’s economics, that is what happens in private enterprise. We can bring the people here, but those that invest and meet the level of expectations are continuing to succeed and will continue to succeed, and I hope we can encourage others to step up as well,” he said.
Despite the final count of room tax in FY13, Ashley was not persuaded that business is up in Ocean City so far this summer.
“From everybody I have talked to, I am not seeing a business increase,” Ashley persisted. “You can call it negative … but I have lived on the same corner 35-plus years, and I can see it. I don’t need Demoflush or Smith Travel, I can see it, and I can feel it.”
Ashley questioned Knapp the level of room tax prior to the summer season, in which she responded room tax had been down since last October but the majority of room tax is collected in the summer months, and not in the off-season.
“In the month of January in 2011, we collected $125,000, in 2012 we collected $136,000, and in 2013 we collected $125,000. So yes, it was down from 2012 but it was very much the same as in 2011, and that is what we saw in those months that it was down,” Knapp provided as an example. “2012 was an extraordinary year, so when you’re in the position I am in I don’t look at one year, I look at the last four years … to try to see where we are going to end up.”
Councilwoman Margaret Pillas agreed with Ashley and believes the rise in cost to conduct business has in return increased visitor expenses and has put a damper on the number of people coming to stay in Ocean City this summer.
“Every year we have had an increase in cost of doing business … it is costly to come here, or that’s what they say, and I agree with it,” Pillas said.
Recor interrupted as he became frustrated with how the presentation of what was meant to be good news turned into a debate among council.
“It seems like anytime we try to present any kind of information it becomes a debate,” he said. “It is not a debate. It is good information. I think it is disruptive.”
The Mayor and City Council collected themselves as the meeting on Monday evening came to a conclusion.
“When Jenny counts the money that is a cold hard fact, and we can go to the bank with that,” Councilman Dennis Dare said.