OCEAN CITY – Ocean City Councilman Dennis Dare is working with a work group formed by the Maryland Municipal League to address the ongoing battle of tax differentials throughout the State of Maryland.
At the conclusion of Monday evening’s Mayor and City Council legislative meeting, Dare announced several months ago he was asked by the Maryland Municipal League (MML) to serve on a work group between MML and Maryland Association of Counties (MACO) to address the issue of tax differential for duplicated services between municipalities and counties.
“We met recently … and talked about trying to find a way for a uniform-fair way for property owners in municipalities to be compensated for the taxes they pay to both their municipality and the county but only receives service from their municipality,” Dare said.
Dare used Ocean City’s and Worcester County’s police service as an example.
“Worcester County provides police services through their Sheriff’s Office in the county but not in Ocean City,” he said. “Our taxpayers are paying the same tax as Worcester County, but they are receiving police service from the city, not the county.”
Dare acknowledged the issue of a tax differential has been long discussed throughout Maryland, and in fact Ocean City has been denied to be a legislative priority by MML on multiple occasions.
“We had a pretty spirited discussion at the meeting, although no conclusion was reached other than we are going to meet again and that date is being set,” he said. “Hopefully something can be resolved prior to the MML conference in June, and acted through legislation during next year’s legislative session.”
Dare furthered in the State of Maryland there are “may” and “shall” counties when it comes to a tax differential.
“All the counties on the Western Shore except for Washington County are ‘shall’ and all the ones on the Eastern Shore basically are ‘may’, although some counties like Talbot County voluntarily give a tax set off,” Dare said. “The law says ‘you shall have a tax set off’ but it could be for one penny or a dollar and it would meet the letter of the law. In fact on “shall” counties everyone that has a tax setoff it is basically negotiated separately, so they are all different, they are not uniform, and in most cases they are not fair.”
Dare pointed out Annapolis received a tax differential from Anne Arundel County but only after a lawsuit.
“In fact, everyone in the work group said Ocean City should be the poster child for the need for this issue to be addressed,” he said.
A tax differential for Ocean City has a long history but most recently during a Worcester County Commission meeting earlier this month Ocean City Mayor Rick Meehan requested a meeting with the county over the matter.
“The issue of tax differential is still very important to Ocean City taxpayers. The increase in the undesignated grant in 2009, which was provided in lieu of a tax differential, was a start to address this issue,” Meehan said at that time. “The City Council would like the opportunity to meet with you to develop a plan for future annual increases in the amount of the undesignated grant to address the disparity and create fairness between the cost of the services the town provides in lieu of the county providing the services and the county contribution.”
In January, Ocean City Manager David Recor presented a recap of Ocean City’s Strategic Plan accomplishments within the past year. A tax differential was placed as a priority.
Recor reported an updated study was completed by Municipal & Financial Service Group (MFSG) in February of 2013. According to the study, Ocean City has based its requests for a tax differential on the rationale that certain county services and programs were neither available nor provided to Ocean City residents by the county because Ocean City provided those same or comparable services and programs to its residents.
In the past, Worcester County has been reluctant to grant the city’s requested tax differential and has instead responded with a variety of grants. However, these grants only offset a small fraction of what the tax differential would be, based on the fact that Ocean City constitutes almost 60 percent of the assessable real property tax base in Worcester County yet receives a disproportionately small share of county services and programs.
MFSG identified several county services or programs that are not offered to, provided to and/or utilized by the town and its residents, such as the Worcester County Tourism, Public Works, Recreation, Emergency Services, Fire Marshal’s Office, Development Review and Permitting, the Sheriff’s Office and Environmental Programs.
Based on the assessed valuation of real property tax in Ocean City and in the remainder of Worcester County, MFSG calculated the “real” property tax rate for the entire county and a supplemental tax rate for those portions of Worcester County exclusive of Ocean City.
MFSG’s analysis indicated that for FY 2013, Worcester County will need to collect $119,678,288 in property tax revenue. MFSG analysis indicates that $102,531,947 of the property tax collected should be paid by all county residents including those in Ocean City, but that $17,146,341 in property taxes should not be paid by Ocean City tax payers. Using that figure, 77 cents per $100 countywide property tax rate would be 68 cents for Ocean City and 95 cents for the remainder of Worcester County.
In October, Ocean City received correspondence from the MML regarding its Legislative Action Request (LAR) to receive relief from Worcester County through a tax differential, which was the fourth request made by Ocean City.
MML Legislative Committee Chairman Michael Bennett submitted to Meehan by letter the committee recommended that, in lieu of proposing double taxation legislation in 2014, it was felt MML should use the year to develop a strategy to address the issue.
It was noted that some municipalities would suffer financially if the legislation as proposed by the double taxation workgroup were to move forward. The committee felt strongly that additional time was needed to outreach to MML’s membership and the counties to ensure that a proposed solution would truly address all municipal concerns fairly and not unintentionally cause harm to those cities and towns currently receiving a double taxation rebate or differential.