Ocean City Financial Report Presented To Address Concerns

OCEAN CITY – The annual presentation of the past fiscal year’s performance provided an opportunity for Finance Director Martha Bennett to clear up what she believes is some misconceptions.

On Monday evening, Bennett presented the Town of Ocean City Comprehensive Annual Financial Report for Fiscal Year ending on June 30, 2014.

Bennett began her presentation by taking the opportunity to respond to Tony Christ, spokesperson for Ocean City Taxpayers for Social Justice, “inaccurate statements and assumptions that has been presented to the public over the past year.”

Ocean City’s taxes have not increased but in fact have decreased, Bennett stated. Property taxes collected last year were $5.5 million less than in 2009 before the recession.

“The national recession has been very serious. I have to tell you it is incredible the way the town has gone through the recession, particularly for a resort. We have fared better certainly then our competitors on the East Coast and in Florida. It is commendable what has happened,” Bennett said.

Bennett pointed out $15 million in room taxes was collected in 2014, which is a 21-percent increase from 2009. The town increased its advertising budget from $2 million to $6 million to maintain tourism and support local businesses.

“This is a very good performance in the longest recession that the nation has been under in decades. Given that vacations are not an essential of most families that are hit by the recession, so the fact that we have not only maintained sales but increased them in this time period is excellent, and has been shown to help us weather this period,” Bennett said.

Bennett furthered revenue collected largely goes toward funding public safety followed by tourism development.

“One of the comments to me is we should go back to where we were 30 years ago,” Bennett said as she presented a photograph of Ocean City following Hurricane Gloria 30 years ago. “That was before you did beach replenishment, and other projects that have enhanced the community and the beach.”

Bennett pointed out 30 years ago the town nor the budget included Northside Park, Eagles Landing Golf Course, the Roland E. Powell Convention Center, the Wastewater Treatment Plant, Emergency Management, Special Events, electronics, pension plans, or an increase in transportation because it was prior to the town implementing the ride-all-day fare.

“So, yes, there have been a lot of changes but all of them were done in consensus with the community and it certainly has enhanced the community as a whole,” Bennett said.

The enhancements made to the community have benefited property owners, Bennett stated. Although property values are less than they were in 2009, they have held at the same level as 2007 at $8 billion, which is a $4 billion increase from 2005.

“In a 10-year period, they have doubled. That is an incredible performance. I know there was a recession, and I know the property values have gone down during the recession but they are still at 2007 levels today. This is an incredible performance of the community, and for the people who have invested in Ocean City to see the level the values have held,” she said.

Bennett continued revenues in 2014 were $75,000 more than budget estimates. Expenses were $1.4 million less than budgeted, and Other Uses were $98,000 under budget. The anticipated deficit was $2.3 million but the actual loss was $106,000, which is $2.2 million better than expected for the year.

The town’s governmental funds reported a combined fund balance of $23,240,101, a decrease of $2,188,107 from the prior year. Of the total amount in fund balance, $8,092,696 is restricted or committed for capital projects and $13,602,038 is available to meet the town’s current and future needs, and is unassigned fund balance. Unassigned general fund balance at year-end was 18.2 percent of general fund expenditures and other uses, compared to the percentage in FY 2013 of 19.3 percent, and in excess of the town’s reserve policy of 15 percent.

“Our assets were $273 million compared to liabilities of $112 million at year end. Our net position was $161 million compared to $153 million in 2013, so there is an increase in equity of $8.4 million,” Bennett said. “General Fund debt is rapidly being amortized. This is supported by taxes in the general fund. Over half of the debt will be paid off in seven years, and that is very strong.”

The Town of Ocean City received an upgrade this year from Standard and Poors Rating Service from AA- to AA when bonds were sold in 2013. The town maintains ratings with Fitch of AA- and Moody’s Investor Service of Aa2.

The town sold three bonds in 2013. At that time, the rates received went from .2 percent to 2.85 percent. These bonds went toward Capital Improvement Projects, such as the construction of the new Beach Patrol headquarters and the town’s share of the new Performing Arts Center at the convention center.

The town implemented GASB Statement 67, Financial Reporting for Pension Plans in 2014, which requires the use of the entry age normal actuarial valuation method to determine the total pension liability. The town had previously used the projected unit credit actuarial valuation method to determine the liability. Per its adopted funding policy, the town uses the projected unit credit method to determine its annual pension contribution.

“The plan had investment return of 15.7 percent for general employees and 15.9 percent for public safety employees. You did adopt a funding policy to use a closed 10-year amortization for the unfunded liability that is very aggressive, very strong, and I commend you for doing that,” Bennett said. “As we closed out with the changes, with GASB 67 for June 30, the general employees’ pension plan is funded over 85 percent, public safety 85 percent, and wastewater plan is funded 127 percent. The general employees and public safety employees’ plans have an unfunded liability of $17.2 million at close, which is being amortized over 10 years.”

In 2009, the town established a trust fund to provide for retiree health insurance benefits. The Other Post Employment Benefits Trust (OPEB Trust) is a defined benefit healthcare plan whose assets may be expended solely to pay for post employment benefits and the costs of administering the trust fund.

The town had an actuarial study prepared in May 2014. The plan had investment gains of 15.7 percent for the year. The unfunded accrued liability for the plan is $30,360,057 and it is being amortized over 26 years. The town made the annual required contribution to the plan of $3,617,000 in 2014 and made the annual required contribution in 2011, 2012, and 2013.