OC Budget Introduced With Slight Property Tax Reduction

OCEAN CITY — Ocean City officials this week unveiled the proposed fiscal year 2017 budget at around $122 million including a modest tax cut for resort property owners.

City Manager Doug Miller, who is presiding over his first budget process since taking over the position this winter, and Budget Manager Jennie Knapp outlined the proposed $122 million budget on Tuesday.

“I’m very excited and pleased to present the fiscal year 2017 budget,” said Miller. “The product before you is very well vetted and it’s a balanced budget. It includes an estimate of anticipated revenue and expenditures. It’s important to emphasize ‘estimate’ because there is no way to forecast some of these things when the process starts 18 months out.”

The total budget for all funds is just over $122 million with the general fund making up around $80.9 million, representing an increase of about $1.172 million over fiscal year 2016, or about 1.5 percent.

“This is the single most important thing we do,” he said. “It’s where we implement the town’s priorities for the next 12 to 18 months. There are five goals in the strategic plan and this budget supports those goals.”

The good news for property owners is the tax rate is expected to decrease slightly. Based on the constant yield, the tax rate for fiscal year 2017 is set at .4727 per $100 of assessed valuation, representing a modest reduction from the fiscal year 2016 rate of .478. According to estimates, one penny on the tax rate is equal to $855,473.
Property tax assessments increased about 1.1 percent for fiscal year 2017. The revenue from real property taxes in fiscal year 2016 was $40,239,417 based on the .478 tax rate. Even with the slight lower tax rate of .4727, the estimated revenue from real property taxes in fiscal year 2017 is $40,438,210.

“Real property tax revenue provides 50 percent of the funding for the General Fund,” said Miller. “Other taxes such as room tax, charges for services and funding from other agencies provide the other 50 percent.”

One of the five pillars of the strategic plan is to maintain a more livable community for residents and that includes quality of life investments in things like street paving, canal dredging, Northside Park improvements and even taking over the annual Christmas parade, for example.

Miller pointed out those types of investments are accomplished with little burden on the resident taxpayers. Non-resident property owners contribute the lion’s share to the general fund at 59 percent, while commercial property taxes contribute 38, leaving the remaining 3 percent on the backs of the resident property owners.

“It’s really pretty incredible,” said Councilmember Mary Knight. “The resident taxpayers only pay 3 percent of the budget.”

The enterprise funds are used for services provided to the public on a user charge basis such as water, sewer and public transportation, for example. Miller referred to the enterprise fund section as the “it is what it is” section of the budget. The town operates six enterprise funds, three of which are self-sufficient including water, wastewater and the Eagle’s Landing golf course. Three others are supplemented by the general fund including the Convention Center, transportation and the Ocean City Airport.

In recent years, Ocean City has maintained a fund balance, or rainy day fund of sorts, at 15 percent of the general fund budget. The fund balance is currently at 17.6 percent, or $13.3 million. Roughly $1.9 million is currently available above the 15 percent. As a result, in the fiscal year 2017 budget, $989,453 has been appropriated from the fund balance for canal dredging, street paving and Northside Park improvements.

Another of the five major goals of the strategic plan is maintaining a first-class resort and tourist destination and the proposed fiscal year 2017 budget accomplishes that with a total investment in the beach and Boardwalk of $1.7 million. That figure includes $210,000 for the beach replenishment contribution along with $19,460 for phase two of the restoration of the Boardwalk light poles and another $27,000 for an extra seasonal crew to collect trash on the Boardwalk. The budget also includes $2.3 million for the Beach Patrol.

The largest single component of the budget is public safety, with an investment of $33.7 million in the fiscal year budget. Miller said the public safety portion of the budget represents the lion’s share of the general budget.

“That’s a figure larger than the total budget in many Maryland municipalities,” he said.

The proposed budget includes an investment of $5.7 million in tourism marketing, representing an increase of over $238,000 over the current fiscal year. The budget also contains a $2.2 million investment in special events, including $300,000 for Tourism Advisory Board (TAB) events. The budget also includes a $5.9 million investment in trash removal and a $1.3 million investment in public transportation.

“Our goal is once a visitor arrives in Ocean City, they don’t have to drive their car,” said Miller.

Miller said the budget is based on a financially sound municipal government and pointed to the town’s solid bond ratings.

“Those are extremely impressive bond ratings,” he said. “I think we have achieved those high bond ratings because of solid financial management and they would be even higher if we weren’t on a barrier island.”

Finance Administrator Martha Bennett said the resort’s bond ratings had steadily improved in recent years, strengthening Ocean City’s financial position.

“We had been rated Single A,” she said. “Your change in policy from 10 percent to 15 percent has been substantial in improving the bond rating and reducing the interest rate. After Sandy, the bond agencies recognized the challenges coastal communities face.”

Nonetheless, Miller said the town and its department heads are always looking for ways to reduce spending and increase revenue.

“The staff is always looking for ways to build a better mousetrap,” he said. “It’s highly impressive. They are always looking for ways to maximize reductions in the budget.”

Miller said because Ocean City entertains millions of visitors each year, it always has to have its best face forward in terms of public safety, cleanliness, the quality of services and hospitality. He said the proposed fiscal year 2017 budget reflects that.

“We are probably the most unique municipality in Maryland,” he said. “We have to shine every day and we don’t have the ability to defer projects. We cannot let things go. We can’t let public safety go. There is probably more pressure on us than any other municipality.”

Miller related the story over the weekend about an email circulating through various channels including a picture of a pothole in an alley. The email passed through Miller who forwarded it to Public Works Director Hal Adkins who got a crew out and fixed the pothole on the same day. He said that would never happen in jurisdictions where he recently held the same position. Councilman Wayne Hartman said the pothole story was a metaphor of sorts for how the town attempts to operate.

“The pothole picture story from Sunday is a good example,” he said. “It’s not only what we have to do, but also what our property owners have come to expect.”

After the introduction of the budget on Tuesday, the Mayor and Council and appropriate staff began a series of meetings on individual departments scheduled throughout this week and next week with a budget wrap-up session scheduled for next Friday.