OCEAN CITY — With the dust settled after lengthy fiscal year 2017 budget deliberations for both jurisdictions, the issue of tax differential, or tax set-offs between Worcester County and Ocean City, was raised again this week with a veiled hint of possible legal action or General Assembly intercession.
County Commissioner Joe Mitrecic, who represents Ocean City, delivered his quarterly report to the Mayor and Council on Monday outlining issues germane to the resort. Mitrecic said the county’s budget passed earlier this month consumed much of the commissioners’ time during the spring and resulted in an approved $188 million spending plan for fiscal year 2016.
Of the $188 million county budget, around $81 million, or 43 percent, goes to funding Worcester’s public school system. Mitrecic told the Mayor and Council the state’s flawed wealth-based school funding formula puts Worcester near the back of the bus, so to speak. Due to elevated land values in the north-end of the county, particularly Ocean City, the state’s aid formula views Worcester annually as one of the richest counties in the state and therefore provides one of the lowest amounts of education funding to the county’s government in the state.
“We really need to discuss the formula,” he said. “With Ocean City in the county, we’re one of the most affluent in the state and without it we’re one of the poorest. We receive the second least amount of state funding per pupil in the state and Worcester County taxpayers make up the rest.”
Mayor Rick Meehan responded with tongue firmly planted in cheek perhaps the formula could be adjusted if the resort sent less money to the county.
“If we reduced the amount of money Ocean City sends to the county, Worcester might get some more money from the state for education,” he said.
The half-serious comment from the mayor triggered a larger discussion about the ongoing tax differential issue between the county and the resort. This year like every other year, the Mayor and Council submitted its official tax differential request to Worcester officials in advance of the county’s budget deliberations this spring. Each year, the town seeks tax relief from Worcester County for services duplicated by the two jurisdictions.
Ocean City this year submitted its annual tax differential request to the county along with its independent study that identified roughly $17 million in duplicated services provided by the resort. Worcester County then commissioned its own independent study, the results of which were released this spring in the middle of budget deliberations. While the study is complicated and carefully details each and every area from which duplicated services can be derived, on the surface, it appears to confirm what the resort has been seeking for decades.
The county’s current property tax rate is 77 cents per $100 of assessed value. The county’s independent study appears to suggest based on the level of duplicated services the county property tax rate for Ocean City residents should be more like 74 cents per $100 of assessed value while the rate for property owners in the county at-large should be 82 cents.
With Worcester’s study well into the county’s budget deliberations for fiscal year 2017, the County Commissioners wanted to carefully examine the lengthy document before making any decision, which meant nothing changed for Ocean City during this budget cycle. Instead, the county moved forward with its traditional unrestricted grant program in fiscal year 2017 for Ocean City.
For example, Ocean City last year received a $3 million unrestricted grant from the county and that total was raised to $3.12 million this year. Berlin received $1.4 million in unrestricted grants from the county in fiscal year 2017, while Snow Hill’s total is a little over $1.3 million and Pocomoke is set to receive $1.19 million.
Mitrecic said the unresolved tax differential issue led to his being the lone dissenting vote on the county’s fiscal year 2017 budget.
“I voted against the budget,” he said. “It’s still a far cry from what Ocean City needs in tax differential. We get back about 6 percent of what we send, while other areas get back 67 percent. It’s really not fair. Hopefully we will be setting up some meetings to address it.”
It remains to be seen what will happen with the tax differential, or more appropriately tax set-off, issue next year but it appears resort officials are ready to continue the battle. With two independent studies confirming the large volume of duplicated services, it appears the resort at least has a leg to stand on.
“I’ve been on the council for 10 years and the County Commissioners have been kicking that can down the road for tax differential all these years,” said Councilmember Mary Knight. “I hope the city manager is considering legal action and establishing a timetable to get something before the General Assembly in time for the 2017 session.”