OCEAN CITY — While there appears to be a thaw somewhat in the decades-old debate of tax differential between Ocean City and Worcester County, it remains to be seen if the two sides can reach an amicable agreement, but a new element involving the resort’s contribution to the public school system could further muddy the picture.
Late last year, the Ocean City Mayor and Council again submitted its official tax differential request to Worcester officials in advance of the county’s budget deliberations. Each year, the town seeks relief for its taxpayers from Worcester County for services duplicated by the two jurisdictions.
In 2007, Ocean City hired the Municipal and Financial Services Group (MFSG) to conduct a study to identify those duplicated services and calculate a tax differential, or tax set-off for resort residents against their county property tax rates. In 2013, MFSG was rehired to update the original study and determined the estimated cost of duplicated services for Ocean City residents totaled around $17 million.
In the meantime, Worcester County last winter commissioned another consultant, TischlerBise, to conduct its own study. The county’s independent study suggested a tax set-off for Ocean City taxpayers. The county’s property tax rate is 77 cents per $100 of assessed value. Worcester’s own independent study suggests 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 more like 82 cents.
However, the town’s own independent study suggests an even wider gap between the tax rate for Ocean City property owners and those in the county at large. The MFSG study recommends at 68 cent county property tax rate for Ocean City taxpayers, while property owners in the county at-large would see their tax rate go up to 95 cents.
Basically, Ocean City taxpayers would see their county property tax rate decrease by eight cents, while the rest of the county would see an 18-cent hike under the MFSG recommendation. MFSG President Edward Donahue presented a comparison of the two independent tax differential studies to the Mayor and Council on Tuesday. Donahue explained both studies acknowledge a wide gap in the cost of duplicated services for the resort’s taxpayers.
“This is an important topic that has been debated in Ocean City for 25 years,” he said. “Ocean City is paying twice for certain services. You’re paying property tax to the county for some services the county does not provide. Your citizens are essentially being charged twice.”
Donahue said MFSG utilized the same framework for its study as the methodology used to resolve a similar, but much uglier, rift between the city of Annapolis and Anne Arundel County over the tax differential issue.
“There had been a long, acrimonious debate between Anne Arundel County and the city of Annapolis that was eventually resolved,” he said. “We decided to use the same model.”
While there is considerable disparity in the two independent studies commissioned by Ocean City and Worcester County, Donahue pointed out the fact the county’s study acknowledged there was a tax differential chasm represented a breakthrough of sorts.
“I was actually surprised the county’s consultant came up with a recommendation for tax differential,” he said. “The resolution of this issue is something you all need to sit down with the county and discuss.”
Councilmember Mary Knight agreed the county’s study at least represented a thawing of the debate.
“I think it’s a good sign that the county has recognized tax differential is real and that we do deserve it,” she said. “I think something important that you did not say is that the residents and taxpayers in Ocean City fund 59-percent of the Worcester County budget.”
Knight took it a step further and pointed out the resort taxpayers’ contribution to the county’s burgeoning public school budget, an element that has largely been left out of previous discussions on tax differential.
“I think something else you didn’t say is very important and that is we never considered the school system in these discussions,” she said. “The school system costs Worcester County $79 million and there are approximately 6,600 students. Out of those 6,600, we’re around 300 students. If you divide that out, we’re paying $155,000 per student in Ocean City to attend a Worcester County school, which, to me, more than justifies this tax differential we’ve come up with.”
Knight said adding the town’s contribution to the public school system intensifies the need for resolution of the tax differential issue once and for all.
“We’ve never even talked about that,” she said. “At $155,000, we could pay for a college education for our kids with what we’re paying now. I would hope it comes up in future discussions a realization we’re not just a cash cow. We want a good school system and we want the best of everything for our kids, but we want our citizens and taxpayers to be treated fairly.”
For his part, Donahue agreed the school system contribution has been left largely out of the equation, but pointed out it probably needs to be included in future discussions.
“Because of the disproportion in the tax base, you are providing 60 percent of the taxes that fund the county’s school system,” he said.
Councilman Dennis Dare also agreed the school contribution deserved more scrutiny.
“I agree that we should have used the schools in the methodology,” he said. “When you divide $17 million by the number of properties, that’s $500 to $600 per property each year. There’s a $500 or more injustice annually on our resident property owners.”
Mayor Rick Meehan pointed out Ocean City’s paying the lion’s share of the county’s property tax base put resort businesses at a competitive disadvantage.
“This is an issue that has been a long time coming,” he said. “Our businesses are not competing on a level playing field with businesses on the other side of the bridge. We’re actually working against ourselves.”
However, despite the strong rhetoric, there did appear to be the possibility of a détente somewhat in the tax differential battle. Meehan pointed out County Administrator Harold Higgins was in the room, possibly signaling an olive branch of sorts.
“We see Harold Higgins here and that’s important to me and important to the Mayor and Council,” he said. “It shows that he has taken the time to sit in on this. We need to move this along and set up a meeting with the county. All of the evidence shows there is a reason for the Town of Ocean City to pursue this.”
Councilman Wayne Hartman said he has heard from residents at various public functions that they are largely satisfied with their municipal property tax rate, but felt they weren’t getting the same bang for their buck with the county tax bill.
“We’ve heard from our residents they don’t mind paying the Ocean City municipal tax bill because of the services they are getting,” he said. “It’s the county bill that bothers them because they don’t feel like they’re getting the services.”
Dare suggested there could be some middle ground now between the resort and the county on the issue, but warned anything less than a satisfactory resolution could have the debate heading to the courts.
“Perhaps there is a new spirit with this,” he said. “We owe one more effort to work with the county on this, but if we’re not successful this time, I’ll be the first to make a motion to go the same route as the city of Annapolis and take legal action.”