OC’s Proposed Budget Includes Small Tax Cut For Resident Property Owners

OC’s Proposed Budget Includes Small Tax Cut For Resident Property Owners
City Hall

OCEAN CITY — The proposed fiscal year 2018 budget of around $128 million was unveiled this week and includes a modest tax cut for resort property owners for the second straight year.

City Manager Doug Miller and Budget Manager Jennie Knapp outlined the proposed fiscal year budget on Tuesday, launching a two-week process that will ultimately end with an adopted spending plan.

The total budget for all funds is just over $128 million with the general fund making up around $84 million. The general fund budget includes an increase of about $3.2 million over fiscal year 2017, or roughly 4 percent.

“This budget has been fully vetted,” said Miller. “What we’re doing with the budget is the single most important thing we do. Every dollar has been accounted for to the best of our ability. It’s a status quo budget for the most part, which means we told the departments not to ask for anything they didn’t have last year.”

The good news for property owners is the tax rate is expected to decrease slightly for the second straight year. Based on the constant yield, the tax rate for fiscal year 2018 will be set at .4656 per $100 of assessed valuation, representing a modest decrease from the .4727 rate in fiscal year 2017. For the record, the constant yield is the same amount of municipal funding needed to maintain the same level of services and programs as the prior year. It’s also important to note the resort’s resident property owners are insulated from a potential tax increase by the Homestead Tax Credit, which the Mayor and Council reduced to zero percent a few years back.

Knapp explained anticipated revenue for fiscal year 2018 was up by about 4 percent, helped in part by a one-and-a-half percent increase in property tax revenue. Estimated revenues for fiscal year 2018 come in at around $40.6 million in 2018 compared to $40.4 million in fiscal year 2017, resulting in the adjustment to the constant yield that allows the property tax rate to be decreased modestly.

“The tax bill for resident property owners should decrease in fiscal year 2018,” she said. “It should remain the same for the non-resident property owners.”

In recent years, Ocean City has had a stated goal of maintaining a fund balance, or a rainy day fund of sorts, at 15 percent of the general fund budget. In the proposed budget released on Tuesday, the fund balance would be at 23 percent, or nearly $17 million. Roughly $5 million is currently available over the stated goal of 15 percent. However, about half, or $2.4 million has been appropriated for various projects including canal dredging, IT projects, street paving, a contribution to the pending Boardwalk tram upgrades and airport capital projects.

The steadily growing reserve fund balance has raised questions recently about the potential for reducing the property tax rate further and throwing the taxpayers a bone of sorts, but Miller said the budget already accomplishes that indirectly in many ways.

“We do hear from some of our citizens that we should give some back,” he said. “When we use this excess to reduce debt and pay for projects that is essentially giving it back. Otherwise, that would be reflected on the tax rate.”

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 percent, leaving the remaining 3 percent on the backs of the resident property owners.

Miller pointed out public safety, including the police and fire departments and emergency services accounted for the lion’s share of the budget on the expenditure side, but said it was money well spent.

“We are nothing if we are not safe,” he said. “That’s more money in public safety than many municipal budgets in the state of Maryland.”

Miller said the budget includes $2.1 million in expenditures for maintaining the Boardwalk and the beach, all of which help make Ocean City a first-class tourist destination.

“We were number 10 on a list of cleanest beaches and Siesta Key in Florida was number one,” he said. “I was there recently and they have nothing on Ocean City and they have to do much less. We have to maintain 10 miles of beach and they have to do about one mile.”

Similarly, Miller pointed out the budget includes $6 million for trash collection, which is also a key component in maintaining the resort’s clean image.

“People don’t notice a clean street, but they notice a dirty one,” he said. “By the same token, people notice when a dumpster is overflowing. We’re worked very hard to keep Ocean City clean.”

Miller said the unique nature of Ocean City as a tourist destination separates the resort from many other jurisdictions around the state.

“We have a lot more on our plate then everybody else does,” he said. “Most municipalities have four constituencies including the residents and the business owners. We have four with the visitors and the non-resident property owners. We have to sparkle every day. We cannot put off projects and have less flexibility.”

Ocean City’s steadily improving shoulder seasons have created a double-edged sword of the need to expand services longer throughout the year, but perhaps more importantly expanding the revenue needed to support that. Miller said that situation created unique challenges in the budget.

“We have expanded shoulder seasons and with the schools returning after Labor Day we need to extend services longer and that comes with a price,” he said. “With post-Labor Day school returns, we will be able to keep the Beach Patrol out there longer, which is a good thing, but it comes with a price. We’ve been the victims of our own success, but that’s a good problem to have.”

With the budget introduced on Tuesday, the Mayor and Council on Wednesday began a two-week long series of budget work sessions that will include a deeper dive into some of the individual department budgets. While the process plays out, some on the council praised Miller and Knapp for bringing them a proposed balanced budget at the constant yield with a modest tax decrease for property owners.

“I want to commend you on what is another great budget,” said Councilman Tony DeLuca. “Whenever you have the constant yield stay the same or go down as in this case, I’m elated.”

Councilman Wayne Hartman also praised the staff for bringing in a proposed budget that is balanced, but wondered if some revenue areas driven largely by visitors to the resort could be re-evaluated.

“When I was running for office, a resident asked me what I could do for them as a resident in a tourist town and that resonated with me,” he said. “When we look at some of the revenue sources that are driven by tourism, we need to take a closer look at that.”

Knapp said the budget is always challenging but pointed out some years are more difficult than others and warned a long run of constant yield budgets with property tax decreases might not always be possible.

“There are a lot of very tough decisions involved to be able to bring you a budget at the constant yield,” she said. “I’m not sure we’ll be able to do that forever.”

For his part, Miller said while conservative spending, innovative and creative cost-cutting measures by the individual departments and sound fiscal policies have led to at least two straight budgets with property tax cuts, outside influences good making it challenging going forward.

“It’s important to point out we’re coming off a couple of benign years,” he said. “We’ve had two pretty good summers in terms of weather, we haven’t had any major hurricanes during the season, fuel prices have been low. Anything that changes in those regards can have a big impact. Like we always say, three rainy weekends in August can change everything.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.