OCEAN CITY — Resort officials this week approved on second reading the fiscal year 2018 budget of around $128 million after defending the spending plan during a barrage of public comments.
The Mayor and Council on Monday approved the fiscal year 2018 budget on second reading. Of the total budget for all funds, the general fund makes up about $84 million, about a 4-percent increase, or about $3.2 million, over the current fiscal 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. The constant yield is the same amount of municipal funding needed to maintain the same level of services and programs as the prior year.
Before the final vote on the fiscal year 2018 spending plan, the council entertained numerous questions and comments from members of the public including former Councilman Vince Gisriel, who continued to question the policy of dedicating a significant portion of the town’s room tax to advertising and marketing.
In 2008, an ordinance was passed that added one-half of percent on the resort’s 4 percent room tax with the additional revenue dedicated to tourism advertising and marketing. In the years since, the advertising budget has steadily grown from around $1.5 million that first year to $6.7 this year. Gisriel said the room tax had increased 41 percent in a 10-year period from 2007 to 2017 and the resort’s advertising budget had gone up over 200 percent over the same time period.
“It is not the government’s obligation to promote tourism, especially not to the extent we do,” he said. “I think we need to stop spending as much as we do. I think some of that revenue could be reverted back to the general fund and could knock a few cents off the tax rate.”
Gisriel also revisited the town’s fund balance, a recurring favorite theme. The town’s stated policy is to maintain a fund balance at 15 percent of the total budget, a rainy day fund of sorts for unforeseen expenses and emergencies. However, Gisriel pointed out the fund balance has averaged nearly 20 percent in the last six years and came in at 23 percent in fiscal year 2016. He suggested that figure be brought back to the stated policy of 15 percent and the additional funding be returned to the property taxpayers in the form of a tax cut.
Mayor Rick Meehan said he respected Gisriel’s positions but defended the town’s room tax for marketing policy, pointing out the town continued to invest in advertising during tough times when neighboring resorts were cutting their budgets and that policy was providing dividends.
“I really think you have to look at the budget in its entirety and not cherry pick certain items,” he said. “We increased advertising when everybody else was pulling back and the economy was failing. If we hadn’t made that investment, I don’t know what would have happened. What I do know is we were able to hold our own and even expand our visitor base because of it.”
Meehan said the investment in marketing had nurtured a healthy business climate in the resort and spurred private investment.
“We help create jobs and we provide opportunities and that’s growing today,” he said. “You start to see how important tourism is. We’ve been able to hold the constant yield and even lower taxes while improving the services we provide. You have to look at the 20,000-foot view and not zoom in on certain things.”
Budget Manager Jennie Knapp pointed out Ocean City had been able to make substantial infrastructure improvements and other investments in recent years while holding the tax rate at the constant yield or even lowering it modestly, as is the case with the fiscal year 2018 budget.
“For 10 years, we’ve found a way to hold the tax rate at the constant yield even though expenses have gone up,” she said.
Council President Lloyd Martin said tax revenues have been relatively stagnant or even declining, but Ocean City officials have been able to increase investments at the same time with less.
“We’re using the same amount of tax dollars and doing more and more with it every year,” he said. “We find a way to make it work with forward thinking.”
Councilman John Gehrig agreed, pointing out the town’s tax revenue was $35 million in 2007 and spiked up to $45 million in 2009, but has steadily declined in recent years. For example, Gehrig pointed out the anticipated tax revenue for fiscal year 2018 had dropped back to $40 million. It has been pointed out in a financial study by the city it might be difficult to hold the tax rate at the constant yield in out years, but Gehrig said continuing to invest in marketing and tourism promotion could continue to make that possible.
“We can try to cut our way out of this or invest our way out through growth,” he said. “Both ideas are reasonable and it will probably take a combination of both.”
After considerable discussion, the council voted 7-0 to approve the fiscal year 2018 budget on second reading.