OCEAN CITY — Ocean City officials this week unveiled the proposed fiscal year 2019 budget at a little over $127 million, but despite shortfalls in some key areas including less-than-anticipated property tax assessments, the town’s property tax rate is expected to remain at last year’s level.
City Manager Doug Miller and Budget Manager Jennie Knapp on Tuesday outlined the fiscal year 2019 budget, launching a two-week process that will ultimately end with an adopted spending plan. The total budget for all funds is just over $127 million with the general fund making up around $85 million, representing an increase of $653,503 over the fiscal year 2018 budget.
In March, Knapp presented an overview of the resort’s revenue projections for fiscal year and predicted some early numbers pointed to a possible modest property tax hike in fiscal year 2019. However, despite lower-than-expected property re-assessments in the first year of the current cycle in Ocean City, Knapp said the budget proposed maintains the current property tax rate at the same level as last year and comes in under the projected constant yield rate.
Property re-assessments in Ocean City this year came in around .24 percent lower than during the last re-assessment cycle, resulting in an increase in the constant yield tax rate to .4667. However, the property tax rate for the proposed fiscal year 2019 budget is .4656, or the same exact rate as in fiscal year 2018. For the record, the constant yield is the amount of municipal funding needed to maintain the same level of services and programs as the prior year.
In other words, despite declining re-assessments, the proposed budget comes with the same property tax rate as last year at .4656 per $100 of assessed value. If the town had opted to adhere to the constant yield policy, to which it has for several years, the property tax rate could have increased to .4667. Instead, Miller and Knapp have presented a budget that maintains the same property tax rate 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. As a result, resident property owners will see no increase in their resort property tax bill while some non-resident owners could see a slight increase, or even a decrease, depending on their individual assessments.
Miller explained a review of revenue projections showed some areas going down, including property assessments, while others went up for a variety of reasons. As a result, the proposed fiscal year 2019 budget is largely status quo with last year’s spending plan.
“The re-assessments did not come as well as we expected,” he said. “The ball did bounce our way in other areas. As a result, this budget comes in under the constant yield.”
Miller explained how the budget development process is practically a year-round job. He said meetings with department heads began late last year and culminated with the proposed budget presented on Tuesday.
“This process started in late fall,” he said. “The department heads submitted their budgets and they were requested to keep them at status quo, but identify their needs honestly. We then met with each department head and figured out how best to further pare down the budgets.”
In the proposed fiscal year budget, the enterprise funds, or those funds which are largely self-supported through user fees, will remain constant for the most part this year. The municipal property tax collected represents 48 percent of the general fund, and while that number dropped this year, the proposed budget is balanced with no tax hike.
In addition, it has been the town’s policy to maintain a fund balance, or a rainy day fund of sorts, at 15 percent of the general fund. The budget proposed on Tuesday comes in with a fund balance of about 22 percent, or nearly $6 million over the stated 15 percent policy. However, $1.6 million of the reserve fund will be appropriated to ongoing projects such as street paving and canal dredging, leaving the fund balance at around 20 percent.
In layman’s terms, the proposed budget would allow the town to continue all services and programs at the same level while keeping the property tax rate the same and not stressing the fund balance, a point not lost on some councilmembers.
“This represents a 1.5-percent decrease in the budget despite everything else going up,” said Councilman John Gehrig. “I just want everybody to know that. Our residents’ property tax bill could still go up, but our municipal tax rate is going down. If our residents notice their property tax bill has gone up, it would be because the county tax rate went up.”
Miller explained the proposed fiscal year 2019 budget accomplishes most of the resort’s goals and priorities.
“This is a priority-setting document for the town for the next 12 to 18 months,” he said. “We have some lofty priorities including remaining a first-class resort destination. We have a little contest for counting out-of-state license plates and last year I counted 47, so we are truly a national resort. To do that, we need to make significant investments in public safety and we need to sparkle every day.”
