OCEAN CITY — Resort officials this week moved closer to approving a fiscal year 2019 budget at a little over $127 million, but not before a broader discussion about some of the budgetary challenges they anticipate in the future.
During Tuesday’s work session, the Mayor and Council wrapped up some loose ends with the proposed fiscal year 2019 budget and voted to forward it to Monday’s regular session for a first reading. The proposed budget for fiscal year 2019 for all funds is a little over $127 million, which represents an increase of about $635,000 when compared to the fiscal year 2018 budget.
With property tax assessments in the resort declining slightly in the last reassessment cycle, the constant yield, or the tax rate needed to generate the same amount of revenue as last year’s budget, could have resulted in a modest tax hike in the proposed budget. For example, in order to meet the constant yield, the tax rate should have been set at .4667 per $100 of assessed valuation.
However, the proposed budget sets the tax rate for fiscal year 2019 at .4656, or the same exact rate as last year. As a result, the proposed fiscal year 2019 budget comes with a modest shortfall of around $96,000, a shortfall made up through cuts in some areas and unfunded items in others, rather than raise the tax rate to the constant yield.
At the end of the day, the proposed budget is balanced and appears to be on its way to approval starting with a first reading on Monday night. Although generally pleased with the outcome and a property tax rate set at the same rate as last year, some on the council questioned if the budget should have been set at the constant yield, which has been the Mayor and Council’s policy for many years, despite a modest tax hike.
Councilman Dennis Dare said he believed the budget would result in a tax rate higher than last year based on the constant yield.
“I was surprised to see the city budget with a tax rate set at constant yield,” he said. “Then I found out it amounted to about $96,000, which, when put at a personal level represents about $4 per person.”
A variety of factors, largely due to personnel and staffing issues such as a steadily increasing minimum wage, additional personnel needed to support the town’s ever-growing shoulder season resulted in the roughly $96,000 shortfall below constant yield. In addition, there were infrastructure improvements and certain union contracts that impacted the budget. Dare said in hindsight, he wished the council would have considered setting the property tax rate at the constant yield in order to offset the shortfall.
“As it comes to the 11th hour, I’m kind of sorry we didn’t address the constant yield rate,” he said. “I realize that’s probably just a Band-Aid for a much more serious issue. Next year, we’re going to have a really difficult time.
Dare said the budget was streamlined a few years back when the economy was weaker. In the famed “low hanging fruit” years, some positions were eliminated or consolidated in order to balance the budget. Now, with the economy rebounding, those past cuts are impacting the current budget.
“We’re seeing the result of having a lot of personnel cut out of the budget a number of years ago and we’re going to have to address that,” he said. “I hope that we get to the strategic planning mindset quickly here and sit down and look at a lot of these issues.”
Dare said much of the budget stresses fall under the category of public safety.
“Public safety is just so important,” he said. “We talk about a new firehouse or retaining police officers and those are steps that all take money and we need to figure out how we’re going to do that soon.”
Council President Lloyd Martin said the personnel stresses on the budget are not limited to public safety. Naturally, stronger shoulder seasons and year-round business require more trash collection, water and wastewater and more services overall.
“I don’t disagree, but it’s not just public safety,” he said. “We have a lot of employees in town. We need to look at everybody’s staffing responsibilities as well. I think it’s a responsible budget this year. In the future, it’s going to be tougher. We need to look at better ways and we need to do that as soon as possible
Mayor Rick Meehan put the budget constraints versus the growing year-round business in the resort in perspective.
“Since we’ve downsized and right-sized in our budget, the economy has grown,” he said. “Things have gotten better. We’ve done a good job with expanding our season. While we’ve done that, we’ve expanded way outside the traditional Memorial Day to Labor Day.”
Meehan said those are positive steps, but it comes with a cost.
“It’s a good thing,” he said. “We’ve generated new business in town and we’ve brought new people to town. We’ve been able to help a lot of our businesses increase their room nights and their restaurant nights. The parallel for that time of the year, while there is more revenue, the revenue doesn’t cover the increased costs that we’re seeing because we’re seeing the continuing expansion of the season. That’s really where our costs are increasing and we need to be cognizant of that.”
