OCEAN CITY — There was some measure of closure this week in the civil suit between the Town of Ocean City and Worcester County over tax differential, but the dispute is likely far from over.
A Worcester County Circuit Court judge this week issued an order granting the county’s motion for summary judgment in the civil suit filed against it earlier this year by the town. Last January, after years of veiled threats, the Town of Ocean City and the majority of its elected officials filed a petition for declaratory judgment against Worcester County seeking judicial relief on the long-standing tax differential issue. In simplest terms, tax differential, or a tax setoff, may be granted by a county to a municipality for services and programs duplicated by the two jurisdictions.
Following a motions hearing in early October, the judge ruled in favor of the county on the most salient aspect of the suit. At the heart of the issue is a portion of the state law under the Municipal Home Rule Amendment of the Maryland Constitution that designates some counties in Maryland as “shall” counties, which require those counties to provide tax set-offs for services provided or duplicated by its municipalities.
Other counties are declared “may” counties, in which tax set-offs to the municipalities are optional. The town of Ocean City argued the designation of some jurisdictions as “shall” counties and others as “may” counties was unconstitutional. On that issue, the judge ruled in favor of Worcester County and with the issuance of an order granting the county’s motion for summary judgment this week effectively closed the case.
In terms of the apparent divide between the amount of tax differential, or tax setoffs, owed by the county to Ocean City and the annual grants to county makes to the resort, the court was more sympathetic. During the motions hearing earlier this month, the judge sympathized with the town’s argument the annual grants from the county to the town did not offset the cost of duplicated services.
In the end, however, the constitutionality of the “shall” versus “may” argument ultimately ended the town’s attempt at a legal remedy for the tax differential issue, at least at the circuit court level. However, there have already been veiled threats of an appeal to a higher court even before the Worcester County Circuit Court judge issued his order this week closing the case.
At a candidate forum last week, Mayor Rick Meehan suggested the town is not ready to give up legal action to attempt to correct the tax differential issue.
“This has been an ongoing issue and Ocean City residents do pay more than their fair share,” he said. “We’re paying for duplicate services. We have been somewhat successful in securing grants from the county, but it still falls well short. The judge found in favor of the county in that the county is not violating the state charter. The judge did state the situation is not equitable, so that door isn’t closed. We will remain diligent in our efforts and we if we can’t find an equitable solution with the county, we will continue our legal efforts.”
For years, Ocean City has requested tax differential from the county in the form of a tax set-off, or a county tax rate for property owners in the resort different from the tax rate paid by residents in the county at-large. The reasoning is the property owners in Ocean City already pay taxes to support certain services and programs such as police and emergency services, recreation and parks and public works, for example, services which the county does not necessarily need to provide in the resort. For years, the request has consistently been denied. Instead, the county makes unrestricted grants to the resort for a variety of uses in an attempt to offset the cost of tax differential.
In recent years, there has appeared to be a détente of sorts on the long-standing and often contentious rift with the county at least acknowledging the issue. However, when budget time rolls around and the issue comes to the fore again, Worcester County has balked and reverted back to the grant program.
Ocean City continues to contend the annual grants from the county do not come close to the actual cost of duplicated services the resort provides to its residents and visitors, services the county would otherwise have to provide. In 2013, an independent study commissioned by the town of Ocean City determined the estimated cost of duplicated services for Ocean City residents totaled around $17 million.
The county’s own independent study did not reveal a gap in the cost of duplicated services at that $17 million level, but perhaps for the first time acknowledged what resort officials have been seeking for decades. 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.
