OCEAN CITY – An annual presentation gave resort officials a better understanding of Ocean City’s financial position.
On Monday, Finance Director Chuck Bireley presented the Mayor and Council with a Comprehensive Annual Finance Report for fiscal year 2018, which ended on June 30.
“2018 was a good year for the Town of Ocean City,” he said. “I would go so far as to say it was a very good year for the Town of Ocean City.”
Bireley reported a revenue surplus of $1.27 million and expenses that were $2.14 million under budget.
“We ended up with a favorable variance of $3.4 million for the year,” he said. “It was certainly a positive on that end.”
Bireley also reported an unassigned general fund balance at year-end of $20.3 million, or 25.8 percent of general fund expenditures. In fiscal year 2017, the unassigned general fund balance was 25.7 percent of general fund expenditures.
“The median unassigned fund balance for a municipality with a Aa bond rating is 24.5 percent and the Town of Ocean City has exceeded that the past few years,” he said. “So that is more good news on the financial front.”
Bireley added that utility and business services – which include water, wastewater, transportation, the convention center, the airport and the golf course – also reported a good year.
“It was a very good year for those funds in general,” he said. “The net increase in fund balance for proprietary funds was $9,928,000 for fiscal year 2018.”
Bireley said the town reported $343,677,905 in assets and $192,673,012 in liabilities for a net position of $151,004,893 in fiscal year 2018.
“That is a very solid balance sheet,” he said.
Other highlights included in the comprehensive report included a financial summary on the town’s pension plan. As of June 30, the funded ratio was 84.3 percent for general employees pension and 79.3 percent for public safety employees pension. The town reported total assets in those plans of $117 million and unfunded liability of $26 million, which is being funded over a 10-year amortization period. Bireley added that the Other Post Employment Benefit (OPEB) trust fund reported a funding ratio of 53.9 percent and an unfunded liability of $28.2 million, which will be funded over a 21-year amortization period.
Councilman Mark Paddack, however, shared his concerns regarding the town’s pension plan with Bireley.
“Twenty years ago, in 1998, I stood in the council chambers right there at that table and I was told then that the public safety pension plan was going to become solvent in 10 years. Twenty years later, we are still behind …,” he said. “The sooner we get this knocked off the budget sheet the better.”
Mayor Rick Meehan noted, however, that the town was aggressive in funding its pension plans.
“There aren’t a lot of municipalities that have that aggressive amortization period,” he said. “Ten years is very aggressive.”
Some members of the council also took time during the presentation to educate members of the public on how town funds are used.
Currently, the Town of Ocean City collects $40.9 million per year in real property taxes, which accounts for nearly half of general fund revenue.
Council Secretary Mary Knight noted, however, that 33 percent of a resident’s tax bill goes to Ocean City, while the remaining 67 percent goes to Worcester County and the state.
“When people look at their tax bill in Ocean City and they see ‘x’ amount, their total tax bill, they have to realize that only 33 percent of that is billed by Ocean City for their real property,” she said. “That is really important, and the other 59 percent is Worcester County.”
Councilman John Gehrig added that $9.4 million in collected revenue goes to economic development and tourism, the second highest expense account behind public safety. He noted, however, that most of that money was funded by room tax.
“I’m doing this for public edification because tourism is not being funded by property tax,” he said. “Tourism is being funded by room tax, which is paid for by the visitors of this town.”
Gehrig said a portion of the room tax revenue is then dedicated to associated expenses.
“The more people that come to town there is an associated expense,” he said. “That is why 56 percent of every room tax dollar that comes in goes to pay those expenses. It goes to pay for public safety. It goes to pay for clean beaches. It goes to pay for sanitation and waste.”
Gehrig equated more visitors to a larger tourism budget and a more successful economy.
“It sustains our communities and allows us to keep our property tax rates low,” he said. “But we need to invest in our business, and our business clearly is tourism.”
