OCEAN CITY — The ongoing redevelopment renaissance in the resort is straining resources to the point an adjustment in building fees and permits could be in the offing, resort officials learned this week.
During a budget work session on Monday, Planning and Community Development Director Bill Neville told the Mayor and Council a robust development climate in the resort, fueled largely by a new hotel boom, was achieving the desired results in terms of expanding the tax base, but was coming at the cost of increased expenses in processing building permit applications and other services provided by his department.
Neville said his department’s revenue projections for the current year were down slightly, while expenditures related to issuing building permits and completing the requisite inspections had gone up. He said the difference between revenue and expenditures was around $552,000.
The subject has been broached before, but on Monday the debate was renewed about increasing the building permit fee structure to offset the increased expense to the town for providing the services. Councilman Dennis Dare said building costs had gone up in recent years, but the town’s fee schedule had not followed suit.
“This is showing me expenditures are going up due to inflation-type things,” he said. “That $552,000 expense to the town needs to be supported by the people who use the services. This looks like it’s trending in the wrong direction.”
Neville said there was a $100 million investment in the town last year through development including 1,000 new hotel rooms over the last few years. He said with the current hotel building boom reaching a plateau, the new trend appears to be four- and five-story condominium projects. He also said there have been some permits issued for single-family homes in Ocean City in the $1 million range.
“As we track development, I think it’s a good sign to see that level of re-investment in our town,” he said. “I think we’re reaching an equilibrium with the hotel market, but there is significant re-investment in other areas.”
Neville said there could be room for some modest increases in the building permit fee structure. The fees cover a wide range of projects large and small from major hotel and condominium projects to relatively modest bathroom or kitchen remodels. He suggested if it was the will of the council to explore nudging the permit fees upward, it should likely be an across-the-board process.
“The last time we did an overhaul of the fee schedule was in 2008 or 2009,” he said. “That would be the way to go about it, not dramatically increasing just one area. We can certainly come back with some recommendations. It can be done in an incremental way that is fair over a period of time.”
Dare said the building fees are based on the value of construction and subject to the whims of inflation. He said if inflation causes the cost of building to increase, the cost of providing permitting should go up.
“We provide the services and planning and zoning should pay for itself,” he said. “I think we should take a close look at this. We don’t want to make money from this, but at the same time, we should at least recoup what we’re spending to provide the service. Maybe we can talk about this again at budget wrap-up. If not, that’s okay too, but we better start looking at it quickly.”
With the Mayor and Council working through the fiscal year 2020 budget, Councilman Mark Paddack agreed there could be room for growth in the building permit fee schedule, but cautioned against putting off implementing the changes for another year.
“I don’t want to wait too long,” he said. “A couple of things stand out for me. The government can’t make money, but we do need to be able to charge a responsible fee to offset our expenses.”
Raising the fee schedule could, however, have the adverse effect of discouraging development in the resort. Paddack said whatever decision is made with the potential fee increases, that should be kept in mind.
“I’m in favor of raising some of these fees if it would offset our costs,” he said. “I just wonder if it would curtail building activity if the fees were increased.”
Neville agreed any proposed fee increases should not at the expense of curtailing future development.
“The concern with this is that the raising the fee schedule doesn’t drive away development,” he said. “I think we need to see where we are at the end of the fiscal year with a full year f development activity to look at.”
Budget Manager Jennie Knapp said balancing the budget while maintaining the current property tax rate relied on looking at all potential sources of increasing revenue.
“We need to look at where we are and where we want to go in the next five years,” she said. “To do that, we need to look at all of these types of revenue.”
The council agreed to revisit potentially increasing the fee schedule during budget wrap-up sessions next week.