Report Finds Solid OC Financials

OCEAN CITY — A quick glimpse of the resort’s Comprehensive Annual Financial Report (CAFR) presented this week revealed Ocean City is in an enviable financial position on several key indicators despite recent concerns raised about the need for more revenue.

Finance Director Chuck Bireley and staff presented the town’s CAFR during a regular Mayor and Council meeting this month, revealing the resort continues to thrive financially in several key indicators. For example, in a comparison of revenue and expenditures budgeted in fiscal year 2019, the town ended up with a positive variance of nearly $4.3 million.

The budgeted revenue was around $85.7 million, while the actual number came in at just over $87 million. Similarly, the fiscal year 2019 budgeted expenses were $80.5 million, while actual expenses came in at around $77.6 million, resulting in a positive variance of about $4.3 million. That is not to say the town suddenly has an excess $4.3 million to spend. That is merely the variance between what was budgeted for and what actually occurred during the fiscal year.

Another key indicator in the CAFR presented on Monday is a comparison between the town’s assets and liabilities. For example, the town’s total assets and deferred outflows came in at over $353 million, while the liabilities and deferred inflows totaled just over $192 million, resulting in a net positive position of over $161 million.

Perhaps the best barometer of the town’s overall fiscal health is the unassigned fund balance. It has been the town’s stated policy in recent years to maintain a fund balance, or rainy day fund of sorts, at 15 percent of the general fund balance, but that figure has continued to grow in recent years. For example, in fiscal year 2018, the unassigned fund balance as a percentage of expenditures was around 25.8%, or over 10 percentage points above the stated 15% goal.

In the CAFR for fiscal year 2019 presented on Monday, that figure had risen to 27.5%. To be fair, maintaining a healthy fund balance is desirable considering the significant capital projects in the pipeline and the debt service on capital projects already completed. Paramount to Ocean City is maintaining clean beaches and the Boardwalk and ensuring the public safety of the countless visitors to the resort and there are significant costs associated with that.

No less important is going to the bond market to pay for significant capital projects and it has been argued, perhaps rightfully so, that maintaining such a healthy fund balance improves the town’s credit rating with the bond agencies, resulting in low interest rates for capital projects. Bireley explained the town currently has a AA bond rating from Moody’s, one of the major bond rating agencies, but has inched closer to reaching Moody’s perfect AAA rating.

“We’re now just two percentage points below Moody’s AAA rating of 29.4%,” he said. “As you can see, the town is in a very solid financial position.”

Councilman Dennis Dare pointed out maintaining a healthy fund balance has improved the town’s credit rating, which, in turn has only improved it financial standing.

“Rating agencies sometimes do deep investigations into financial situations,” he said. “Since we’ve had the AA rating, we have not had to buy insurance on any bond sales.”

With the town preparing to go to the bond market early next year, Dare suggested it might be time to increase the stated 15% threshold.

“Having a higher fund balance could result in lower interest rates on bond sales,” he said. “We need a work session as soon as possible to adjust that before we go to the bond market in February. There’s probably not a good reason to go immediately to 25%, but it’s worth exploring to see if we can get a lower interest rate before we go to the bond market.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.