OCEAN CITY — Resort officials this week moved forward with the effort to encourage more people to make Ocean City their year-round home by relaxing some fees associated with new construction and creating other incentives including potential property tax relief.
For the last year or so, the Mayor and Council have heard concerns from property owners and potential homebuilders about the rising cost of developing new homes in the resort including building permit fees, impact fees, inspection fees and a variety of other factors. For example, one north-end property owners has repeatedly told town officials he has seriously considered building his permanent residence in neighboring Sussex County, Delaware because of the disproportionate cost of building the same home in Ocean City.
To that end, Planning and Community Development Director Bill Neville and his staff have spent the last several months developing potential incentive programs to encourage more people to build homes in Ocean City and make the resort their primary residence. In January, Neville presented a cursory set of incentive programs that included relaxing building permit fees, impact fees or other rebate programs.
The Mayor and Council have held multiple work sessions on the incentive programs for new construction of substantially improved existing construction and developed a series of options including relief from building permit fees or a short-term property tax reduction. On Tuesday, Neville presented a fine-tuned proposal including the favored options A and B, for example.
Under Option A, the initial cost of constructing a new home or substantially improving an existing home could be reduced by waiving the building permit fee up to $7,500. The proposed reduction would not apply to impact fees and the potential builder or buyer would have to guarantee their plan was to make the Ocean City home their primary residence for at least five years. In other words, the incentive program could not be used as a loophole to reduce the cost of a short-term rental property.
Under option B, the town would offer a waiver or a refund of the property tax for a newly constructed home or a substantially improved existing home. The same guarantees for primary residence and the possibly of a short-term rental property getting around the system would be in place. The property tax waiver would be up to $2,500 over a period of five years.
As a result, the combined incentives under options A and B could reduce the cost of a newly constructed home or a substantially improved existing home could reach around $10,000. During earlier work sessions, it was calculated the difference between constructing a new home in Ocean City or the same home in neighboring Sussex County, Del., would be around $13,000 with the resort’s building permit, impact fees and other fees. Neville on Tuesday recommended the Mayor and Council move forward with the combined options A and B.
“The recommendation is to approve options A and B as a pilot program,” he said. “The city manager and the city solicitor can form guidelines and draft a resolution for your approval.”
Councilman Tony DeLuca said he was in favor of the pilot incentive program as proposed.
“I certainly support options A and B,” he said. “I support us giving a $10,000 credit for the fee waivers. We have an issue with people moving here. I think we need some strong incentives for people to move here as opposed to Delaware or Berlin or Ocean Pines.”
Councilman Dennis Dare encouraged his colleagues to continue to push for settling the tax differential issue with Worcester County, which could lead to even greater incentives. Currently, primary residents in Ocean City are insulated from fluctuations in property taxes by the Homestead cap, which, in Ocean City, sets the cap at zero.
“If we could be successful with the tax differential issue, we could offer the Homestead cap to new residents if they guarantee this is going to be their primary residence,” he said. “That could be a big incentive.”
Mayor Rick Meehan urged the incentive program to be structured in such a way as to provide an upfront cost reduction as opposed to a modest reduction spread over a number of years.
“Based on a typical $250,000 to $300,000 home, the waiver of the building permit fee could reach that $7,500 number,” he said. “I would support option A, but I think it should be an upfront reduction of the cost.”
Through the various work sessions, an emphasis has been placed on encouraging single-family homes with the incentive program. Dare pointed out any incentive program should protect the sanctity of the town’s single-family homes.
“If the goal is to bring people into the community, our residential areas need protections,” he said. “We’ve talked about that R-1A zoning designation and maybe that needs to be revisited.”
The council voted unanimously to approve the combined options A and B and instructed staff to draft a resolution for formal approval.