OCEAN CITY — It certainly wasn’t easy, but resort officials this week signed off on an incentive program to encourage more year-round residents to make Ocean City their home by relaxing some of the fees associated with new construction and potentially short-term relief from property taxes.
For the last year or so, the Mayor and Council along with staff have been working on a two-pronged incentive program to encourage year-round residency. The effort began after city officials repeatedly heard from private citizens the cost of building a new home in Ocean City or substantially improving an existing home was disproportionately higher than other neighboring areas.
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 permanent residence. On Monday, Neville presented the final draft of the resolution creating the incentive program to the Mayor and Council for review and approval.
The first prong of the incentive program is relief from the various fees the town imposes on new construction or the substantial improvement of an existing structure including building permit fees. The intent of the Mayor and Council throughout the process has been to get the reduction of those fees to around $7,500.
Neville explained the average value of a new single-family home in Ocean City is around $275,000, which is how the $7,500 target was determined for the fee relief package. However, if a newly-constructed home came in under that $275,000 average, the relief from the various fees could come in less. Neville said the intent was not to reduce the fees to a level lower than what the potential homebuilder would be on the hook for already.
Under one scenario, a potential homebuilder could get relief from all or a portion of the town’s impact fees in order to reach the desired $7,500 threshold. For example, if a $200,000 new home was eligible for a relief in building fees at say $5,000, the impact fees could be reduced by $2,500 to get to the $7,500 target.
However, Neville explained he and his staff were not recommending relaxing impact fees to reach the target.
“The recommendation is not to consider waiving impact fees,” he said. “Those are dedicated to a specific fund balance on which utility rates, for example, are based. Staff recommends not waiving impact fees. It’s the same thing with the critical area fees.”
However, Councilman Tony DeLuca said the intent all along is to provide $7,500 in relief from building permit fees and other fees associated with building a new home in the resort. DeLuca said the equation was becoming too complicated and he wanted to arrive at a simple formula that provided $7,500 in relief from permit fees.
“The intent is to create incentives for new permanent residents in Ocean City,” he said. “I don’t want any strings attached. I want all of them to be able to get the full incentive including relaxing the fees up to $7,500 along with the $2,500 property tax relief.”
The $2,500 relief package to which DeLuca referred is a waiver from property tax deferrals over a five-year period. Like the fee relief package, the proposed reduction would only apply if the potential builder or buyer guaranteed their plan was to make their Ocean City home their primary residence for at least five years. In other words, the reduction and relief package could not be used as a loophole. Mayor Rick Meehan agreed to some degree about relief from impact fees, but said the goal has always been to get the incentive to $7,500.
“I understand what you mean about the impact fees,” he said. “The goal from the beginning is to get to the max of $7,500. That has been the goal the whole time.”
City Manager Doug Miller said however the incentive program is finalized, it was important to point out the town was not shelling out funds to support it.
“Just to be clear, we’re not paying anything out,” he said. “From a budget standpoint, it falls under unrealized revenue.”
DeLuca was adamant about creating the meaningful incentive program to encourage more year-round population in the resort.
“The population continues to shrink in Ocean City,” he said. “People are moving to Ocean Pines, West Ocean City, Selbyville, Whaleyville. We want people to move here and stay here. That’s the whole point of this.”
Councilman John Gehrig agreed, but said the relief package had to be more clearly defined. He said it should not necessarily be a one-size-fits-all approach because of the disparity in value of new homes. In other words, a property owner building a new home valued at $200,000 shouldn’t necessarily get the same relief package as someone building a $350,000 home. Similarly, someone substantially improving an existing residence shouldn’t get the same relief as a property owner building a new home.
“I’m all in, but we need to define some of these things,” he said. “I want a vibrant community with a solid year-round population. I want to incentivize people to build here and move here.”
However, DeLuca was adamant about approving an easy-to-understand incentive package available to all.
“It’s very complex and it needs to be re-explained,” he said. “It needs to be clear if I move to Ocean City, I can get the $7,500 in the reduction of fees and the $2,500 in property tax relief.”
Meehan said he hoped the council could reach some agreement on the incentive plan that was been tweaked and tweaked again multiple times over the last year-and-a-half.
“I would hate to defer this again,” he said. “We’ve beaten this to death. I think we all agree with the intent. We just have to nail down the last details.”
In the end, the council voted 4-0 with Councilmen Matt James and Mark Paddack absent to approve the $7,500 fee relief package and the $2,500 property tax reduction spread over five years for a potential $10,000 savings for those eligible. If the relief from building permit fees falls short of the $7,500, the difference would be made up from all or a portion of the impact fees. For the record, Councilman Dennis Dare was present for the meeting, but abstained from voting on the incentive plan because he missed much of the discussion because of glitches in his remote participation.