OCEAN CITY – The Ocean City Mayor and Council has narrowed the list of projects deemed critical in the pending capital improvement plan, while agreeing to jumpstart a major renovation of the Baltimore Avenue corridor.
Two weeks ago, Mayor and Council members submitted their own rankings on the vast list of projects included on the proposed capital improvement plan (CIP), and instructed staff, including several department heads, to make their own lists ranking the projects as either critical, very important, important, less important or for future consideration. On Tuesday, City Engineer Terry McGean presented the staff rankings and a comparison with the rankings provided by the Mayor and Council.
McGean explained eight department heads reviewed the list of projects in the proposed CIP and made their own rankings, which largely mirrored the priorities expressed by the Mayor and Council with a couple of exceptions. While the redevelopment of the Baltimore Avenue corridor was the top-ranked project in the CIP for the elected officials, staff ranked it “very important.”
“Staff prioritized taking care of something pressing we have now before adding something new,” said McGean. “For the staff, for a project to be deemed critical, it would have to be funded for public safety reasons, repair failing critical public infrastructure or because the project is already in progress.”
After an hours-long debate, the council ultimately approved a list of projects deemed critical and to be funded in the upcoming fiscal year budget with a price tag of around $1.5 million. Those projects include continued street paving, replacing a section of the Chicago Avenue bulkhead near 4th Street, upgrading the communication system at the Public Safety Building, repairing the elevator at fire department headquarters, continued storm-drain cleaning, replacing the deck at Sunset Park and replacing the gym floor at Northside Park.
Ongoing canal dredging was also included in the short list with an asterisk. The council agreed to revisit a $400,000 contribution to canal dredging next fall after the impacts of COVID on the general fund balance are realized. It is anticipated COVID impacts will result in budget shortfalls that could be made up by transferring fund balance. If the impacts are not as bad as anticipated, canal dredging could be added to the CIP short list next fall, bringing the total cost of “pay as you go” projects deemed critical to around $1.9 million.
As for Baltimore Avenue, the council continued to press for the reconstruction project from North Division to 15th streets, including undergrounding the utilities and widening the sidewalks, to be deemed critical. The State Highway Administration (SHA) has been chomping at the bit to repave Baltimore Avenue and bring its sidewalks into Americans with Disabilities Act (ADA) compliance, but thus far has deferred to the town’s desires for a major renovation of one of the main gateways into the resort marred by countless unsightly utility poles, signs and overhead wires.
The project comes with a steep price tag, however. McGean estimates the project will cost around $20 million, the lion’s share of which will be the undergrounding of the utilities. As such, Baltimore Avenue will likely be included in the town’s next major bond sale. However, on Tuesday, the council voted unanimously to form a resolution authorizing an initial $200,000 expenditure to pay for the various utility companies’ design work for undergrounding the utilities.
Under the plan, the town would be compensated for the $200,000 when the next bond sale is completed. Because of the steep price tag, McGean cautioned against ranking the Baltimore Avenue renovation too high on the CIP’s critical list.
“Baltimore Avenue is going to be paved by State Highway whether we do something or not,” he said. “It’s a $20 million project that would take up a huge part of our bond issuance and limit what we can do with some of these other things.”
There are various sources of funding for projects on the CIP. For example, many are considered “pay as you go” and are paid for from fund balance. Other major projects, such as Baltimore Avenue, the downtown recreation complex, the midtown fire station and the storm-water outfall repairs, for example, can be funded through a bond sale and paid for over time. There are also various grants and other user-fee generated revenue to help pay for some projects in the CIP.
The town’s stated policy is to maintain a fund balance at 15% of the general fund budget, but that figure has crept upward in recent years and now hovers over 20%, or about $23 million. Assuming a contribution will have to be made to cover COVID-related shortfalls in the current fiscal year, that would still leave around $21 million in fund balance. At the stated goal of 15%, the fund balance would need to be around $13 million.
Councilman Tony DeLuca said he liked the plan for funding projects listed in the CIP, but wished Baltimore Avenue was moved further up the list. However, he understood that massive project would be funded through an eventual bond sale and not included as a “pay as you go” project.
“I love the strategic financial plan,” he said. “There are at least four projects on the list that we all agree are critical. If I draw a line across Baltimore Avenue on this list, that’s at least 13 projects and I’d like to add a 14th, but we’re only really concerned with fiscal year 2022 right now.”
DeLuca said ranking the projects for inclusion in the upcoming fiscal year budget boiled down to a few simple questions.
“What can we afford?” he said. “What can we plan for? I’d really like to see Baltimore Avenue moved up. We need to start on that now and there are things we can get started on with design work.”
McGean said staff understood the council’s desire to get moving on the Baltimore Avenue project.
“We heard loud and clear how important that project is to you,” he said. “When this process is over, we’re going to be coming back to you with estimates for design. Our list of one to six projects are the ones that are critical and need to be done now.”
Public Works Director Hal Adkins said the design work for undergrounding the utilities on Baltimore Avenue was a necessary first step in the process.
“If the council is dedicated to that project, we can move forward almost immediately with design for the undergrounding,” he said. “That’s going to be the biggest challenge for us in terms of the timeline.”
McGean presented a chart representing the town’s projected debt service over the next several years. According to the chart, the debt service would peak in the next few years, especially with the addition of the bond sale for Baltimore Avenue and other major projects, but would begin to drop off in out years as some of the current debt is erased. However, he cautioned Baltimore Avenue could put limitations on which projects that town could take on in future years.
“The debt service projection jumps up in 2024 with the Baltimore Avenue project,” he said. “That’s a $2 million addition each year for the general fund. That’s going above and beyond what we’re paying now for debt service and takes us to 2027 before we can do anything else.”
However, Councilman John Gehrig said the town should consider taking advantage of the historically-low interest rates right now.
“If we’re going to borrow money, let’s not drag our feet,” he said. “We’re playing with fire with the interest rates. They’re only going to go up.”
There are certain sacred cows in every CIP for Ocean City including, for example, street paving, canal dredging and storm-drain cleaning. Gehrig questioned why those projects are not considered ongoing maintenance projects and included as line items in the general fund budget each year. However, it was explained those critical projects had to be included in the CIP in order to identify a dedicated funding source.
In terms of canal dredging, McGean explained it has been a top priority for a number of years, which is why it is always included in the CIP as a critical project. However, he said the town has made significant headway on canal dredging in recent years.
“If you asked me five years ago, I would say it was critical,” he said. “We’ve done a great job with clearing most of the navigational channels and it is not as critical now. At this point, I don’t have any canals I consider critical. Could we take a break for a year? I think so.”
McGean said canal dredging could be added back to the list next fall when the fiscal year 2021 picture becomes clearer.
“We can’t do any dredging during the season anyway,” he said. “We can see how the summer goes with fund balance and have everything ready to go with permitting next fall if you want to add canal dredging to the critical list.”
Replacing or moving the midtown fire station at 74th Street has long been on the town’s radar, but the Mayor and Council ranked the project as less important and the staff ranked it as very important. McGean explained it probably should be added to the critical list soon.
“With the midtown fire station, there was a significant discrepancy between the Mayor and Council and the staff rankings,” he said. “We honestly believe it getting to be critical and the chief will tell you that. That existing building is obsolete.”
After considerable debate, DeLuca made a motion to include the list of projects deemed critical with a price tag of around $1.5 million in the fiscal year 2022 CIP, with a provision to add canal dredging back into the plan next fall if funding allows, for a potential total expenditure of $1.9 million. Some on the council questioned if Baltimore Avenue should be included on the short list. However, Councilman Peter Buas said Baltimore Avenue is a separate issue.
“We can prepare a resolution to fund the $200,000 for Baltimore Avenue design work from fund balance and re-compensate the town from the eventual bond sale,” he said. “That does not have to be part of this motion.”
The council voted unanimously to approve the list of projects deemed critical for fiscal year 2022 at a price tag around $1.5 million, with the contingency to add canal dredging if funding allows after a review of the current fiscal year.
