Capital Reserve Account Approved

OCEAN CITY — With an eye on creating a funding mechanism for certain pay-as-you-go projects, resort officials signed off on a proposal to create a capital reserve account.

During recent capital improvement plan (CIP) discussions, the concept of creating a capital reserve fund was pitched by town staffers. Many of the projects in the CIP are pay-as-you-go projects paid for through general fund contributions, while other larger capital projects are bonded.

However, some projects are ongoing and paid for through the general fund each year such as street paving and canal dredging, for example. In addition, there are occasions when emergency projects need funding outside of the parameters of the general fund budget.

To that end, Budget Manager Jennie Knapp and City Engineer Terry McGean pitched the idea to the Mayor and Council to create of capital reserve account for those types of projects. The plan calls for a first-year contribution to the capital reserve fund from the general fund of $3 million.

Another $1.5 million would contributed to the account annually in each year thereafter as part of the budget process. The plan also calls for maintaining a minimum balance of $1 million at the end of each fiscal year. If the capital reserve account ever dipped below $1 million, the annual contribution from the general fund could increase.

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The annual contribution to the capital reserve account would not occur if the unassigned general fund balance ever fell below the town’s stated policy of 15% of the total budget. However, it’s unlikely given the town’s unassigned fund balance is around 22% in the proposed fiscal year 2022 budget, even after transferring roughly $2.4 million to cover fiscal year 2021 shortcomings related to COVID.

In order to qualify for funding from the capital reserve account, a project would have to have a relatively high monetary value at a minimum of $100,000, have an expected long life of at least five years and result in the creation of a town asset or the revitalization of a town asset. Knapp on Tuesday explained the reasoning behind creating the capital reserve account.

“What were trying set this up for is maintenance projects,” she said. “This is for street paving, bulkhead repairs, maintenance at Northside Park and projects like that.”

The council voted unanimously to approve the creation of the capital reserve account.

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.