OCEAN CITY — Ocean City officials this week approved on first reading the proposed fiscal year 2022 budget at around $158 million, which will hold the property tax rate at the constant yield.
The total budget for all funds is approximately $158 million, with the general fund making up around $91 million. The proposed fiscal year 2022 budget sets the property tax rate at the constant yield rate of .4561 per $100 of assessed valuation, which is slightly higher than the current rate of .4559. For the record, the constant yield is the property tax rate needed to generate the same revenue as the prior year.
For many years, it was the town’s policy to set the property tax rate at the constant yield, but a couple years back resort officials broke from tradition and set the property tax rate at the constant tax rate, or the same rate as the prior year, representing a slight decrease. That was not the case this year, at the proposed budget sets the tax rate at the constant yield, technically represents an increase of fractions of a penny.
Before the council could vote on the proposed fiscal year 2022 budget, former councilman Vince Gisriel took the opportunity to weigh in on some key elements. Gisriel pointed out areas in the budget he perceived could be altered to lower the property tax rate.
“I want to remind the council when you closed the books on fiscal year 2021, you had a favorable variance of $4.8 million,” he said. “Year after year, you underestimate revenue and over-estimate expenses.”
Gisriel pointed to the recently-approved capital improvement plan as an example of potential overspending in the budget.
“Three things struck me the most in the capital improvement plan were Baltimore Avenue, the downtown recreation complex, the sports complex and all of these other projects,” he said. “When you add it all up, it’s something like $46 million. You’re looking at boatload of bond money in the next few years. I don’t think it’s affordable and it should be spread out.”
Mayor Rick Meehan then systematically addressed some of Gisriel’s issues and concerns, starting with overestimating revenue.
“One of the things that cause revenue to exceed what was budgeted is we don’t recognize grant money that we hope to receive prior to passing the budget,” he said. “We can’t recognize these grants until they are approved and received by the town.”
Meehan pointed out property tax is not the driving revenue generator for the budget.
“When you look at our budget, property tax accounts for less than 50% of our revenue,” he said. “Most of the revenue is generated from user fees and the economic development of tourism. That’s were the room tax comes in. Most of the room tax goes to lowering the tax rate by covering these expenditures. The balance of that goes to keep tourism going.”
One of Gisriel’s pet issues is fund balance, which typically far exceeds the town’s stated goal of 15%. Meehan pointed out coming out of COVID and the losses it produced last year, maintaining a healthy fund balance is now more important than ever.
“Some of those projects you mentioned will be revenue generators, so we can maintain a very stable budget and a very stable economy,” he said. You mentioned we got COVID relief money to lower our losses. That was an unknown. If we hadn’t gotten that money, a lot of that fund balance would have been used to cover those losses. It’s important to have that in place to protect our citizens from those types of losses.”
Also pointed out was the plethora of new hires and their impact on the budget. Meehan addressed that issue as well.
“You asked about the hiring of 10 additional police officers and six firefighter-paramedics,” he said. “You asked if we can afford them. We can’t not afford them. We have to have that if we’re going to continue to provide the same level of public safety and services that our residents expect and deserve.”
Meehan said the proposed budget meets the town’s needs, while maintaining a healthy fund balance, a rainy-day fund of sorts.
“The importance is to pass a balanced budget, a budget that is going to serve our community in total and have the reserves to plan, not only for the future, but for those things that are unexpected,” he said. “Every year, those occurrences happen more often than not.”
Councilman John Gehrig agreed.
“I think overestimating expenditures and underestimating revenue is a good budget practice,” he said. “Our tourism and marketing budget is generated from the room tax. About 60% of that goes to paying our bills. Without that, it would probably come from property tax, which accounts for around 46% of our budget.”
Gehrig personally addressed Gisriel’s concerns about the potential cost of a sports complex, which is one of his pet projects.
“We’re talking about investing $20 million to make hundreds of millions of dollars,” he said. “That’s a game changer. We’re making tough decisions about investing in our product. If we’re wrong, vote us out, but its better than making a decision like they’re doing in other places nearby where they’re discussing how much they’re going to raise taxes this year, to add to how much they raised taxes last year and the year before that.”
