OC’s Fund Balance Handling Merits Close Watch

OC’s Fund Balance Handling Merits Close Watch

An interesting storyline heading into the next budget review in Ocean City will be how officials manage the excessive fund balance that has accumulated in recent years. It must be reduced. Where the excess dollars should be distributed is the question.

Ocean City is a financially strong government. It has an experienced administration steering a successful resort town benefitting in many ways from the pandemic. The real estate market is strong. Tourism is solid, thanks to Ocean City being a convenient, safe and clean beach resort for millions of visitors. Business for resort operations is strong more months than it’s not. The current reality was not always this way, and the government’s stability is an envy to others who do not have it so well.

Even the ongoing workforce shortage – while it makes daily operations a challenge – has benefited bottom lines everywhere as doing more with less has resulted in soaring net revenues. When restaurants and hotels do well – as they did last summer – and real estate transactions remain steady – certainly the case over the last 18 months – government coffers hit new heights. This is the case in Ocean City, as revenues are up and expenses down. This success means Ocean City’s government is making too much money.

Ocean City’s current fund balance stands at $29 million, or approximately 37% of its budget. Ocean City’s stated policy is 20%, up from the 15% goal just a few years ago. This means the town has about $14 million in reserves that should not be there. The city is over withheld, and the responsible choice for city leaders is to use the extra funds in another fashion. How to allocate the dollars will invariably divide the current council.

Due to its coastal vulnerabilities, we believe Ocean City is right to retain more funds in its reserve fund than other towns. We supported the decision to increase the fund level from 15% to 20%, but we oppose retaining anything beyond that level. In the next budget cycle, the city needs to get its reserve fund down to its stated goal. Officials should return the extra funding either through a property tax decrease, investment in tourism with a plan to document the return on investment or earmark the funds for capital projects looming in the future rather than financing them.

It would be wise of Ocean City to soon begin the deep dives necessary to evaluate the best course with the elevated reserve fund. This will allow budget officials at City Hall to devise a plan. These talks cannot wait until the traditional budget sessions next spring. These conversations need to occur now to ensure a responsible and fair approach can be given to city officials. Ocean City property owners should play close attention to what options are explored. The only inappropriate course would be to continue amass massive reserves beyond the 20% goal.

About The Author: Steven Green

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The writer has been with The Dispatch in various capacities since 1995, including serving as editor and publisher since 2004. His previous titles were managing editor, staff writer, sports editor, sales account manager and copy editor. Growing up in Salisbury before moving to Berlin, Green graduated from Worcester Preparatory School in 1993 and graduated from Loyola University Baltimore in 1997 with degrees in Communications (journalism concentration) and Political Science.