OCEAN CITY — A recently-passed ordinance scaling up the percentage of the town’s collected room tax dedicated to marketing in future years is being challenged with a petition for referendum.
In early December, the Mayor and Council narrowly passed an ordinance altering the formula for how a percentage of room tax generated in the resort is distributed to marketing and advertising. By way of background, Ocean City’s room tax in 2019 was raised from 4.5% to 5% with about 44% dedicated to marketing and advertising and 56% dedicated to the town’s general fund to help offset the cost of increased tourism, such as increased fire and police services, public works, salaries and overtime, for example.
There are essentially two schools of thought regarding the distribution of room tax revenue in the resort. On the one hand, dedicating more of the room tax revenue to marketing and advertising will only grow the revenue source by attracting more visitors to Ocean City. On the other hand, attracting more visitors to Ocean City, particularly in the shoulder seasons and offseason with more and more special events puts additional strain on essential services such as police, fire and paramedics, public works and other departments.
The option ultimately approved by a 4-2 council vote in December was to continue to direct 2% of the increase in room tax revenue to destination marketing, advertising, promotions, sponsorships and special events and the like for fiscal years 2022 and 2023, while scaling up the percentage for that purpose to 2.1% in fiscal year 2024 and 2.2% in fiscal year 2025.
Former Councilman Vince Gisriel from the beginning publicly challenged the ordinance on the grounds the scaled increases in the amount of room tax dedicated under the broad umbrella of marketing and advertising would exponentially grow those budgets at a rate faster than the general fund growth. To that end, in December he sent a letter and a draft petition for a referendum on the room tax ordinance to the city solicitor for approval.
The preamble to the petition for referendum reads, “We, the undersigned petitioners, being duly registered voters of said town, do hereby request that Ordinance 2021-24 in its entirety, as stated herein, be submitted to a referendum vote of the registered voters of the town of Ocean City for their approval or disapproval.”
Gisriel’s letter to City Solicitor Heather Stansbury for approval of the petition set in motion a 40-day window for gathering the requisite number of voter signatures to bring the question to referendum. The city charter requires signatures representing 40% of those who voted in the last municipal election. With 1,528 votes cast in the last election, the target number for a successful petition is 612 signatures.
In a letter back to Gisriel dated Dec. 30, Stansbury acknowledged its receipt and outlined the procedure by which the former 14-year councilman must proceed.
“I acknowledge that your petition was received on December 23, 2021, which was within three business days of the passage of Ordinance 2021-24,” the letter reads. “Effective December 30, 2021, you shall have 40 days from the date of this letter, February 7, 2022, to obtain the signatures of 40% of the number of voters at the most recent general election. Therefore, you will need at least 612 of those qualified registered voters’ signatures for you to have a successful petition for referendum.”
In a letter to the editor this week, Gisriel outlined his reasons for seeking a repeal of the room tax ordinance.
“This new ordinance replaces an earlier one passed in 2007, which was flawed from the outset,” the letter reads. “The old ordinance was supposed to dedicate one-half percent of the room tax to advertising. However, instead it dedicated an amount equal to 2% of gross room revenue to advertising. This resulted in an enormous increase in the amount of money being spent to promote the town.”
According to Gisriel, under the original ordinance passed in fiscal year 2007, the town’s advertising budget was just over $1.76 million. By fiscal year 2021, it grew to over $7.46 million.
“By way of comparison, from fiscal year 2007 to fiscal year 2021, property tax revenue grew 17%, while room tax revenue grew 80%,” the letter reads. “As the room tax dramatically grew, funds from the revenue source to the general fund for such essential services as police payroll and overtime, and additional EMS shifts, only grew by 30%, while funds from the room tax for advertising increased 324%. This caused a major imbalance in the budget.”
In the letter, Gisriel asserts the recently-passed ordinance only exacerbates what he believes is an already-disproportionate room tax distribution formula.
“Rather than correcting the problem, the Mayor and Council have passed a worse ordinance to replace a bad ordinance,” the letter reads. “The new ordinance exasperates the situation by increasing the advertising budget even more. Based on the trend of room tax increases over many years, and based on the increased formula found in the new ordinance, a conservative estimate is that funds dedicated to the broad category of destination marketing, which includes advertising, will be in excess of $8.7 million in fiscal year 2024 and over $9.5 million in fiscal year 2025.”
To that end, Gisriel is seeking a referendum to allow the city’s voters to decide the issue.
“Short of an outright repeal of the ordinance by the Mayor and Council, the only way to stop this financial irresponsibility is to petition the ordinance to referendum,” he said. “That is exactly what I’m going to do.”
As of midweek, Gisriel said he hasn’t yet acquired any of the requisite signatures after just having received the letter from Stansbury.
“I don’t have any signatures yet,” he said. “I just received the updated voter rolls, and that’s a more efficient way to do this.”
Gisriel said he would go out and do the old-fashioned way of gaining signatures for the petition, which could begin as soon as late this week.
“I’m just going to go out and knock on doors,” he said on Wednesday. “That will begin tomorrow. That’s the best way to do it.”