Major Emergency Damages Discussed

OCEAN CITY — There has been much debate lately about the appropriate level of fund balance the resort should have in reserve, and town officials last week considered the potential impact of a potential impact.

Ocean City’s existing policy has set the minimum threshold for fund balance at 15%, but there has been discussion about increasing it to 20%. In reality, the current fund balance is closer to 30% of the operating budget, which provides a comfortable cushion in the event of a major storm. During an earlier budget work session, Councilman Peter Buas questioned if there was any way to determine what the town might need in reserve in the event of an emergency.

“We tried to come up with some ways to quantify that,” City Manager Terry McGean said last week. “COVID might be similar to losses from a storm or other disaster. We have about $12 million in revenue losses due to COVID.”

McGean said each catastrophic event was different, but pointed to Hurricane Sandy as an example. In addition to physical damage from a major storm, the town could suffer significant revenue losses if a peak summer weekend was knocked out.

“If we looked at just what we lost to government facility damage due to Hurricane Sandy, it was around $1.3 million,” he said. “It’s very hard to quantify. As I mentioned, the projected $22 million in room tax revenue could be gone. Parking revenue could be gone. The impact could be very substantial.”

Ocean City can, and does, receive state and federal relief grants in the event of an emergency, but the funds are often slow in coming, said McGean.

“For COVID, we got the grants almost immediately,” he said. “With FEMA, sometimes there is a lag with grants and we have to use fund balance.”

Councilman Mark Paddack said the fund balance issue is similar to personal or business financial practices – three to six months of operating expenses if nothing else is coming in.

“Applying that same principle, if the town took a direct hit from a hurricane, we would want to have that three-to six-month cushion,” he said. “Sandy skirted by us and will still had $1.3 million in damages to our facilities. It did billions in damage in New Jersey. How long would it take the town to get back up and running to start collecting that revenue again? If we did have a catastrophic event, how much do we really need to have in that fund balance?”

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.