OCEAN CITY — With little further discussion, the Mayor and Council on Monday approved on second reading the fiscal year 2023 budget with the property tax rate set at the constant yield.
The proposed budget sets the property tax rate at the constant yield of .4526 per $100 of assessed value. The constant yield is the tax rate needed to produce the same revenue as the prior year in order to maintain the same level of services and programs.
Last year’s budget was set at the constant yield rate of .4561, meaning the fiscal year 2023 rate of .4526 would represent a slight property tax decrease for many. Residential property taxes were reassessed in the last cycle and property values went up modestly in general.
Those whose Ocean City properties are their primary residences are insulated from rising property taxes due to increased assessments by the Homestead Tax Cap, which is set at 0% in Ocean City. However, non-resident property owners are not protected by the cap. Nonetheless, setting the property tax rate at the constant yield represents a modest tax decrease for many.
Heretofore, the town’s stated policy was to maintain reserve fund balance at 15% of the total operating budget, but that figure has grown in recent years to over 20%. Last month, however, the council voted to increase that minimum fund balance threshold to 17% after moving some of the undesignated funds around to certain capital projects and to increase the separate capital reserve fund dedicated to ongoing maintenance projects such as street paving and canal dredging, for example.
The total fiscal year 2023 budget comes in at over $156 million for all funds, with a general fund budget of a little over $101 million. The tax rate for personal property and corporation tax is reduced by $1.13 per $100 of assessed value in the fiscal year 2023 spending plan.
Anticipated revenue from real property taxes is $42.5 million, which represents 42% of the general fund budget. The majority of the general fund budget is derived from room tax revenue and other revenue sources, including parking. During budget deliberations, City Manager Terry McGean said the projected room tax revenues were somewhat aggressive based on estimations of a strong summer season.
In the proposed fiscal year 2023 budget, capital projects are funded at $3.6 million, which includes $2 million for street paving, $1.5 million for the capital maintenance fund, and another $100,000 for the Boardwalk re-decking project. Projects approved in the capital improvement plan (CIP) will be funded through the capital maintenance fund. They include street paving at $500,000, canal dredging at $400,000, a City Hall roof replacement project at $375,000, another $80,000 for the City Watch video surveillance system, a Northside Park roof replacement project at $149,000 and storm drain cleaning at $50,000.
The ability for the town to fund pay-as-you-go projects from fund balance and the capital maintenance fund is being made possible largely because of one-time federal grants related to the COVID pandemic in the last budget cycle. For example, federal American Rescue Plan Act, or ARPA, funds in the amount of $3.4 million have been applied to the fiscal year 2023 budget to ensure the continuity of government.
In addition, an estimated $1.9 million in federal Coronavirus Response and Relief Supplemental Appropriations Act funds and grants specifically dedicated to transportation projects are being used to offset the town’s general fund contribution to transportation at over $725,000 for fiscal year 2023. Of course, those federal grants are one-time funding sources related to COVID, necessitating the importance of maintaining a healthy fund balance in future fiscal years.