OCEAN CITY – With little fanfare or discussion, resort officials this week got an overview of proposed budget amendment number two and learned the town’s financial picture was rosier than anticipated on several fronts.
Once a town’s fiscal year budget is adopted, there are often budget amendments on different occasions throughout the year to make adjustments for unforeseen changes on the revenue and expenditure sides. Typically, funds are moved if there are shortfalls in anticipated revenue sources, or redirected if revenues appear to be exceeding budgeted projections. During Tuesday’s work session, Budget Manager Jennie Knapp presented the proposed budget amendment-two to the Mayor and Council.
The presentation takes a statistical dive into all of the sub-categories in the town’s adopted budget and the slide show can be tedious and full of numbers, but perhaps the biggest takeaways were the gains realized on certain key revenue generators. There was some justified trepidation entering the season with COVID concerns still lingering, nationwide inflation and gas prices soaring.
Nonetheless, when the budget was prepared and eventually adopted last spring, the anticipated numbers for room tax were admittedly optimistic and thus far it appears that key indicator is matching expectations along with several other key revenue sources, according to Knapp.
“The second budget amendment recognizes additional revenue received since the first budget amendment, adjusts revenue estimates for fiscal year-end and recognizes any actions taken by the council since the first budget amendment,” she said. “A lot has happened since the first budget amendment. Revenue estimates for room tax, admissions tax, casino revenue, parking revenue and parking fines have increased substantially, resulting in a $3.36 million increase in revenue estimates from these sources.”
Knapp said gains in those revenue generators will offset what will be needed from the general fund on the expense side and could be redirected to funding other projects and programs.
“The estimated amount required from prior year reserves, or fund balance, decreases from $4.8 million to around $4.5 million,” she said. “General fund revenue estimates were increased by $1.7 million, but prior year reserves were used to partially fund the Boardwalk re-decking project and to purchase two parcels at the airport for the runway expansion. These two projects increased the use of prior year reserves by around $1.4 million.”
The bottom line is the key revenue sources are running ahead of what was anticipated, allowing Knapp, City Manager Terry McGean and Finance Director Chuck Bireley to make adjustments through the budget amendment process and maintain a balanced budget. For example, the increase from room tax, admissions tax and casino contributions came in at around $2.7 million. Parking revenue is showing a $365,000 increase in the proposed budget amendment and parking fines and police tows are showing a $286,000 increase. Room and business licenses increased by $220,000 over what was first anticipated.
There were some revenue sources that are not performing as well as anticipated. For example, Springfest revenue was down roughly $189,000, while anticipated income tax revenue was down $178,000 in the proposed budget amendment. Nonetheless, those losses will be offset by gains in other key revenue indicators. The total net gain from all changes in anticipated revenue is around $4.8 million.
On the expenditure side, there were some big-ticket items included in the proposed second budget amendment. For example, the proposed budget amendment includes a $950,000 contribution to the Boardwalk re-decking project and around $566,000 for the implementation of the police department’s new body-worn camera system.
Also included on the expenditure side is $592,000 for the purchase of two parcels at the airport to accommodate a runway expansion project. The town’s contract with Covanta, the waste-to-energy recycling company, increased by $315,000. In addition, repairs to the fire department’s fire rescue boat came in at around $242,000 in the proposed budget amendment on the expense side.
In a nutshell and in simplest terms in what can be a complicated budget planning document, revenue estimates are projected at $4.8 million, while the combined changes on the expenditure side come in at around $4.5 million.
After the presentation, the council voted unanimously to approve the proposed second budget amendment and move it to ordinance form for first reading at the next meeting. The exact amount of fund balance required for the fiscal year 2022 budget will be reported in the town’s annual financial report after an audit is completed.