OCEAN CITY – A review of the resort’s annual comprehensive financial report (ACFR) presented this week revealed “fiscal year 2022 was a very good year for the town of Ocean City.”
Finance Director Chuck Bireley on Tuesday presented the ACFR for fiscal year 2022 to the Mayor and Council. The weighty tome revealed significant positive variances in what was budgeted and what the actual numbers were on both the revenue and expense side.
For example, revenues in the final budget were anticipated at over $96 million, but the actual figure on the revenue side came in at over $102 million, for a variance of about $5.7 million. On the expense side, the budget anticipated nearly $92 million in expenditures, but the actual number came in at around $84 million.
The net change in the town’s fund balance with revenues coming in higher than anticipated and expenditures coming in lower was around $13.5 million. As a result, the town’s total unassigned fund balance is around $25.6 million, or over 30% of expenditures. For years, the town had a stated goal of maintaining a general fund unassigned balance of 15%, but resort officials earlier this year raised the goal to 17%. At 30% in the ACFR presented this week, the town’s fund balance is healthier than the policy calls for.
Among the key components in the rather rosy ACFR were gains on the revenue side. For example, room tax increased by around $3.3 million over fiscal year 2021, while admissions and amusement tax increased by over $922,000. Parking revenue also increased by about $1 million over fiscal year 2021.
Ocean City also received a second payment in federal American Rescue Plan Act (ARPA) funds totaling $3.4 million. ARPA funds were distributed to jurisdictions in the wake of the pandemic for a variety of uses and the town received its second installment during fiscal year 2022.
Perhaps the biggest gain, and contributor to the town stellar financial report presented this week, were significant changes in the Other Post-Employment Benefit, of OPEB, which funds retiree health benefits. It OPEB was created in 2009 with a 30-year funding plan. In a year where the OPEB fund has a deficit, the town makes up the shortfall with a contribution from the general fund.
The goal has always been to have the OPEB funded at or near 100% with no outstanding liability for the town. At the close of fiscal year 2021, the town had a liability of over $6.2 million in the OPEB trust fund, but that had reversed by the end of fiscal year 2022 with the OPEB assets standing at around $6.2 million. As a result, the OPEB trust is now at over 120% funded as of the close of fiscal year 2022.
The bottom line in the ACFR presented on Tuesday is the town remains in solid financial shape on most fronts. Ocean City’s assets and deferred outflows stood at over $438 million, while the liabilities and deferred inflows stood at over $219 million. The end result is a net position of over $218 million.
“This year was an interesting challenge,” said Bireley. “The reality is, it was extremely challenging, but there’s a lot of positive information in here when you look at the actual numbers. Fiscal year 2022 was a very good year for the town of Ocean City.”
Bireley explained one apparent anomaly in the ACFR was a decline in anticipated spending on advertising of around $4.4 million.
“There was about $4.4 million on the expense side that came in under what was budgeted because of advertising funding that was unspent,” he said.
Councilman John Gehrig asked if that was the true number or the figure at the end of the fiscal year when the report was initiated.
“Our fiscal year ends in June,” he said. “Are those the advertising funds we’re talking about? We didn’t receive June’s room tax figures in real time, so their probably not reflected in this report.”
City Manager Terry McGean explained the apparent decline in the town’s spending on advertising in the report presented on Tuesday.
“Part of it was we were in between ad agencies,” he said. “We were transitioning. I don’t think we spent as much as we would have.”
Bireley said while the federal ARPA funding helped the navigate through challenging pandemic years, the latest installment would be the last.
“This represents the last of the ARPA funds,” he said. “We won’t see that going forward.”
Gehrig said the way the numbers came out, it appears the town thrived despite the pandemic.
“We got the ARPA funds because we were shut down,” he said. “We would have been better off if we were open.”
Bireley said the ground made up on the OPEB trust fund was the catalyst for the strong ACFR this year. Again, there were significant gains on the revenue side, and expenses were down compared to what was budgeted but the OPEB gains were really what surprised him.
“There’s good news on the expense side,” he said. “Literally, the profitability of the town increased because of the profitability of the OPEB plan. I can’t overemphasize that. The OPEB was really incredible.”
He said the OPEB trust fund has made up several million dollars in a short time for a variety of reasons.
“The OPEB fund is now at 120%,
he said. “The fund now exceeds the town’s liability. In the past two years there has been a difference of $27 million. It’s a tremendous accomplishment for the town. It’s fantastic and I never would have believed it.”
