OC Council Concludes Budget Work Sessions; Officials Consider Room Tax Policy

OC Council Concludes Budget Work Sessions; Officials Consider Room Tax Policy
Photo by Chris Parypa

OCEAN CITY – Officials last week agreed a policy was needed to address how room tax dedicated to marketing can be used to pay general fund expenses.

Last Thursday, the Mayor and Council concluded days of budget discussions with a work session to address issues such as charitable funding, beach patrol salaries and the addition of four, full-time firefighter/EMTs. Officials also discussed tourism funding, or more specifically, how room tax revenues should be used to pay expenses related to marketing the town.

“The issue of how and what the 42% of room tax dedicated to marketing can be used continues to cause controversy among the council and mistrust between some on the council and the staff,” Town Manager Terry McGean said. “My opinion is this mistrust is not warranted or necessary. What we need is clarification.”

Currently, 42% of room tax revenues are dedicated to advertising the town, while the remainder is used to cover general fund expenses. The formula, approved by the Mayor and Council through an ordinance, also outlines approved expenditures, such as advertising, sponsorships, promotion of special events, and more.

In recent years, however, the use of room tax dollars to pay general fund expenses have been the source of contention among council members and staff. Two years ago, for example, Councilman John Gehrig questioned staff on transfers from the town’s advertising budget to special events. At the time, Budget Manager Jennie Knapp said more and more offseason special events required additional police and fire crews, trash collection and other town services.

“The mistrust stemmed from how the numbers were presented and policy dictated through the numbers hoping we would not be paying attention,” Gehrig said last week. “So $400,000 was stolen from that advertising budget for 10 years, on purpose, hidden by special events. It came to light at a meeting that those special events weren’t special events. It was public safety and public works to support the special events.”

Gehrig said those transfers were made at the direction of Mayor Rick Meehan during his tenure as acting city manager. For his part, Meehan said those funds were used for free events that were advertised.

“It was presented by then tourism director at that time and it was approved by the Mayor and City Council …,” he said. “That was the intent … If something changed after I left that position, I don’t know.”

Resort staff this week presented the council with a list of general fund expenses covered by tourism dollars. Gehrig pointed out those expenses totaled roughly $700,000.

“At least $700,000 is coming from the advertising budget to support other city expenses,” he said.

For his part, McGean said language in the town’s room tax ordinance was open to interpretation. He said this has led to some level of mistrust between some members of the council and staff.

“In my opinion, the solution is for council to adopt a policy that better defines how the ordinance should be applied …,” he said. “I think this will go a long way in putting this issue to rest and providing better assurance these funds are being spent as the council intended.”

After further discussion, the council voted unanimously to explore a proposed policy at a future work session.

The council last week also voted to fund $1.58 million in pay-as-you-go capital projects in the coming fiscal year, as well as requests from various charitable organizations.

The council also agreed to establish end-of-season bonuses and overtime pay for lifeguards, so long as a balanced budget is maintained.

“The standard lifeguard works 43.5 hours a week,” McGean said. “We’d like to suggest that time worked beyond that they’d get an extra $1 an hour. What we’d like to do is encourage the people we have to work more hours. Number two, the suggestion we’d like to make is have an end-of-season bonus of $250 provided you work 80 hours after Labor Day. I think that would do more than the standard increase in the hourly rate.”

During budget discussions late last month, officials highlighted the beach patrol’s efforts to hire lifeguards ahead of the summer season. They noted that wages and housing had made hiring difficult this year. When asked about wages, Beach Patrol Captain Butch Arbin said other beach patrols paid between $1 to $1.50 more per hour.

“We are now behind the other beach patrols on Delmarva,” he said.

Last week, however, McGean noted that research on beach patrols from Atlantic City to Myrtle Beach revealed that Ocean City’s lifeguard wages were higher than most other jurisdictions.

“We believe our hourly pay is adequate,” he said.

Officials noted that base pay for lifeguards had increased to $18.45 an hour, and $18.82 for those who worked more than 400 hours. Council Secretary Tony DeLuca, said starting pay should be increased to $18.55 an hour, or the same rate paid to state lifeguards.

“We have a hiring issue,” he said. “I think Ocean City should be the most attractive and have the highest pay in the state, not Assateague, not Sandy Point, not Gunpowder Falls.”

DeLuca then made a motion to approve the end-of-year bonuses and overtime pay, but to increase base pay to $18.55 an hour, with max pay set at $19 an hour. The motion failed with DeLuca in favor and the remaining six councilmembers opposed.

“The concern we always have when we raise the rates is the ripple effect it can have for other positions, which is why we prefer what we are suggesting,” McGean said.

A motion was then made to include an end-of-season bonus and overtime pay in the coming year’s budget, with the stipulation that the budget remains balanced. The motion passed unanimously.

“What we are offering is fair at this point,” said Emergency Services Director Joe Theobald. “My goal is to have the right number of guards to guard our beaches properly for this summer.”

The council last week also voted to include funding for four additional, full-time firefighter/EMTs. While the draft budget submitted to the Mayor and Council last month includes funding for eight new positions, officials say 12 positions are needed to meet the needs of the department.

“What we need for the additional four positions is $104,473. I’m much more confident the Medicaid reimbursement would at least be that much …,” McGean said. “I’m comfortable moving forward with four added positions with a balanced budget.”

Lastly, the council last week had before them a motion regarding the mayor’s mileage reimbursement program. Officials noted that despite the name, the mayor was paid a yearly stipend based on 24,000 miles at the current federal mileage rate of roughly 65 cents per mile.

“A mileage reimbursement should be based off actual mileage,” Council President Matt James said.

Gehrig agreed.

“That’s a ton of miles when you live in Ocean City. That’s 100 trips to Annapolis a year …,” he said. “It seems easier to have a fixed allowance, or submit actual mileage, or buy a car we can brand.”

McGean noted that before the formula was implemented, mayors received cars for their personal use, and the town paid for fuel, insurance and any maintenance. Since then, the town has implemented an annual car allowance, which is based off 24,000 miles multiplied by the federal mileage reimbursement rate.

“A reminder, it is a taxable benefit,” Knapp said. “The mayor is taxed on this.”

Gehrig, however, said the town could better manage costs by either paying the mayor based on actual miles driven, or purchasing a company car for the mayor’s use.

“I don’t know what the problem is for either one of them,” he said.

DeLuca, however, made a motion to keep the current formula and rename it the mayor’s vehicle allowance. The motion passed 5-2, with James and Gehrig opposed.

“If it’s a small thing, it’s an indicator the big things are out of control too,” Gehrig said. “We see it all the time … The public needs to start asking some questions.”

About The Author: Bethany Hooper

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Bethany Hooper has been with The Dispatch since 2016. She currently covers various general stories. Hooper graduated from Stephen Decatur High School in 2012 and the University of Maryland in 2016, where she completed double majors in journalism and economics.