Resort scaling back expectations for 2022; budget still holds line on taxes
OCEAN CITY – After a banner 2021 season that resulted in higher-than-expected revenues in Ocean City, the resort isn’t banking on 2022 being quite as productive.
Even so, the budget detailed at last week’s Ocean City Council meeting remains flat on its impact to taxpayers.
Chief Financial Officer Frank Donato and auditor Leon Costello spent about an hour outlining details of the 2022 budget in front of council.
Mayor Jay Gillian had released the overall budget two weeks earlier, an $88.8 million spending plan that increased appropriations by just over $1 million but used about half of a record budget surplus to keep the tax rate flat at 47.2 cents per $100 of assessed valuation.
As Donato and Costello pointed out, many of the revenues for 2021 came in higher but they have tamped down those expectations for 2022.
Parking revenues were nearly $750,000 higher last year than the $2.7 million budget for 2021. Coming off the pandemic-restricted summer of 2020, 2021 saw Ocean City packed with visitors. The city realized $3.44 million in revenue there. For this year, the city is budgeting $3.2 million for parking fees.
Those visitors last year also had a big impact on beach tag sales, bringing in just more than $4.2 million, more than $400,000 higher than budgeted for 2021. For 2022, the city is anticipating $4 million even in beach fees.
Emergency Medical Services also were substantially higher than predicted, coming in at $665,339, well over the $475,000 budgeted for 2021. City officials noted how busy EMS was throughout the summer season last year. For 2022, the budget expects $550,000.
The Aquatic and Fitness Center, which had $400,000 budgeted for 2021, saw revenues of $770,227. Like other city facilities, the pandemic had impacted use of the center through 2020 and into 2021. The city is budgeting $700,000 in revenue for the Aquatic and Fitness Center in 2022.
Construction code fees came in at $1.12 million rather than the budgeted $900,000 in 2021. The city anticipates $950,000 there in 2022. Fee and permits were up nearly 14 percent over budget for 2021, coming in at $1.13 million. The city is budgeting $1.05 million for 2022 in that category.
Donato explained the city is going to use nearly half of the fund balance in 2022 to keep the tax rate flat. In the past five budget years, the fund balance has grown from $5.8 million in 2018 and 2019 to $10.46 million in 2022. The city plans to use $5.4 million of the fund balance in this year’s budget, but that will leave just over $5 million for future use.
Each of the past five years the city has used about half of its fund balance: $3 million in 2018, $2.85 million in 2019, $4 million in 2020, and $3.15 million in 2021.
Donato said the city keeps a fund balance to ensure the stability of future budgets and operations and in case the city needs to fund an unanticipated emergency. The reserves also provide for cash flow because revenues aren’t collected consistently during the fiscal year and payrolls exceed $1 million every two weeks.
An added benefit of the fund balance is that it helps give the city better bond prices because that is a key indicator for bond rating agencies.
The city budget takes up 47.1 percent of each property tax dollar in Ocean City; 26.7 percent goes to the county; 21.4 percent goes to the school district, 3.8 percent to the library; and 1.2 percent to open space. (See other stories in this addition on the county tax rate, which remains flat this year, and the school tax rate, which is decreasing this year.)
Although spending is up in this year’s budget, it is offset by a $174 million increase in ratables in the resort. The ratable based is now at nearly $12.3 billion.
Among the biggest increases in expenses in the 2022 budget are $660,000 more for health insurance; $395,000 for salaries and wages; $351,000 for debt service; $320,000 for liability insurance; and $308,000 for pensions.
Pension costs have increased every year since 2017 when it accounted for $4,764,082 to 2022’s budgeted amount of $6,276,357.
The city’s health insurance costs have fluctuated over the years, getting as high at $8.6 million in 2018, but are projected at $7.31 million for 2022. Donato and Costello noted the resort changed its health benefits programs in 2013 and in 2019, both resulting in lower costs.
The resort has been on a tear in capital improvements in recent years, which has required bonding large sums to pay for work on infrastructure.
Debt service has increased an average of 7.1 percent annually from 2016 to 2022.
In 2016, debt service was $10.66 million. In 2021 it was up to $16.5 million and it is at $16.9 million for 2022.
The budget will be introduced at the next City Council meeting.
By DAVID NAHAN/Sentinel staff