City Council splits 4-3 in favor with arguments for and against new tax
OCEAN CITY — Starting late this year or early 2026, people who book short-term rentals in Ocean City through online sites such as Airbnb and VRBO will be paying an additional 3 percent tax.
Ocean City Council voted 4-3 Thursday, July 17, to approve a transient accommodations fee of 3 percent on properties rented through the transient space marketplace. That marketplace includes sites such as Airbnb and VRBO.
Council members were narrowly split over the new tax. Proponents believe the city needs the expected $1.8 million in new revenue to benefit the city’s taxpayers. Opponents see it as unfairly targeting one sector of the huge rental market in Ocean City, that it may harm an already weak market and that no new tax should be imposed until the city gets budget spending under control.
In public comment at the start of the meeting, resident Steve Kearns, who owns rental properties, cited social media posts that Ocean City is pricing itself out of the family market. He said they can buy plane tickets and fly to tropical locations for the cost of food and lodging in the resort.
“And here we are considering a 3 percent tax on short-term rentals through the digital marketplace,” he said.
Kearns said renters are charged the 6.625 percent sales tax plus a 5 percent hotel-motel occupancy tax. Adding the 3 percent fee would mean renters would be hit with a 14.625 percent fee, in addition to whatever is charged by the services.
He pointed out real estate agencies that rent properties won’t be subject to the fee, making it an unfair playing field. Kearns called on anyone in the real estate business to recuse themselves from voting because it would be a conflict of interest.
He said property owners would be happy giving commissions to real estate agencies “but the real estate agencies simply can’t or don’t get the job done filling those all-important weeks” in the summer.
Kearns added many people have invested in Ocean City with the intent of renting their properties with the long-term plan to be able to own homes here.
If this ordinance passed, he said, not only would some benefit, but more people would be driven away.
Arguing for the tax
Fourth Ward Councilman Dave Winslow, Third Ward Councilman Jody Levchuk, Council President Terry Crowley Jr. and Vice President Pete Madden argued in favor of the tax.
Winslow said the city could not leave the potential revenue on the table because it comes with no administrative cost and would be paid by visitors, not by the taxpayers.
“It is one piece of the puzzle to reduce the burden on our taxpayers,” he said.
He added that most surrounding towns already impose the fee, that they haven’t experienced a great rental loss by doing so and that it was nominal — $75 on a $2,500 rental.
“Most won’t leave Ocean City for $75,” he said.
Levchuk, who has properties he rents through Airbnb, said everyone who called him to complain about the fee when it was passed on first reading ended up understanding the motivation by the end of the call.
He said he didn’t see it as a conflict of interest to vote on it because he was voting in favor of adding the fee that affects him as well.
Levchuk said times are changing. Visitors used to rent Saturday to Saturday for their weeklong stays, booking through real estate agencies, with B&Bs and hotels and motels available for those who wanted shorter stays.
He said in the past few years, the popularity of booking online has offered the flexibility to allow for one-, two- or three-night stays.
“Our duty is to watch out for taxpayers of Ocean City,” Levchuk said, adding he didn’t believe the tax would turn his or other renters away.
“We’re all tasked with keeping taxes low and keeping amenities high,” Madden said. “This is a state-approved program” with no added hire for the city, which can do it pretty easily. “Most things in government you can’t do easily,” he said. “I’m in favor.”
Crowley said he agreed with Levchuk and Madden that it would benefit the city.
Arguing against the tax
Second Ward Councilman Keith Hartzell and At-large Councilmen Tony Polcini and Sean Barnes argued against the tax.
Polcini said he had gone back and forth on the tax and contacted some other municipalities.
“I don’t feel it’s a good time,” he said. “We need to grow our rentals and get people back here. Times are tough. People are scared about spending money.”
Not knowing the future, he said, “I don’t think it’s the right time. Now I’m against it.”
Hartzell was blunt: “Until this budget gets under control, I’m not for a new tax. I don’t care who gets affected and who doesn’t, it’s another new tax.”
He said he agreed with Levchuk’s and Winslow’s points, but “you never solve a budget issue with another new tax.” He said until the budget gets down to a 1- or 2-cent tax increase, “I’m out.”
The latest budget increased taxes 3.7 cents per $100 of assessed valuation or 7 percent, similar to what it went up the year before. Over three years, taxes have risen about 17 percent.
The root problem in Ocean City is the spending, Hartzell said.
“I’m demanding that we get control of the budget and get it down to the number where it should be,” he said. “You don’t give someone more money if you don’t agree with how they’re spending it.”
Barnes, who rents a property through Airbnb, said his opposition was because it is not fair.
“It has the unintended consequence of making one rental platform more marketable than the other,” he said.
“This equates to government stepping in and making one business more marketable than the other and I am thoroughly opposed to that,” Barnes said.
He added the tax isn’t sustainable and down the road people will go to other platforms.
Barnes said there is another platform that exists in the city, VROCNJ, “which is like a Craig’s List for real estate. It’s not exposed to this tax.”
As he argued when it was debated on first reading, he said a more fair solution would be to have a minimal tax, perhaps a half-percent, on all rentals.
“Three percent is a lot of money across the board. It’s not a good time when occupancy is down,” he said. “There is the need to promote prosperity for everyone.”
He said because he has an Airbnb rental that he would recuse himself from the vote.
However, when the time to vote came, he voted no with Hartzell and Polcini. Crowley later noted Barnes’ plan to abstain and asked City Solicitor Dorothy McCrosson whether they should revote.
McCrosson said if he truly wanted to abstain, he should not have commented on the issue, but he could change his vote.
Barnes decided not to change his vote.
Asked about it later, Barnes said he went into the meeting leaning toward abstaining based on a recommendation from McCrosson because of his Airbnb rental.
“After listening to members of the public and fellow council members during the meeting, I decided that any apparent conflict was tenuous at best and far outweighed by the importance of the equal protection that our Constitution provides. The vote was too important, so I cast my ‘no’ vote on the ordinance,” Barnes said.
McCrosson said the ordinance would go into effect 90 days after the council approval and review by the state. She suggested it could take effect at the start of 2026.
On a question from Levchuk, she said the state would have to weigh in on whether people who already booked online for 2026 would have to pay the tax.
– By DAVID NAHAN/Sentinel staff
