City reworks spending plan, expects hit to parking, tag revenues
By DAVID NAHAN/Sentinel staff
OCEAN CITY – Mayor Jay Gillian presented the new Ocean City municipal budget in February. It won’t look the same as the one coming May 14.
The COVID-19 pandemic intervened, forcing the city to take a new look at revenues and expenses.
When the mayor presented his budget Feb. 27, it came in at $82.9 million with a tax increase of half a penny per $100 of assessed valuation. It would have inched up the tax rate from 46 cents to 46.5 cents per $100.
“Obviously, since then, a lot of things have changed,” city Chief Financial Officer Frank Donato III said last week when the Sentinel asked him how budget projections were proceeding. He added, “In my almost 20 years” of budgeting, this year “will be the most unusual.”
“We’re still working on it every day,” he said. “We’re asking all the department heads to take a tight look at all their operations, figure out how COVID has changed things in the last month and a half, take our best guess at what season operations are going to look like this summer. I’m looking at revenues and inevitable impacts to revenues.”
Because Gov. Phil Murphy has not yet set a date when the state will get out from under the COVID-19 restrictions that greatly curtail business and tourism, city officials don’t know the exact impacts on the budget.
“That’s the reason we’re taking the longest period we can, under the revised statutory deadlines, so that we can have as much information known as possible prior to introducing our budget,” Donato said.
He explained the state pushed back the statutory dates for budgets to give municipalities more time to take the COVID-19 implications into account. The introduction was delayed to either the end of April or the next regularly scheduled meeting after that. That meeting is May 14.
“And from introduction to adoption (of the budget), you still have another month where changes can get made,” Donato said. “That is going to give us the longest window of opportunity to take as much as we can into account that is COVID related as far as how it will affect this budget.
“But still there are going to be some unknowns from that point going forward,” he added. Without knowing when the city will reopen businesses, the beaches and the Boardwalk, it is difficult to pinpoint the impact. “The biggest concerns in our budget are beach tags, which are roughly $4 million, and parking at $3 million,” Donato said.
The city expects beach tag and parking revenues to be down, but there also will be expenses that will be down – “taggers, parking attendants, recreational staffing, Pops concerts, you name it,” he said. “There are going to be some savings on the expense side of the budget with some staffing in these areas that will sort of make up for the loss in revenues, but the loss in revenues will be greater.”
Asked if the city is still aiming at a half-penny tax increase, Donato replied, “We’re still working on that day to day as things continue to change. I don’t know, as I sit here today, what that will look like on May 14. We’re going to try to take as much as we can into consideration.
Working in the resort’s favor is the fund balance.
“The one good thing we have going into 2020 is that we finished 2019 with the highest fund balance that Ocean City has ever recorded – a $2.3 million increase to our fund balance from fiscal year 2018 to fiscal year 2019 closing,” Donato said. The balance stands at $8,155,000.
“It’s the last thing we want to do, to give that security blanket away, but that’s what it’s there for. It’s there as the taxpayers’ protection. That’s going to insulate us from some of the fallout here,” he said. Even so, he is hoping to preserve the fund balance because the city plans to sell bonds later in the year and the fund balance is a key indicator that could get the city up to a double A-plus rating with lenders, meaning better bond terms for the city.
Expect work to continue on the budget up to the May 14 meeting – and beyond.
“We’re also not in any rush this year to get an adopted budget out,” he said. “In prior years, we would look to adopt by the end of April, and then we would send our budget right away to the county, and the state would be working on their budget at the same time. The goal would be to get a tax rate that would be struck, so to speak, by the state and the county, somewhere in July so that the actual tax bills could go out for the third and fourth quarters.
“That whole process is going to be changed this year,” Donato said. “Therefore there is not as much of a need to adopt these budgets locally because we’re not going to be working under the same parameters.”
He said that because the state announced it is pushing its fiscal year ending from June 30 to Sept. 30, “the state is not going to be in any position to adopt a budget in order for us to have a final tax rate come July. Therefore the guidance to the municipalities has been, be prepared to issue estimated tax bills for the third quarter billing sometime in June. We’re not going to have a final tax rate for the year until we get closer to the fourth quarter bill.”