By DAVID NAHAN
Sentinel staff
OCEAN CITY – After learning they couldn’t use more of the federal COVID-19 relief money for tax relief, Ocean City Council unanimously approved the 2021 budget with a 1-cent tax hike Thursday evening, June 25.
Chief Finance Officer Frank Donato presented the “prudent, fiscally responsible budget” in short form, saying the numbers were the same as when he did an extensive budget introduction on May 27 before council.
The budget totals $86.9 million with a tax levy of $57 million.
The tax rate will increase to 47.1 cents per $100 of assessed valuation. The current tax rate is 46.1 cents.
The administration originally faced a potential 2-cent tax hike because of about $2.1 million in revenue shortfalls due to the pandemic over the past year, but waited to adopt a budget because they expected that to be offset by a federal relief payment.
A few members of council suggested using more of the $7.035 million in federal relief money to offset the tax hike, but Donato and city auditor Leon Costello explained that wasn’t possible.
The city put approximately $2.1 million of the money into the budget to offset the revenue loss – such as fewer dollars in parking and beach tags during summer 2020. That is permissible under the rules of how that federal money can be spent.
Donato and Costello explained an important part of the rules was a change allowing communities to use that money for stormwater management in addition to water and sewer infrastructure. Costello called that change a “gold mine” for coastal communities that have to battle stormwater flooding. Ocean City has spent years and millions of dollars during the Gillian administration on projects to mitigate flooding throughout the community.
“That’s a huge benefit to us,” Donato said. “We’ve got a lot of different pump station projects on the table. The legislation will allow us to invest some of that money into these projects.”
They said the city has four more years to spend the remaining roughly $5 million in federal funds.
Council President Bob Barr and Councilman Keith Hartzell both said they feared that if the city didn’t use the money, it could lose it.
Barr said his “biggest fear” is that “Uncle Phil” (Gov. Phil Murphy) and President Joe Biden could take the money away if it isn’t spent in the next few years.
“As long as you spend the money as you’re supposed to,” Costello said, “you won’t have to give it back.”
“As long as you stick to the guidelines, that amount has been allowed to us,” Donato said. He pointed out President Biden signed the law for the federal relief.
Barr and Councilman Michael DeVlieger asked if the city could put $1.2 million of the federal money into the capital plan – to lower what’s coming from the city – to eliminate the need for a tax hike.
“It wouldn’t meet the guidance,” Donato said. “It’s not meant for straight-up tax relief.”
Costello also explained that as budget increase every year because of salaries, pension payments and health care costs, using the federal money would “create a false decrease in the tax rate” and the city would have to make up an additional $3 million in spending the following year.
“That’s why Frank is on the cautious side,” he said.
The city is about $5.6 million under the levy cap this year and is using about half of the fund balance, or some $3.15 million, for the new budget.
During public comment two citizens offered different perspectives on the budget.
David Breeden, president of citizens group Fairness In Taxes, blasted the budget, saying the city has been the recipient of “lots of good fortune, but we still need $1.2 million from the taxpayer.” He said he had a “lack of confidence” in the budget numbers coming from the administration and said the numbers “keep changing. I think it’s a bait and switch. You tell us what you want to hear at the town hall meeting and then you change it.”
Noting the $190 million increase in ratables in the resort, he asked, “Where is the compassion?”
Donato later said there was no bait and switch in the budget numbers.
Resident Frank Worrell said the city was being prudent by having small increases each year so taxpayers don’t get hit harder in the future. He said when Gov. Christie Whitman was in office, she cut taxes, but did it by not making contributions to the state pension fund, exacerbating the problem for future governors and taxpayers.
City’s population
is over 90,000?
On an interesting side note, Costello and Donato said Ocean City got the money directly from the federal government – rather than going through the state – because the resort is considered having a population over 50,000. The only other shore community that got the money in that fashion is Atlantic City.
They said those numbers obviously weren’t based on the federal census, which shows Ocean City with a permanent population of around 11,900. They figured the government was figuring in the summer tourist population which can swell the numbers to 125,000 to 150,000 at peak periods.
They said the population was listed above 90,000.
After the discussion and public comment, City Council voted 7-0 to adopt the budget.