By DAVID NAHAN
Sentinel staff
OCEAN CITY – If Ocean City’s fiscal 2020 budget is approved on final reading June 25, taxpayers won’t feel an increase in their taxes.
The new budget held the line on taxes.
Initially, when Mayor Jay Gillian presented his budget on Feb. 27, it came in with a half-penny increase per $100 of assessed valuation. Total spending was $82.9 million with a tax rate of 46.5 cents per $100.
And then the COVID-19 pandemic hit. It was back to the drawing board as the administration, Chief Financial Officer Frank Donato and department heads went back to revise their estimates of revenues as they looked ahead to a changed summer season and adjusted their spending.
The new budget, at $80.5 million, was introduced at the City Council meeting Thursday, May 28. It was approved on first reading on a 6-0 vote.
To keep the tax rate even, the city is using about half of its surplus, contributing $4 million to the 2020 budget. In fiscal 2019, the city used $2.85 million in surplus funds. The good news is that there is another $4.15 million in surplus because the city finished the 2019 fiscal year with an $8.15 million surplus.
“We had a record high fund balance that we ended 2019 with,” Donato said. “We’re using that roughly 50-50 mix toward balancing the budget and keeping the rest in reserve. The early version of the budget called for using less of the fund balance … but with corona situation we reduced some of our anticipate revenue figures based on the outlook. We decided to lean on fund balance a little more.”
Although he said there was nothing positive about the pandemic, he pointed out “it actually happened at an ideal year for Ocean City because we had such a reserve built up in 2019.”
The local tax levy actually increases in the 2020 budget, growing by $611,000 to $54,892,721. What keeps the tax rate from going up is a $107 million increase in property values in the resort, which now stand at more than $11.93 billion.
“I think this is our sixth year in the row with a $100 million plus gains to the ratable base. Ocean City has been on a slow and steady appreciation climb,” Donato said.
Total revenue in the budget is up by about $68,000, but credit that to the surplus being used and the additional $611,000 in tax levy from property values (assessed valuation).
In the budget, state aid – energy receipts tax – remains a constant at $2.146 million. There is an additional $50,000 expected in delinquent tax payments, but $359,000 less in local revenues.
There are a number of areas in the budget showing decreases that appear directly related to the COVID-19 pandemic restrictions, many of which have not been lifted.
The 2020 budget expects $100,000 less in beach fees, down to $3.7 million, and $120,000 less in parking meter fees, down to $2.9 million. The biggest decline, of more than 30 percent, is in Aquatic and Fitness Center user fees, down to $700,000 in the 2020 budget from $1.05 million in 2019.
“None of us have a crystal ball,” Donato explained. “Some of these revenue sources could rebound. However, the Aquatic and Fitness Center has been closed because of the pandemic so “we know that will not recover.”
Among the biggest expenses in the budget are police and fire protection in the resort. For salaries and wages alone, the 2020 budget sees spending of $7.96 million for the police, $7.1 million for firefighters and $1.5 million for lifeguards, all up from 2019.
“More than half of the salary budget is public safety,” Donato noted.
Health insurance is another major expense in the budget, at $6.325 million – the same as in 2019; workers comp is $1.445 million, down slightly; and general liability at $491,000, also down a bit.
There is also a $7.2 million contribution for retirement funds, about half going to police and fire, and about $1.5 million each to public employees and Social Security.
The city is spending $10.79 million for paying down the bond principal and another nearly $3.8 million in bond interest in the 2020 budget.
Donated explained that last year the city sold $85 million worth of bonds, a record for the resort. “We hit a home run on the rates and hit the market at an ideal and opportune time,” he said. That $85 million wraps in three to four prior years of capital spending after doing temporary financing for various projects. The large bond amount includes spending on roads and draining, pumping stations, back bay dredging, fire engines and equipment, boardwalk work and other things.
The city has a six-year capital budget plan of almost $112 million. Capital projects planned for 2020 are expected to cost $35.77 million, according to the budget.
Overall, Donato said, the mayor first presented a budget with a half-cent tax increase per $100, that he believed most people would accept because of the investment in infrastructure, but that changed in March. “The mayor felt strongly for us to bring a budget to city council that had no increase to the tax rate because of the dire times we’re in” and “because so many people are hurting.”
In his Friday, May 29 letter to the community, Gillian further explained the rationale.
“We had proposed a budget earlier this year with a small tax increase to help pay for our capital improvements and other costs. But after everything our taxpayers have sacrificed in the past few months, I wanted to do everything I can to help them,” Gillian wrote. “The entire city team went back to the drawing board and made the cuts and adjustments necessary to make this possible. … The budget is in City Council’s hands now, and a final vote is scheduled for June 25.”
City going to court over dealership property
The mayor also noted Ocean City is taking legal action to take the roughly two-acre parcel of land near the Ocean City Community Center that was once the site of a Chevrolet dealership.
“This is just the beginning of a long process,” he wrote. “The courts will decide the price. But I am confident that we are on a path to fully acquire the property before the end of the year. We are continuing our efforts to acquire two adjacent properties to preserve all open space in the area.”
The city council approved $9 million to buy the property. Although it was approved, citizens group Fairness In Taxes fought the purchase through a referendum and won, believing the city was overpaying.
While the owners voted to build houses on the site, a move opposed by the city and neighbors because of the added density, the city has continued to try to purchase it but at a lower price of $6.5 million.
A sign remains on the site for building lots. Eminent domain proceedings could have the courts set the price for the property.