Spending is over 5 years as city looks for federal stimulus to offset costs
By DAVID NAHAN/Sentinel staff
OCEAN CITY – City officials laid out $141 million of capital spending over the next five years with more than half of the spending set for this fiscal year.
In a presentation Thursday, Aug. 12, in front of Ocean City Council, Chief Financial Officer Frank Donato and Operations and Engineering Director Vince Bekier spent an hour on the proposal, which would cost taxpayers another half-a-cent on the tax rate annually for the next 11 years or about $25 each year per $500,000 in assessed valuation.
That is their worst-case scenario.
Mayor Jay Gillian is having his administration take aim at the recently approved federal $1.2 trillion infrastructure plan – and another $3.5 trillion in proposed federal spending – to help offset the cost of a substantial portion of Ocean City’s projects.
He said Bekier is taking the lead as Ocean City aggressively pursues federal funding for projects. He said they learned the last time there was stimulus money that it is best to have projects shovel-ready for when grants are being awarded.
Gillian pointed out when the new Ocean City High School was built, the city received $11 million in grants. The city, he said, has received tens of millions of dollars in grants over the past 10 to 12 years for other projects.
With infrastructure as the big federal priority, the city is looking at flood mitigation projects. It has spent millions on those projects in recent years with more spending on tap for future projects.
Gillian said they also hope the proposed $42 million Public Safety Building (plus $1.3 million in final design) will be eligible for some federal grant money as well.
Donato and Bekier said the city still has $4.9 million in federal stimulus funds that can go toward flood mitigation. The city also is eyeing funding sources including:
– Department of Transportation (DOT) dredging grants for Intercoastal Waterways;
– DOT annual municipal aid road grants;
– Federal Emergency Management Agency (FEMA) grants from two recent storm disaster declarations in the area, including the tornado last year in Upper Township;
– Cape May County open space/recreation grants;
– Community Development Block Grants.
Combined with the federal stimulus money available, that could represent a sizable offset to the projects. “To what degree, who knows? It could be $10-$20-$30 million,” Donato said.
Bekier said the city will be laser-focused on federal money that is going to be available. “We are going to apply for everything we think we are eligible for. The potential is tens of millions of dollars,” he said.
“It’s all taxpayers money, I get that,” Gillian said, referring to any kind of funding, but that the city should try to get a return for all the money it sends out in tax money.
“We sent $32 million to the county this year, plus another million in open space (funds),” he said. “I used to feel hesitant approaching them on open space, but that has left my mind.
It’s amazing how much money they get from us.”
“The mayor tasked me to get my arms around the infrastructure bill in Washington, D.C.,” added Bekier, who “in a previous life” worked in both the Legislature and Executive Branch and for the chairman of the budget committee. He said he understands the process the federal government is going through and how to apply for funds.
“There is going to be a lot of money for states and municipalities,” he said, noting the mayor was “crystal clear: Harness as much of those federal funds that we are eligible to apply for, for the benefit of Ocean City and our residents, and let’s reverse the normal flow of Ocean City residents’ tax dollars going to Washington, D.C., and get it flowing back to Ocean City.”
‘A big chunk of change’
Donato acknowledged the $141 million is “a big chunk of change” and that in the fall at the Town Hall meeting on the proposed Public Safety Building, the city was talking about $116 million in bonding over seven years of the capital plan. At that point the city didn’t have revised cost estimates on the building, which is now at $42 million plus another $1.3 million for phase three planning. The new estimate is more detailed and it also includes the demolition of the current police and fire stations.
“I don’t want to say the $116 million is out the window,” Donato said. “If we get enough grant money, that is still in play.”
However, he said they wanted to demonstrate in their capital plan proposal how much it would cost the city if no grant money materializes.
The city plans a $30 million bond sale in 2024, a $40 million sale in 2026 and $80 million bond sale in 2028. He said the city would try to get debt paid off in 12 years in each sale to get better interest rates.
Averaged out, the cost would be an additional $590,000 on average added to the municipal budget each year, or less than a half-penny on the tax rate.
To be under half a penny, under worst-case scenarios (no grants) with that level of debt is definitely affordable and manageable for Ocean City for all the improvements that are encompassed in this plan, he said.
How that compares to the Town Hall meeting at the Tabernacle in the fall, he said “we were between a third of a penny to half a penny a year.”
A half-penny increase amounts to adding another $25 to the tax bill annually for a $500,000 home. When council members questioned whether it was fair to use $500,000 for a home price, Donato responded, “Although real estate values are selling for historic highs, keep in mind assessments have not changed. Tax bills are still based on assessment.”
The average assessment in Ocean City is $600,000.
Council to review plan
Donato said council can expect to see the capital plan on the agenda for a vote at the next meeting, Aug. 26, and has two weeks to digest it, offer comments and ask questions.
He pointed out that no projects can move forward until the city adopts a capital plan and puts a bond ordinance in place to actually fund these projects.
The mayor told council, “This is just a plan …. If there is anything you can think of, we’ll put it in there.”
Donato explained that even with a bond ordinance in place, the council will still see large-scale projects such as lagoon dredging, flooding mitigation and road work, including design contracts and then contracts for actual construction.
“The point being there are multiple opportunities for input on the projects in the capital plan,” he said.