Second reading and public hearing set
OCEAN CITY — In a split vote, Ocean City Council approved a new 3 percent tax on rentals placed through transient marketplace services such as Airbnb and VRBO.
The move June 26 came after a similar attempt was thwarted in December 2024 when representatives of multiple hotels and motels complained the market last summer was soft and they feared it would dissuade future visitors.
This time around, hotels and motels are exempt. Council voted 5-2 in favor last week after a few members of the public opposed it, but the ordinance will be back for a second reading and public hearing during the meeting at 6 p.m. July 17 before it would gain final approval.
The ordinance would not have an impact on near-term rentals. City Solicitor Dorothy McCrosson explained it would go into effect roughly 90 days after it was reviewed and approved by the New Jersey Division of Taxation.
During council’s first public comment section near the start of the meeting, one reserved only for citizen comment on agenda items, resident Susan Cracovaner spoke in opposition, criticizing the mentality of city government, and resident Jim Kelly urged delay to get input.
It’s another cost increase facing a select group of tourists in addition to the beach tag and parking fee increases of last year, Cracovaner said. “This tax-and-spend mentality needs to end. Costs need to be controlled.”
“We take pride in being America’s Greatest Family Resort and we need to tend that carefully,” she said, “but we can’t afford to drive away tourists and residents by continuing to increase taxes to support this spending.”
Kelly said council should consider the impact on tourism.
Price increases have an adverse effect on demand when substitutes exist and vacationers have choices, so the price increase will affect demand for Ocean City rentals, he said.
He advised council to explore ways to mitigate it.
Reasonable fees should be able to be absorbed if the rental market is robust and growing, Kelly said, but if the market position is soft or softening, it could place greater downward pressure on demand and result in the loss of business.
He encouraged council to seek credible third-party data to assess the health of the tourism industry when considering the ordinance.
Ocean City is a great place to visit, but as the cost of vacations increases “we must continue to challenge ourselves to maintain a vacation experience that people are willing to dig a little deeper to enjoy,” Kelly said.
He posed a range of questions: Can our town be cleaner, safer, more peaceful? Can ambassadors be friendlier? Can we provide greater convenience? Can we offer more attractions and entertainment? Can we innovate ways to make visitors’ dollars go farther?
He asked that the administration engage the public and look for answers to those questions first.
Fourth Ward Councilman Dave Winslow advocated hardest for the transient rental tax, saying it is part of a larger picture that includes the administration finding ways to cut costs.
Second Ward Councilman Keith Hartzell and At-large Councilman Sean Barnes argued against the tax for different reasons. Hartzell and Barnes were the ones in the minority, voting against the tax.
Winslow said he didn’t envision the tax driving away tourism and pointed out it would not affect hotels and motels.
He said he listened to property owners for and against the tax. There were initial misconceptions the fee was paid by the property owners, but it is paid only by renters when they book stays.
Because he has been on a push to limit or diminish city government personnel, Winslow noted the tax does not require any additional staff to process.
McCrosson explained the fee is collected through the vendors such as Airbnb and VRBO, sent directly to the state Division of Taxation, which then sends the payment to the city.
Winslow said he saw the fee, which he said could generate about $1.8 million in revenue, was part of his larger look at the financial wellbeing of the city.
It is one of many steps the city needs to take to reduce the tax burden on property owners and residents, he said, noting that people will not accept reductions in city services “and rightfully so.”
He pointed out the 3 percent fee on a $2,500 rental amounts to $75 and other municipalities have reported the fee doesn’t drive away rentals. He said 209 other municipalities in New Jersey have the fee, including the Wildwoods, Cape May, West Cape May, Lower Township, Middle Township, Somers Point, Galloway, Pleasantville and Egg Harbor Township.
Hartzell, who even voted against the introduction of the resolution, was surprisingly brief in his comments. He said the timing was bad.
He said Winslow was “stellar” in his proposals for cutting costs in the city and before he would support any tax, he wants those proposals implemented.
Barnes took the opposite tack of Winslow, saying much of his opposition was that it was targeting only one segment of the rental population and that it wasn’t equitable.
He said there were six ways individuals can rent properties in town. Those include through brokers such as real estate agencies, through owners and reservations through hotels and motels.
Barnes asked, “Why are we leaving all that other income on the table?”
He said some of the property owners who are going through Airbnb or VRBO are part of a business model that allowed them to purchase the property now and use the rentals to finance their own way to living in Ocean City in the future.
He questioned leaving out hotels and motels and their potential income.
However, he said rather than hitting one rental segment with a 3 percent tax, a more equitable proposal would be to tax all rentals in the city nominally at perhaps a half-percent or a 10th of a percent.
“This is having government stepping in and deciding which platform is going to be more profitable or successful in the long term,” Barnes said.
Third Ward Councilman Jody Levchuk, who said he owns properties that are rented through Airbnb, and Council Vice President Terry Crowley Jr. echoed Winslow. At-large Councilman Tony Polcini said he made some calls to different municipalities and discovered the tax hasn’t affected their rentals.
Council President Pete Madden, who didn’t comment, Winslow, Levchuk, Crowley and Polcini voted in favor.
At the start of the meeting, mayoral aide Michael Allegretto, speaking for the absent Mayor Jay Gillian, quoted him as saying the bottom line is that the transient rental tax is “a great opportunity” to reduce the burden on local taxpayers.
– By DAVID NAHAN/Sentinel staff