OCEAN CITY — The resort will be going through a revaluation in the next few years to more accurately reflect the rising values of the 19,000-some properties on the island.
Ocean City Finance Director Frank Donato mentioned the reval during a budget presentation before Ocean City Council on March 27. Donato handed out copies of the budget two weeks earlier during Mayor Jay Gillian’s State of the City address, but made the formal presentation of the budget last week. (See story online at ocnjsentinel.com.)
The proposed budget for 2025-26 includes a 3.76-cent tax rate increase — 7.04 percent — that would cost the owner of an average $645,000 home another $242 next year. The budget came in with $124.6 million in spending, an increase of just under $5.5 million. The current year’s budget included a similar tax increase.
When talking about the “average” price of a home and how it related to the tax increase, Donato reminded taxpayers they are taxed at the assessed value of their homes. “That does not represent fair market value,” he said. “We will get there in a few weeks when we do a full reval.”
A $645,000 home is generally worth at least twice that, Donato said.
When the reval goes through, the tax rate should come down, but not necessarily how much property owners pay in taxes. The rate will come down because the tax levy will be spread among what is expected to be a larger ratable base because of rising home values. The tax rate would be down, but the assessed values of individual homes will likely be substantially up.
The current rate is $0.534 per $100 of assessed valuation. The proposed tax rate would be $0.5716. Under the proposed budget, the owner of an average home would pay $3,715 in municipal taxes.
Ocean City and its budgets have benefited from a rapidly increasing ratable base that jumped by another $174.8 million over the past year and now stands at $12.949 billion.
After suffering more than $1.6 billion in cumulative ratables loss from 2012 through 2014, values rebounded. The base was at $11.296 million in 2015 and has gone up more than $100 million every year since then.
The tax rate has followed, from 35.6 cents per $100 in 2012 to 44.6 cents in 2017 to the 57.1 cents proposed for next year’s budget.
Donato said the reval is a multi-step process that will take time.
“You don’t want to reval the whole town in an escalating real estate market,” he explained. That would make the reval outdated as soon as it is done. The city, he said, “will wait for things to plateau.”
Because it will cost several million dollars to do the reval, the city wants it to remain accurate for as long as possible, Donato said.
He noted the Cape May County Board of Taxation notified Ocean City and Sea Isle City as the top candidates to go through the reval process, although at least 14 of the 16 communities in the county will have to do that in the next couple of years.
Donato said the city hoped to have the tax map certified by the state by the end of summer. That would put the resort in the position to seek requests for proposals for the revaluation. There are only two or three firms that do them in New Jersey.
He explained it is laborious to go through 19,000 properties to photograph and evaluate them and could take an entire calendar year to complete. In a best-case scenario, Ocean City would get a new set of values on the books in 2028.
Donato suggested the resort may be getting to a plateau, but there is no crystal ball to anticipate what will happen or when there will be a downturn.
He pointed out the market has changed substantially. When there used to be a thousand properties in the real estate MLS listings for sale, there were only 275 last year, an all-time low.
Council President Pete Madden, a broker with Goldcoast Sotheby’s International Realty, confirmed those numbers. There are fewer properties for sale, which helps keep their value up, but there is reluctance among buyers who don’t want to trade in their low mortgage rates of 2 percent to 3 percent to buy a home with rates that are now 6 percent to 7 percent.
When the reval is done, the tax rate could drop substantially because it will be based on the much higher assessed value in town. However, the budget’s tax levy would still be spread among the relatively same number of properties.
– By DAVID NAHAN/Sentinel staff
