Councilmen argued against tax hike, wanted to use other funds
OCEAN CITY – Ocean City Council voted 4-3 Thursday evening to approve an amended 2022 budget that carries a tax hike of less than a penny per $100 of assessed valuation. Several council members said the administration should have been more forthcoming about a possible tax increase during campaign season and that the city should have used more of the available fund balance or COVID-19 relief money to keep their promise to taxpayers.
Council President Bob Barr and Councilmen Tom Rotondi and Keith Hartzell voted against the budget, which had to be delayed to account for an additional $770,000 in spending to cover a revised contract for trash and recyclables collection.
Council members Karen Bergman, Pete Madden, Jody Levchuk and Terrence Crowley Jr. voted in favor of the amended budget, which carries a tax hike of about $41.33 for a property valued at $600,000.
Chief Financial Officer Frank Donato made a brief presentation to council, summing up what he told council members at private meetings and at the last May meeting, explaining the most prudent way to cover the additional spending for trash and recycling was to raise taxes a modest amount this year and not to use fund balance or relief money for what is a recurring operating expense. Raising taxes was not a recommendation taken lightly by the administration, which, Donato said, “took every maneuver” to come up with a zero tax hike.
Gold Medal, the company that is in the final year of a five-year contract to collect trash and recyclables, started pressuring a number of shore communities to renegotiate their contracts this year because of rising expenses including fuel and other factors.
Ocean City Business Administrator George Savastano and City Solicitor Dorothy McCrosson began dealing with the company in March, when it demanded another $1.4 million in payments just to cover the remainder of this year. Ultimately, they were able to negotiate the increase down to $770,000, which the administration believed was fair to ensure Ocean City’s trash and recycling collection would continue uninterrupted.
Council members collectively praised Savastano and McCrosson for their work on behalf of the city in negotiations, but the sticking point for some was the timing of the tax hike.
Through the spring, Mayor Jay Gillian’s administration touted a 2022 budget with no tax increase. That budget was part of the initial presentation to the public. It wasn’t until the May 12 council meeting – two days after the municipal election in which Gillian was re-elected mayor over Hartzell, who challenged him – that Donato and city Auditor Leon Costello discussed a revised budget that included the additional $770,000 and said the best way to cover that spending was via a tax hike.
Rotondi, who signaled his opposition to the revised budget in the May 26 meeting, said it was obvious before the election the city would need a tax hike because of what was transpiring with Gold Medal.
“It’s hard for me to swallow that we knew it two days after the election but didn’t know that prior,” he said. “To me, there was no doubt we knew there was going to be a tax increase. I would have had no problem voting for that tax increase if it was transparent in the beginning.”
He said he preferred using COVID-19 relief money instead of raising taxes to “keep the promise to taxpayers” they would not have a tax hike.
Crowley asked about the money still available in COVID relief and how and when it needed to be spent.
Donato explained there is about $3.7 million in relief money remaining and the administration would like to dedicate it to a pump station project. He said relief money was used in the former budget to make up for one-time revenue shortfalls due to the pandemic and it was spent for cybersecurity upgrades, enhanced remote work ability and enhanced internet service, among other things.
He said if the city used relief money, when it knows the expense for trash and recycling would be even larger next year, it will just be “kicking the can down the road” and the city would have a bigger hole in next year’s budget.
Bergman pointed out the city did a “great job” negotiating the contract down to almost half of what was requested.
Hartzell asked about the impact of Gold Medal not renewing its performance bond this year.
Savastano said the contractor did not renew it this year but the fact it lapsed did not impact the negotiations. He also said it didn’t help other towns that had performance bonds.
Hartzell said he would vote against the revised budget because the city could use more of the fund balance to offset the tax hike and use the time until the next budget to come up with revenue enhancements and cuts to offset the higher trash and recycling costs.
“I feel as strongly as Tom does that the timing was wrong. People need to stand up and say it was wrong,” Hartzell said.
Levchuk agreed with Hartzell and Rotondi about the timing, but said the administration did a good job negotiating.
Responding to a question from Madden about why the city didn’t use more of the fund balance, Donato explained using it would be the same as using the relief money. It would be taking a one-time revenue source that won’t be there next year and then the city won’t have that fund balance to offset what could be an even bigger expense for trash and recycling. “Every action has an equal and opposite reaction,” he said.
Madden said since the city was in the middle of negations with Gold Medal, putting money into the budget during the election would be showing the city’s hand to the company.
McCrosson said that was indeed one of the city’s concerns and that the city started its negotiations at offering Gold Medal no additional money.
Madden said the choice was to have a small tax increase this year, rather than to pay twice as much in next year’s budget. “We have to make the best decision on behalf of the taxpayers in this moment,” he said.
Barr acknowledged it was a difficult situation and that he believes there was a “reluctance” on the part of the administration to raise taxes during the election. Saying he had a lot of faith in Donato, Costello, Savastano and McCrosson, he believed it was important to keep their word to taxpayers and not raise taxes. He suggested using either the fund balance or relief funds and, as Hartzell said, use the next year to come up with budget cuts or ways to raise new revenues.
Just like families have to make tough decisions in difficult financial times, the city will be faced with the same thing, Barr said, adding he was confident Donato, Costello, Savastano and McCrosson, working with the new council, could make difficult choices but still keep their word to taxpayers. He said the city is going to have to consider raising taxes and fees in the future and possibly cutting things.
Everyone was saying they have faith in the four administrators, Bergman said, and “all four of those people have said this is the best thing for the taxpayer.”
Madden added there are clear recommendations and council’s job was not to make an emotional or political decision.
Council voted to approve the revised budget after Savastano laid out a timeline to show council members were kept fully apprised of negotiations and there was no logic to not following the recommendations of the city’s finance director and auditor.
By DAVID NAHAN/Sentinel staff