OCEAN CITY – After being told earlier this year they wouldn’t face a tax hike, Ocean City property owners will likely be paying an extra $41.33 for the average house assessed at $600,000, courtesy of a renegotiated contract for hauling trash and recyclables.
Ocean City Council voted 4-1 Thursday to spend $770,000 more through the end of the year on the contract – to ensure there is no disruption in service – and to cover that amount by raising taxes, rather than using money available in the fund balance. There will be a public hearing on the revised budget June 9.
No members of council were pleased with the development, but most credited Business Administrator George Savastano and City Solicitor Dorothy McCrosson with being able to negotiate down the cost with Gold Medal, the waste hauler that threatened to withhold services from multiple shore towns if they refused to renegotiate.
The company cited global changes, the pandemic and inflation with the need to be paid more for the final year of the five-year contract the city negotiated with Gold Medal back in 2018.
The decision to raise taxes after the May 11 election prompted one council member to question whether the decision was a “bait and switch,” but Savastano pointed out they had been working since March to try to get the company to stick to its contract and then to negotiate the price increase down.
Chief Financial Officer Frank Donato said his recommendation was to add the money to the contract and to raise taxes to cover it rather than use the available money in the fund balance.
He recommended modifying the budget to get the city to the end of the year.
“We don’t take it lightly, but it is the best course of business at this junction to keep trash collection smooth and on schedule for the rest of the year,” he told council.
He explained because the cost of trash and recyclables collections are expected to continue to skyrocket, it is better to pay more now through taxes and then “brace” for another increase in the appropriation next fiscal year rather than face an even bigger tax increase next year.
Savastano said he had been meeting with members of council in small groups to provide updates and they have been aware since March about the ongoing negotiations with the company.
Although some public comment asserted Gold Medal got everything it wanted in the negotiations, Savastano said that wasn’t the case. He said originally the company asked for more than $1.4 million to cover May through December. He said McCrosson could attest to the fact the company didn’t walk away happy and neither did the city, but it was the best agreement to protect the services through the busy tourism season.
He explained what is happening in that industry locally reflects what is going on throughout the country and worldwide, factoring in labor shortages, unexpectedly high inflation and fuel costs 250 percent higher than a year and a half ago.
He also explained that five-year contracts are unusual for most vendors with the city and that when Gold Medal bid it to start in 2018, its bid was about $1.5 million – half that of the next lowest bidder.
Councilman Jody Levchuk said he believed Savastano and McCrosson did a good job negotiating with the company, but he wished taxpayers got the news about a potential tax hike 10 weeks earlier. He said he was glad Savastano was open to the idea of the city creating its own sanitation department because he expects costs to be “astronomical” in the future.
Councilman Terrence Crowley Jr. said no one is happy to be in the situation with a “perfect storm” driving up costs, putting the city in a terrible spot, “but we have to get through the summer. Tourism is our life blood.”
Councilman Tom Rotondi, who later was the lone vote against approving the resolution, said he believed the administration knew there would be a tax increase in March while it was touting a zero percent tax increase.
“I think it’s a bait and switch,” he said, adding he wouldn’t have a problem voting for it if there was “a little bit of transparency and honesty.”
Savastano said there wasn’t a bait and switch and that the administration worked hard to compel the company to stick to its agreement and that council was aware, when the budget was presented, that the city was negotiating with Gold Medal. “This isn’t a surprise,” he said, noting back in March he couldn’t say more publicly because of potential litigation and negotiations.
“My objective was not to have a tax increase. My objective was to do everything we could do legally to compel” Gold Medal to perform, he said. Although the company wanted a bigger increase, he said the city’s position was that it would not reward the company for blowing its bid in 2018, but would negotiate an increase for rising costs Gold Medal could document.
He pointed out the company tried to negotiate the increase in public and through the media and even refused to pick up recycling one day in May to pressure the city.
“Everything was as transparent as we could possible make it,” he said.
Council President Bobby Barr said he believed Savastano and McCrosson did well in negotiations and that although, to some, it may have looked like a bait and switch because of the election, they didn’t know there would be a tax hike.
“I think we’re going to get killed next year probably when we go out to bid,” Barr said. Next year the city will have to “look long and hard” not just at raising taxes, but also raising revenues and potentially cutting programs. ”We all have to share some pain in this.”
He supported Savastano looking at the city creating its own sanitation department, but acknowledged that could not be done this year.
Crowley, Barr, Levchuk and Pete Madden voted for the budget resolution. Rotondi voted no, Keith Hartzell was absent and Karen Bergman arrived at the meeting after the vote.
By DAVID NAHAN/Sentinel staff