OC budget draft sticks with stable tax bill for propertiesResort officials cut requests; drew $2.44M from reserves to balance FY18 spending
(April 7, 2017) Once again, Ocean City officials have proposed a small tax break for property owners in the upcoming fiscal year, and have drawn from the fund balance to do it.
City Manager Doug Miller and Budget Manager Jennie Knapp formally presented a draft revenue and spending plan for the 2018 fiscal year during the first budget session on Tuesday. The proposed budget slightly varies from last year, but manages to keep the tax rate to the constant yield rate — the rate the state says will produce roughly the same revenue as the year before.
Because of slight growth in property values in the past year, the state set that value at 46.56 cents per $100 assessed value compared to 2016’s 47.27 cents.
“A lot of tough decisions had to be made to make budget at constant yield, and I don’t know it that’s feasible forever,” Knapp told the council.
In all, the total financial package included $128 million for the upcoming year, including revenue and expenses from the general fund, which is funded by taxes and other fees, and six “enterprise” funds.
The enterprise funds are separate, and three of them — water, wastewater and the golf course — pay for themselves, while the others — the airport, convention center and transportation — require support from the general fund.
The proposed general fund budget is $84.3 million, or $3.1 million more than last year. It draws $2.44 million from the general fund reserve, similar to a savings account, to reach the total amount while keeping to a lower tax rate. That money will be used to pay for canal dredging, street paving, IT projects, Boardwalk Tram replacements and airport capital projects.
Ocean City’s fiscal policy is to keep 15 percent of the general fund unassigned to expenses as a backup cushion. Under the proposed budget, 15 percent of the fund balance would be $12.6 million.
As of the end of the fiscal year 2016, there was $16.9 million, or 23.1 percent, that was unencumbered because of increases in revenues. Knapp said the suggested withdrawal would slash the excess fund balance in half as long as revenues are met and expenditures do not exceed the FY18 budget. She cautioned that recurring expenses are looming.
“In FY19, I anticipate needing a million for street paving to bring funding to $2 million and anticipate $3 to $5 million for canal dredging,” Knapp said.
Miller added that while residents often ask the council return the excess funds to the public, putting it to use is another way to pay it forward.
“When you’re investing back into your capital needs, or reducing the debt, you are giving back,” he said. “If you don’t take care of those needs through the excess, it will have to come from tax rate.”
If the council agrees to the proposed tax, real estate properties would bring in $40.65 million in revenue. A small increase in the resort’s tax base, including hotels close to completion, accounted for the $243,920 increase in the city’s property tax revenue this year while giving property owners a small decrease in their tax bills.
This continues a trend that has seen real estate tax revenue drop as a percentage of the general fund from 56 percent in 2009 to 48 percent this year.
Although the draft sounds exact in future spending, some areas have wiggle room. Officials factored a $33,000 reduction in revenue from tow fees, but last week the council voted to increase rates. Room tax is also projected to generate $15.4 million in the upcoming year, but that depends on the tourist season.
The budget proposal also takes into account employee costs, which were magnified by the resort’s expanding tourist season.
“We are the victims of some good things going on here, like the school after Labor Day and the shoulder season, and employees are here longer,” Miller said.
Several city departments requested 23 positions, but only three were filled in a way that pushed money down, he added. The three positions include an office associate was promoted to construction inspector in the Planning and Community Development Department, a part-time park worker that was promoted and four firefighter/EMT positions were made in lieu of hiring a captain and two lieutenants.
Health care insurance is expected to increase roughly $200,000 by January 2018 and Ocean City is expected to have an increase in its pension contribution.
The resort will also pay out various step increases and cost-of-living increases to general employees and fire and police union members.
The single largest spending item outlined in the draft remains public safety at $35.2 million. The Ocean City Police Department is the largest budgeted item in that category at $21.19 million.
Miller added that the budget invests $2.3 million in protecting the beach, $400,000 for beach replenishment and $45,000 for Boardwalk redecking.
The council thanked Miller and Knapp for presenting a balanced budget. Councilman Wayne Hartman in particular thanked Knapp for working to stay at the constant yield rate.
“We’re asking you to come up with the same amount of dollars even though everything increases,” Hartman said. “It says a lot that you’re able to do that for nine years.”
The council will review the allocations and requests of each department before voting on the budget in May.