Ocean City Today

County’s reply in suit over differential: ‘no’

Worcester repeats its position on resort’s quest for tax break
By Brian Gilliland | Mar 29, 2018

(March 30, 2018) Worcester County’s official response to the suit filed Jan. 16 in Circuit Court seeking declaratory judgment on whether the resort is owed a tax differential isn’t far removed from what it has said during face-to-face negotiations: No.

Ocean City Solicitor Guy Ayres filed the January suit asking the court to determine whether it is entitled to a differential. In response, the county initially filed a motion to delay, and then issued its official response on Monday.

The county has retained Victoria Shearer of the Baltimore firm Karpinski, Colaresi and Karp to represent it in the case.

Ayres argues the state law governing differentials is unconstitutional, that the unconstitutional portions of the law should be severed and that the surviving portion of the law obligates the county to provide the setoff.

Shearer, along with some musings wondering why the county is defending state law, requested the action either be dismissed or a summary judgment be entered in favor of the county.

There are two operative words in consecutive sections of the state property tax code regarding tax setoffs for duplicated services: “may” and “shall.” In legal terms, “may” refers to something allowable, but not required, and anything that “shall” be done is mandatory.

According to Ayres, 19 of 23 counties that “may” provide tax setoffs have done so. The four that have not are Howard, Baltimore, Wicomico and Worcester counties. Of those four, Baltimore and Howard counties do not have municipalities.

In his argument, Ayres cites the State Department of Legislative Services December 2016 report that notes that 136 of the state’s 157 municipalities receive a tax differential or tax rebate from their county.

Instead of providing a tax setoff, the county has elected to fund the municipalities by means of an annual unrestricted grant — a lump sum payment the towns can use any way they choose.

Shearer argues that the grant provided to Ocean City by Worcester County does indeed aid in paying for these services and programs, so an additional setoff is unnecessary. Further, Shearer argues the court is unable to force the county to provide a differential, since ordering such relief is outside of the scope of the primary dispute: the law governing differentials is unconstitutional.

Though there are several methods for providing tax differentials, County Attorney Maureen Howarth has previously said, if forced, the county treasurer’s office would divide Worcester into “taxing areas” where each area would be charged a different rate in county property taxes.

To ensure local governments bring in at least the same amount of money each year, the state sets what is called a constant yield rate. This year, the constant yield rate of 82.2 cents per $100 of assessed value is lower than the actual tax rate in Worcester, which is 83.5 cents per $100 assessed.

If, however, one area was charged less than another, a shortfall would be created, thus requiring taxpayers in one area to make up for revenue lost in another.

Ocean City’s County Commissioner, Joe Mitrecic, and Ocean City Mayor Rick Meehan have repeatedly said there are other ways to make up the difference, but what they might be or how they would work have never been made public.

According to a decade-old study funded by the city, the value of the differential is about $17 million. The county performed its own study in 2015, which placed the number closer to $3 million.

Ocean City made its annual budget request last Tuesday, and asked to have its grant increased by five percent, which would bring it to about $2 million.

Each year, the county is required to meet with officials seeking a differential, but is not obligated to take any action.

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