Finance Director presents budget tutorial to first ward residents

Last Updated on Friday, December 07, 2012 04:32 pm Written by Ann Richardson Wednesday, October 10, 2012 09:15 pm

Next year's budget a 'work in progress'

OCEAN CITY — Although the 2013 municipal budget will not be introduced by the mayor or formally approved by City Council until 2013, Frank Donato, the city’s finance director, said much of the work for the fiscal document is already underway.

The invited guest speaker at an Oct. 9 1st Ward meeting, Donato presented a tutorial on the budgeting process in what he deemed a “full service” family resort.

“We’re a pretty big operation for the little town we live in, we’re almost a $70 million operation,” he said. “We are, by far, the largest municipality in Cape May County and only Atlantic City is larger in the region.”

Noting that the community paid police and firefighters, Donato said Ocean City was unique among shore resorts. Ocean City, he said, “has a lot of attributes that set it apart from other resort communities that essentially shut down for the winter.”

The city operates under the Faulkner Act, with a mayor, seven council representatives and a business administrator, and with department heads reporting to the administrator.

By law, he said, this means that the department heads have to present budgets to the administrator by the end of November.

“We’re starting to formulate the numbers now, what’s required and what’s requested,” Donato said.

Each department, he said, is diverse, with differing needs. The city expands in many ways during the summer, he noted, with lifeguards, beach tag checkers, seasonal police officers and other part time employees.

“Each department balloons,” he said. “It swells for half the year. It presents a lot of challenges, but at the same time allows us to be creative, have fun and think outside the box.”

Once departmental budgets are submitted to Mayor Jay Gillian, the administration goes to work. Gillian, he noted, presents a budget to City Council at the first council meeting in January.

“It’s accompanied by a state of the city speech,” said Donato.

“Right now it’s a work in progress,” he said, adding that the numbers are crunched to a “fine powder.”

Once council receives the budget document, there will be two workshops towards the end of January to discuss its various aspects. Once everything is ironed out, the budget will be formally introduced in March and approved in April, he said.

Tax assessments are a big factor in the budget process.

“We all know since the peak of the real estate market in 2005 things have come down and stabilized,” he said.

There was a delayed reaction as the market came down, he said. As a result, the assessed value of most properties was higher than the fair market value.

“Seven years later we are still grappling,” he said.

This year there were 850 tax appeals; last year there were 650, according to Donato.

“That is an indication to us that people have a problem with their value,” he said.

Many municipalities, he said, ignored the problem but Ocean City is trying to solve it through what is called a compliance plan – a way of bringing properties values in line slowly over time.

“We did a series of compliance plans,” Donato said.

He said the roblems was in the value of the land, not the value of the home. Rather than performing a labor-intensive $1.5 revaluation, the city set out to revalue the land only.

“We know the problem lies with the land value, the shift in supply and demand means land was less valuable,” he said. “We have a pretty good handle on the building value, we were pretty spot on. Compliance allows us to adjust the land value without the laborious process of going in and out of 19,000 buildings.”

They started with the beach and bayfront properties, and the smaller “condotels.”

“We did 3,200 properties last year, the biggest chunk we could bite off,” he said. “That’s where the biggest deviation was.”

As a result of the revaluations, these owners paid less in property taxes.

“We lost $681,000 (in taxes) through 650 tax appeals,” said Donato. “That caused a lot of angst and confusion.”

The next compliance plan should begin soon and 9,000 more properties will be reassessed. The city applied to the Cape May County tax board for approval on Oct. 1.

“They meet next week, this should allow us to get another good chunk of the island done,” he said.

When the compliance plan is finished, Donato said the city will have reassessed about 15,000 properties. An outside company is reassessing the island’s commercial properties.

“The pendulum will have swung,” he said, adding that the beach and bayfront property owners will go back up a bit as some of the other properties now go down.

“By the following year, the whole island will be level,” he said.

The goal, he said, is a balance, with every property owner paying “fair market value.”

Donato said he will have more information for the first council meeting in November.

“We’re anxious to get in front of council, we understand there will be questions,” he said.

The next properties to be reassessed will be those across the street from the beach and bay, and many properties in the Gardens. By the end of the month, Donato said residents should be able to call the city tax assessor’s office for more information, including whether their neighborhood will be reassessed.

“It’s not the end of the world if we don’t get to your neighborhood to reassess,” he said. “You can always file an appeal.”

Properties that are within $10,000 or so of the fair market value will probably not be changed. Former city business administrator Richard Deaney, a 1st ward resident, asked Donato why local revenue was off by $1 million from 2011 to 2012. He noted that the city utilized only 50 percent of its $5 million fund balance.

“The amount of surplus you are using is on the low side,” he said. “By the same token, that money is available to be used to offset taxes. It’s hard for me to understand how you lost $1 million.”

Donato said local revenue was up in almost every category. Beach tags came in at over $4 mil

Next year's budget a 'work in progress'

OCEAN CITY — Although the 2013 municipal budget will not be introduced by the mayor or formally approved by City Council until 2013, Frank Donato, the city’s finance director, said much of the work for the fiscal document is already underway.

The invited guest speaker at an Oct. 9 1st Ward meeting, Donato presented a tutorial on the budgeting process in what he deemed a “full service” family resort.

“We’re a pretty big operation for the little town we live in, we’re almost a $70 million operation,” he said. “We are, by far, the largest municipality in Cape May County and only Atlantic City is larger in the region.”

Noting that the community paid police and firefighters, Donato said Ocean City was unique among shore resorts. Ocean City, he said, “has a lot of attributes that set it apart from other resort communities that essentially shut down for the winter.”

The city operates under the Faulkner Act, with a mayor, seven council representatives and a business administrator, and with department heads reporting to the administrator.

By law, he said, this means that the department heads have to present budgets to the administrator by the end of November.

“We’re starting to formulate the numbers now, what’s required and what’s requested,” Donato said.

Each department, he said, is diverse, with differing needs. The city expands in many ways during the summer, he noted, with lifeguards, beach tag checkers, seasonal police officers and other part time employees.

“Each department balloons,” he said. “It swells for half the year. It presents a lot of challenges, but at the same time allows us to be creative, have fun and think outside the box.”

Once departmental budgets are submitted to Mayor Jay Gillian, the administration goes to work. Gillian, he noted, presents a budget to City Council at the first council meeting in January.

“It’s accompanied by a state of the city speech,” said Donato.

“Right now it’s a work in progress,” he said, adding that the numbers are crunched to a “fine powder.”

Once council receives the budget document, there will be two workshops towards the end of January to discuss its various aspects. Once everything is ironed out, the budget will be formally introduced in March and approved in April, he said.

Tax assessments are a big factor in the budget process.

“We all know since the peak of the real estate market in 2005 things have come down and stabilized,” he said.

There was a delayed reaction as the market came down, he said. As a result, the assessed value of most properties was higher than the fair market value.

“Seven years later we are still grappling,” he said.

This year there were 850 tax appeals; last year there were 650, according to Donato.

“That is an indication to us that people have a problem with their value,” he said.

Many municipalities, he said, ignored the problem but Ocean City is trying to solve it through what is called a compliance plan – a way of bringing properties values in line slowly over time.

“We did a series of compliance plans,” Donato said.

He said the roblems was in the value of the land, not the value of the home. Rather than performing a labor-intensive $1.5 revaluation, the city set out to revalue the land only.

“We know the problem lies with the land value, the shift in supply and demand means land was less valuable,” he said. “We have a pretty good handle on the building value, we were pretty spot on. Compliance allows us to adjust the land value without the laborious process of going in and out of 19,000 buildings.”

They started with the beach and bayfront properties, and the smaller “condotels.”

“We did 3,200 properties last year, the biggest chunk we could bite off,” he said. “That’s where the biggest deviation was.”

As a result of the revaluations, these owners paid less in property taxes.

“We lost $681,000 (in taxes) through 650 tax appeals,” said Donato. “That caused a lot of angst and confusion.”

The next compliance plan should begin soon and 9,000 more properties will be reassessed. The city applied to the Cape May County tax board for approval on Oct. 1.

“They meet next week, this should allow us to get another good chunk of the island done,” he said.

When the compliance plan is finished, Donato said the city will have reassessed about 15,000 properties. An outside company is reassessing the island’s commercial properties.

“The pendulum will have swung,” he said, adding that the beach and bayfront property owners will go back up a bit as some of the other properties now go down.

“By the following year, the whole island will be level,” he said.

The goal, he said, is a balance, with every property owner paying “fair market value.”

Donato said he will have more information for the first council meeting in November.

“We’re anxious to get in front of council, we understand there will be questions,” he said.

The next properties to be reassessed will be those across the street from the beach and bay, and many properties in the Gardens. By the end of the month, Donato said residents should be able to call the city tax assessor’s office for more information, including whether their neighborhood will be reassessed.

“It’s not the end of the world if we don’t get to your neighborhood to reassess,” he said. “You can always file an appeal.”

Properties that are within $10,000 or so of the fair market value will probably not be changed. Former city business administrator Richard Deaney, a 1st ward resident, asked Donato why local revenue was off by $1 million from 2011 to 2012. He noted that the city utilized only 50 percent of its $5 million fund balance.

“The amount of surplus you are using is on the low side,” he said. “By the same token, that money is available to be used to offset taxes. It’s hard for me to understand how you lost $1 million.”

Donato said local revenue was up in almost every category. Beach tags came in at over $4 million. Parking revenue was “phenomenal,” the Aquatic and Fitness Center was a hub of activity and permits for construction were up.

The fund balance, he noted, was a taxpayer savings account and some of it had to be utilized to account for the money lost on tax appeals. He said the process plays out after the budget is crafted.

“We build a budget based on revenue that’s no longer there,” Donato said.

He said $2.5 million was used to balance the budget, leaving $2.5 million.

Donato said it was important to keep a healthy fund balance because the city wants to retain its AA bond rating. A healthy fund balance helps the city get through “dry periods.”

“It’s there for emergencies, some towns spend it down to nothing,” he said. “It’s there for us to lean on if a road gets washed out.”

lion. Parking revenue was “phenomenal,” the Aquatic and Fitness Center was a hub of activity and permits for construction were up.

The fund balance, he noted, was a taxpayer savings account and some of it had to be utilized to account for the money lost on tax appeals. He said the process plays out after the budget is crafted.

“We build a budget based on revenue that’s no longer there,” Donato said.

He said $2.5 million was used to balance the budget, leaving $2.5 million.

Donato said it was important to keep a healthy fund balance because the city wants to retain its AA bond rating. A healthy fund balance helps the city get through “dry periods.”

“It’s there for emergencies, some towns spend it down to nothing,” he said. “It’s there for us to lean on if a road gets washed out.”

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