Bond sale, emergency spending mean bigger budget in 2013

Last Updated on Friday, March 08, 2013 01:59 pm Written by Claire Lowe Friday, February 22, 2013 06:19 pm

Claire Lowe / Mayor Jay Gillian, business administrator Mike Dattilo and director of finance Frank Donato at the Ocean City Council budget workshop Wednesday, Feb. 20.

OCEAN CITY — An increase in the city's debt service payments for 2013 was the largest contributor to this year’s budget increase of about $2.24 million, according to city director of finance Frank Donato.

On Thursday, Feb. 21, Donato presented the second budget workshop to Ocean City Council, this one focusing on expenditures.

“Some of the increase of this budget, the fact that it’s up $2.2 million, has to do with expenses and some offsetting revenue,” Donato said.

He said that the debt service increase of $1.306 million “is much greater than what our debt service would normally be.”

A $9.9 million bond sale, undertaken by the city in early December, resulted in an interest rate of 1.87 percent, but added $782,000 worth of debt to the city’s existing model. The sale was supposed to take place in 2014, but was recommended for 2012 due to potential long-term savings from historically low interest rates.

The total debt service payment for 2013 is $11 million, up from $9.77 million in 2012. This includes $6.9 million in bond principal, $2 million in bond interest, $560,562 in interest on notes and $70,936 in the Green Acres Trust program, as well as $1.45 million in bond anticipation and capital notes.

Each year, the city attempts to keep the debt service increase modest.

“We always shoot to be in that 5-6 percent range,” Donato said.

This year, the increase is triple that, which Donato said is attributable to the bond sale and some emergency spending from Hurricane Sandy. However, he said, this is offset on the revenue side of the budget with a portion of a $1 million premium the city received from the sale, as well as anticipated reimbursements from the Federal Emergency Management Agency.

Salaries and wages are also up $634,000.

Staffing is up four positions to 256 employees in 2013. The police department saw a decrease in its number of sworn officers, from 59 to 58. There were two new administrative positions: a promotion of an IT employee from part time to full time and a requested vacancy in the engineering department, which city administrator Mike Dattilo attributed to the stepped-up capital plan for 2013.

There are also three new positions in the fire department, although one retirement is expected in April.

“Last year the fire chief’s position was not necessarily a budgeted position,” Donato said.  “We’ve since filled the permanent chief’s position.”

The other two positions are an assistant to the chief and one firefighter. Donato said staffing is down from a high in 2003 of 297 full time positions.

Revenue collection operating expenses, pension costs, general liability insurance, engineering operating expenses (due to the coastal engineering firm contract) and unemployment also increased for 2013.

“We have two major pension contributions that we make,” Donato said, which are the Public Employee Retirement System and the Police and Fire Retirement System.

“They’re bills that we get handed from the state, we don’t really have a say in them,” he said.

The increase for 2013 is 3.7 percent from $4 million to $4.2 million.

Decreases in spending can be seen in workers’ compensation insurance, all other departmental operating expenses, citywide expenses, utilities, the capital improvement fund, trash and recycling, the library appropriation and health insurance.

“We switched off the state health benefits plan to a private plan,” Donato said of the decrease to health insurance.

Before becoming part of the state plan, often called SHBP, in 2009, the city funded its own insurance plan.

“The city made a decision in 2009 to go the state health benefits plan and that really saved a substantial amount of money,” Donato said. “That switch served us well for a couple years.”

This year, the city received a favorable rate from AmeriHealth and BeneCard, which, coverage-wise, are pretty much the same as the SHBP, he said. The new cost for health insurance for the city is $6.125 million, down 7 percent from $6.597 million in 2012.

Donato said the city was looking at a 10 percent increase to the SHBP in 2013.

The next step of the budget process is for City Council to review the mayor’s proposed budget and make changes.

“The ball’s in council’s court, so to speak,” Donato said. “Eventually, what we would like to do is work towards an introduced budget.”

He said that over the last few years, it has been the city’s goal to introduce a budget by the second meeting of March, and have a vote for adoption at the end of April. 

RELATED STORY: Drop in ratable base means 2.96-cent tax increase for Ocean City