OC council introduces $69.7M budget with tax increase

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Officials believe drop in property values is over

OC council introduces $69.7M budget with tax increase OC council introduces $69.7M budget with tax increase

OCEAN CITY — City Council on Thursday, March 27, unanimously introduced a $69.7 million budget that will include a tax rate increase of 1.46 cents for every $100 of assessed value.

If the budget is approved as introduced, the 40.06-cent tax rate per $100 of assessed value would mean the owner of a house assessed at $580,000, the average for the town, would pay $2,323.48 in local taxes this year, which does not include county and school taxes.

A public hearing on the budget and final vote is planned for 7 p.m. April 24.

The budget as introduced is down about $3 million compared to what was presented by Mayor Jay Gillian in February.

A decline in the overall valuation of the city has contributed to the tax rate hike, according to Frank Donato, the city director of finance. He said property values dropped in Ocean City over the past three years, which means the city needs a higher tax rate to raise the same amount of money to support the budget.

This year’s proposed tax rate is close to 3.75 percent more than last year. According to Donato, without last year’s decrease in assessed property values of $14.4 million, the tax rate increase would be slightly under a penny, under the proposed budget.

That’s a considerable drop in values, but far less than what Ocean City lost the two previous years, when two compliance plans and a flood of tax appeals stripped about $800 million from the total assessed value of the town each year. In 2013, Hurricane Sandy contributed to the loss in the ratable base.

City officials say a series of compliance plans have brought Ocean City’s assessed value closer to the real market value. There were about 800 tax appeals in 2011 and ’12, and 200 last year. This year, there have been 30 or 35, administration officials told City Council, although that number could change because the deadline has not yet passed.

After Thursday’s meeting, city business administrator Mike Dattilo said he believes the property values have turned a corner, and this year the city is likely to see an increase in overall value, driven by both new construction and by increased housing values.

The city added $25,000 to the budget as introduced to cover overtime costs from several snowstorms this year.

Other budget changes Thursday included:

An added $155,000 to the capital improvement fund to provide for the 5 percent down payment required by law on the almost $14.4 million worth of capital improvement the 2014 capital plan calls for; and

A reduction of the employer share for pensions by $134,090 (Public Employees Retirement Systems) and $182,684 (Police and Fire Retirement System).

Donato wrote in a memo to council prior to the meeting that the total of all the changes outlined represent a net decrease of $141,191 to the amount to be raised by taxation from the figures that were given out in February.

“Like I stated in February, there are two categories of budgetary items which would change to a great degree between then and the introduction of the budget, but would have little to no effect on the amount to be raised by taxation,” he wrote. “Those categories are grants and capital interfunds.”

Under appropriations, state and federal grants changed from $331,330 in the mayor’s budget to $439,344 in the budget as introduced. Under revenues, local revenues decreased from $17.97 million in the mayor’s budget to $15.07 million in the budget up for introduction. Donato said the budget presented in February kept those items at the previous year’s levels to provide a better comparison from year to year.

“The grants and capital components listed above have virtually no effect on the tax levy, but represent a significant overall decrease to the bottom line of the budget compared to 2013, as I indicated they would in the budget workshops,” he wrote.

Although the budget was trimmed from the original proposal, some on City Council wanted the administration to go further. Councilman Pete Guinosso wants to see more of the city’s operations break even. He said there was still $700,000 in what he described as red ink in the budget, and asked if the administration had taken any steps to eliminate it.

Dattilo rejected the description of city spending as being in the red, saying that the money spent helps make Ocean City a more attractive place to live and to visit.

“You could put it under the broad term of quality of life,” Dattilo said.

City operations, including the Ocean City Community Center and the money spent on offerings such as the Ocean City Pops, may not bring money into the city, or even cover their own expenses, but Dattilo argued that they are still important to residents.

He used the example of the Aquatic and Fitness Center, which he operated before being tapped as the city’s top executive. The decisions made for that facility are different than those at a for-profit fitness club, he said, which allows Ocean City to offer more to the patrons.

One area that does break even is Ocean City’s municipal golf course, Guinosso pointed out, saying it is one of the few municipal golf courses in which fees cover expenses.

One reason for that, Donato said, is the course is on the former city dump, “which we’ve owned forever.” Other municipal courses are still paying debt service on the land, he said.

The city’s contribution to the Ocean City Pops was also raised as an issue at the meeting. Council members said they’d like to see more done to market the orchestra with the idea of covering more of the cost with increased attendance.

According to Dattilo, city representatives were meeting with the nonprofit Friends of the Ocean City Pops and orchestra director William Scheible the same night as the council meeting in order to discuss funding and marketing.

Councilman Michael DeVlieger said he supports spending on the Pops, but that he would like to see the Friends of the Pops also increase its contribution if the city increases its marketing spending.

This year’s tax levy proposal is $432,363 below the state’s 2 percent cap on tax increases, when all exceptions are taken into account.

There is also a sate-imposed cap on the total budget increase. At Thursday’s meeting, council approved establishing a cap bank, which clears the way for the city to increase spending over that cap in the future. That could be important, Donato said, depending on what the state allows under cost of living allowances in the future, especially considering contractual salary increases and potential increases in health coverage costs.

Council members were assured the cap bank did not obligate the city to spend more in future years, but merely allowed for the possibility.

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