OCEAN CITY – After months of deliberation, heated at times, the Mayor and City Council approved the resort government’s budget on its second and final reading on Monday.
Developing and finalizing the proposed Operating Budget for fiscal year 2014 has been a strenuous process that at times pitted property owners speaking out in opposition to the Mayor and Council’s tactics to balance spending and revenues.
During City Manager David Recor’s initial budget review, original department funding requests were reduced by more than $4.2 million including $3 million in personnel and operating expenditures plus an additional $1.2 million in proposed new vehicle purchases.
Following the presentation of the Preliminary Operating Budget on April 9, the following changes were made to further reduce the budget gap — several additional paid parking locations were established, weekend rates at the Inlet Parking Lot were increased, ambulance fees were increased, the third shift bus service was eliminated during the winter months and operating hours at the skate park were reduced.
Also, projected surplus monies in the destination advertising budget were identified to offset the rising costs of in‐kind services provided to the growing number of large private/special events held in Ocean City. Plus, city staff further reduced other department expenditures by more than $250,000.
These reductions totaled about $1.2 million, which is equal to $.0144 off the preliminary tax rate. The final reductions to the original department budget requests total nearly $5.5 million.
The fiscal year 2014 projected revenue for property taxes is based on the constant yield tax rate of $0.462 plus a penny per $100 of assessed valuation of real property. The penny added derived from a decision the former council made last year to reduce the proposed tax rate by a penny that ended up saving the average taxpayer about $20.
The additional penny above constant yield will generate an additional $850,500 in property tax revenue for FY14. In addition, projected revenue from corporate and personal property is based on a rate of $1.29 per $100 of assessed valuation.
During the budget’s first reading, the council voted to reinstate full funding for the Ocean Bowl Skate Park, after many community members turned out to voice concerns over the parks hours being reduced.
The skate park’s annual pass revenue was increased to reflect a little over $6,000 in the budget, which was the projected estimate for lost revenue due to the reduction of skateboard park hours. Also, estimated recreation donations had been increased in the budget to reflect a $1,000 donation pledged from the Elks Club toward operations of the Ocean Bowl. In the end, close to $14,000 was taken from fund balance to offset the additional labor expenses at the skate park.
Councilman Dennis Dare became concerned the funds taken from fund balance to fully fund the skate park will contradict the Mayor and City Council’s goal to keep the reserve at a healthy 15 percent. He reminded the council of a motion and vote that was taken during a budget session to keep the fund balance at that level.
“Fund balance has really two functions. One, it gives us a cash flow capability. We collect our bulk of our revenue at the end of the season, but we spend the bulk of our expenses going into the season, so we need the fund balance for the operating expenses. The second main function of it is for emergencies … and I think the 15 percent is something we really need to hold to, keep it for emergencies and not to balance the budget as we make last-minute changes,” he said. “We have spent months agonizing over the budget in these meetings and in the 11th hour to make changes if there are going to be any, like funding for the skate park, it should come out of capital funding like we agreed to back in April.”
Budget Manager Jennie Knapp offered the Mayor and City Council an alternative to fund the skate park besides from the fund balance or capital improvement funding as it was recently learned the town’s general services director will be retiring.
“I have an alternative amendment that would reduce the funding for the position of the general services director upon his retirement and that would also reduce the funding that is necessary in solid waste, transportation, and charter for services,” she pointed out.
Councilman Joe Mitrecic suggested entering the funding for the skate park during Budget Amendment #1 that usually takes place around February.
“At that time, we will see where we are financially and at that point have that money add the skate park,” he said.
Mayor Rick Meehan advised against waiting to add the funding for the skate park to the budget at a later time as that was not the promise made to the public.
“We told them it would remain in the budget, and I would hate not to follow up what was said that night,” he said.
Mitrecic moved to amend his motion to approve the budget as presented to not take the funding for the skate park out of fund balance but to take it out of paving, which is scheduled to being next season. The council will then have Budget Amendment #1 and the funding can be reinstated into paving.
Councilman Brent Ashley became concerned with fund balance being set at 15 percent, as he pointed out that it’s the lowest level it has been in years. In 2012, the fund balance was at 17.5 percent and in 2011 it was at 20.2 percent.
“I compare things in everyday terms,” he said. “We have the same income, less savings, and further and further debt.”
Council President Lloyd Martin asserted Ashley was part of the former council majority who voted to give employee bonuses as well as take a penny off the tax rate last minute in the budget process.
“What that did was it made us take more money out of fund balance to pave the roads,” Martin said. “So for a person that is concerned about the fund balance … you voted to take money out of fund balance to give bonuses to the employees, so you can’t have it both ways.”
The council voted to approve the FY14 budget in its second and final reading as amended with a vote of 5-2 with Ashley and Pillas in opposition.