OC Property Values Still Higher Than 2007
OCEAN CITY – Ocean City holds a strong financial position, according to this year’s financial report, and City Council members are looking to maintain that status as future capital improvement projects are addressed.
Finance Administrator Martha Bennett Lucey presented Ocean City’s Comprehensive Annual Financial Report for the fiscal year ending June 30, 2011.
Lucey started with the change in assessments from 1981 through 2011. Assessments have declined in the last two years. In 2011, the estimated actual value of taxable property is $10.4 billion, which represents a 2.2-percent decrease from 2010.
“We have gone through these ups and downs previous to this but historically this is a higher percentage than we saw in the 1990’s,” she said. “However, even with those differences the overall assessment of property is still $2 billion above of what they were in 2007.”
Every three years Ocean City is reassessed by the State Department of Assessments and Taxation to determine current property values, and preliminary estimates confirm values are continuing to decline. The exact decrease should be known next month.
Lucey demonstrated where the general fund money came from this past fiscal year -- 57 percent funded by property tax, 18 percent from other taxes that includes room tax, 17 percent from charges for services, 4 percent from capital and operating grants and contributions and 4 percent of other revenues including investment earnings.
“One thing I wanted to point out for this year was in the general fund property taxes were down this year,” Lucey said.
Due to declining property values, property taxes brought in $42.6 million in 2011, which was a 2.8-percent decline from 2010, but other taxes, including room tax, increased 5.2 percent.
Lucey also presented overlapping tax rates for Ocean City properties dating as far back as 1978 when over 45 percent of taxes a resident paid were distributed to Ocean City.
“As time progressed over the years, Ocean City has lowered their tax rate,” she said. “The percentage of the bill that is now contributed to Ocean City is less than 33 percent. The county portion has increased dramatically as well as the state portion.”
Next Lucey explained how the town’s money is spent in governmental activity. Public safety is the largest portion of expenditures, but also produces one of the largest revenues.
“Any operation that is 24 hours a day, seven days a week naturally costs more,” she said.
Governmental fund expenditures display how expenses have gone down for some divisions, including sanitation and waste removal costs have decreased 12 percent since the town’s waste is now transported for incineration.
“But we have increased our budget for economic development in tourism by almost 7 percent,” Lucey said, adding that Gov. Martin O’Malley and Comptroller Peter Franchot have applauded Ocean City on its commitment to tourism.
According to Lucey’s presentation, expenses dedicated to economic development in tourism increased 6.9 percent from 2010. The town has increased its advertising budget and has had wide media exposure by utilizing social media and apps, also by continuing website and email blasts. The advertising budget was increased from $1.3 million to $5.1 million from 2002 to 2011.
“There is a lot of energy from the city delved into this and our employees spending time with this but also our commitment in the budget for this,” she said.
In 2011, Ocean City received almost $45,000 over what was budgeted in revenues, and expenses including encumbrances were $2.1 million below budget. The net change in the general fund increased $4.8 million, which has raised the fund balance 20.2 percent and a high of $16 million.
“If you look at comparisons of what’s used by the rating agencies to look at fund balances, a strong fund balance is above 8 percent so at 20.2 this is very good for the city and very positive in this economy,” Lucey said.
Where Ocean City stands as of June 30, 2011 is about $245 million in assets including $68 million in cash and current assets. The town’s largest investment is in capitalized assets. Bonds and debts equal about $85 million plus other payments owed equal a total liability of around $101 million. City-wide the net assets equal close to $145 million.
“We have a rapid debt retirement,” Lucey said. “Even if we acted this over time, and even with the projects we anticipated, our level will probably be equal or less than what it is in 2012 because we have a rapid debt retirement over the next 20 years.”
The last item Lucey presented was Ocean City’s pension funds that are reviewed on an annual basis. Employees contribute one third of the costs of the pension funds and the town has funded 100 percent of their contribution since the funds were established in 1972. Last year both plans increased in the amount funded. General employees increased to 79 percent and public safety employees increased to almost 73 percent.
Councilman Brent Ashley expressed concern over the bonds and debts reported, as he presented the case that Ocean City’s list of capital improvement projects continue to grow.
“Those are decisions that we are going to have to face in the years ahead,” Lucey agreed. “We have improved our financial position … in a recession I think it bodes well for this town in comparison to other communities.”
Council President Jim Hall was happy to see from a cash basis of the general fund the town is in good shape but he added that he has heard property assessments are going to drop by at least $3 million in their next evaluation.
“That is why I am happy we are in good financial shape, but over the next couple years we are really going to have to be careful if those assessments do fall … every decision we make at budget time is going to be critical,” he said. “I don’t think the taxpayers can take one more penny or will take one more penny so we will just have to do what we have been doing over the last couple of years and try to be conservative.”
Joe Hall was disappointed that there was not a component involving future capital improvement projects were not included in the financial report.
“We need to know the big number we are looking at … over the next 10 years I see over $100 million easy,” he said. “We need to step up.”
Mayor/Acting City Manager Rick Meehan said that future discussions are scheduled for capital improvement projects, the first being road improvements to be discussed next week.