City Council Shaves Penny Off Proposed Tax Rate

OCEAN CITY – The Mayor and City Council cast their final vote on Monday to adopt the Fiscal Year 2013 budget, including a one-cent decrease from the proposed property tax rate, which will save the average taxpayer $20 but cost the town $863,000.

A couple of weeks ago, the budget reached first reading with a tax rate set at the constant yield rate of 0.4685 per $100 of assessed valuation of real property.

Councilman Joe Hall made a motion to amend the budget and reduce the tax rate by one penny to provide relief to the taxpayers of Ocean City. The reduction in the tax rate will require about $863,000 to be taken from the fund balance to fund the budget rather than with tax revenue.

At that time, Budget Manager Jennie Knapp explained that at the end of last fiscal year, June 30, 2011, the fund balance was about $15 million. In the current fiscal year, $2.2 million in anticipated costs were reduced from the fund balance, such as an increase in the advertising budget and legal fees, funding for the new Art League of Ocean City building, 4th Street parking lot construction, and street paving, which leaves the fund balance at $12.8 million.

The original proposal for 2013 was to take an additional $1,885,799 out of the fund balance, which would bring it to $11 million. The amendment would reduce the fund balance to $10.1 million and will leave the account within the 12 percent policy, which is $9.2 million.

The median assessment for owner-occupied properties in Ocean City after the Homestead Tax Credit is $199,828. Using that figure, the average taxpayers tax bill would be $936 set at the constant yield tax rate of $0.4685. If the tax rate is set at one cent less, or $0.4585, the average taxpayer’s bill will be $916, which is a total savings of $20 per year.

This week Councilman Lloyd Martin started out by saying Mayor/Interim City Manager Rick Meehan, along with Knapp and department heads, brought forward a responsible budget

that focused on the town’s list of improvements in infrastructure and created a long-term plan for those projects.

“We didn’t have a whole lot of questions during budget time for this because we saw the right sizing in the budget,” Martin said. “To stay consistent I have to vote against the budget.”

Councilwoman Mary Knight was also in opposition of the amendment and said that in the last couple weeks she has not heard a plan on how the $863,000 would be replenished in the reserve fund.

“One of my constituents stopped me and said we had more discussion about horse manure on the beach then we did on this penny savings … nobody has really called me and told they were excited over the $20 but more people have called me, emailed me, and stopped me and said ‘why are we doing this and why are we depleting our reserve fund’,” Knight said.

Councilman Doug Cymek also voiced his opposition against the one-cent decrease made to the tax rate and believed the town was better off saving the $863,000 in the reserve fund in case of an emergency.

“We got a little wakeup call this week with that storm that could have hit here, and the recent storm we had last year … if we have a major storm, we are going to have some losses,” Cymek said. “I just think we are spending it too quickly.”

Councilwoman Margaret Pillas spoke in favor of the amendment regardless of the amount of money it will save the taxpayer.

“There is nothing wrong with telling the taxpayers that we are doing everything we can, even looking at $20,” Pillas said.

Mayor Rick Meehan took the opportunity to bring a few items to the council’s attention. First, this year the town did not have to make a payment to the Beach Replenishment Fund because the account is at its maximum capacity, but if the town has to make a payment to the fund in the next year it will cost around $450,000.

Second, the first payment on the bond issuance the town just passed a few weeks ago is coming up, which will be an expenditure from the general fund of $550,000 that was not figured into this year’s budget, only the interest was.

Between those two payments, plus the $863,000 decrease in the reserve fund due to the one-cent decrease in this year’s tax rate, the town will be at least $1.8 million short moving forward.

“Also, I would like to point out that our incoming city manager, Mr. Recor, did present to his commission a constant yield neutral budget so maybe that is an indication that great minds think alike,” the mayor said.

Recor is Ocean City’s new city manager and hails from Fort Pierce, Fla. He will begin his career in the resort next month.

The budget was passed in its final reading with a 4-3 vote with Joe Hall, Ashley, Jim Hall, and Pillas in favor and Cymek, Knight, and Martin opposed.