Rental License Revenue Eyed

OCEAN CITY -- While Ocean City attempts to find ways to expand its revenue base in the face of a looming deficit, one possible source in the form of unpaid rental property licenses could be right under the City Council’s noses.

Ocean City officials are exploring alternative revenues sources to offset millions of dollars of needed capital projects, including an estimated $41 million in road repairs, but the resort could be missing out on a million dollars a year in unpaid rental property licenses.

On Monday, Joe Groves, spokesman for the private sector Citizens For Ocean City group and president of the Delmarva Condominium Managers Association (DCMA), told the Mayor and Council there are thousands of rental properties in the resort for which rental licenses have not been obtained.

Each rental property in Ocean City is required to obtain a rental license from the town each year. The license costs $116, due on May 1 each year, and the permit expires on April 30 of the following year. Groves told the council on Monday an informal audit revealed around 28,000 condos in Ocean City and about 9,000, or a third, had not obtained the requisite license and those figures could be just the tip of the iceberg.

“Those numbers are so skewed it’s unbelievable,” he said. “We did some audits and some people just don’t buy rental licenses. I think we’re missing out on about a million dollars a year.”

Groves suggested town staffers work with the DCMA to get a better handle on the numbers and figure out a way to recoup the losses.

“I think we need to try to do a better job on what we do,” he said. “I’d like to get approval to work with the license people to figure out how to do a better job with this. We’re missing a ton of money.”

Acting City Manager and Mayor Rick Meehan agreed the public-private partnership should be explored in an effort to bring the rental license scofflaws into compliance.

“The association wants to work with the city to educate people on why they need to pay for rental permits,” he said. “Maybe they don’t know. It could be a matter of communication. We need to work to bring more condos into the fold.”

Council President Jim Hall said many disregard the rental permit fee because they are already bombarded with so many other expenses.

“It’s not just the rental permit fees,” he said. “It’s all the other fees combined.”

Meehan, who is also a Realtor, said part of the problem might be the listing agents aren’t making it entirely clear the rental licenses need to be obtained.

“I don’t do rentals, but I do know they present a packet with a rental listing that outlines what they should do,” he said. “It doesn’t require it, but suggests it.”

From a legislative standpoint, enforcing the rental license rule could be a slippery slope, according to City Solicitor Guy Ayres.

“This has come up before,” he said. “The question is, can you regulate the real estate industry already regulated by the state or are you pre-empted from doing that? It gets very muddy and murky.”

Groves said for that reason, approaching the problem from an educational standpoint rather than a compliance enforcement standpoint could be a better solution.

Councilman Doug Cymek said he had done his own homework on the rental license issue and his suspicions were confirmed.

“Out of curiosity, I checked one building with 145 rental units and only 119 had rental licenses,” he said. “It’s quite a bit of revenue we’re missing.”

“The revenue streams need to be diversified to sustain this town,” he said. “It sounds like a good approach.”