Commissioners silent on OC’s tax deal memo

Commissioners silent on OC’s tax deal memo

(March 20, 2015) The assumption, following the Worcester County Commissioners’ discussion Tuesday of Ocean City government’s request for more money, is that county and resort officials will meet at some point during the budget process to discuss their widely differing views on how much money should be awarded.

That is only an assumption, too, since the commissioners took no action following their discussion of the memorandum of understanding presented last month by Mayor Rick Meehan that outlined how those cash grants would work.

At issue is that Ocean City property owners pay taxes to the county for services they don’t receive because Ocean City government provides them locally. The sticking point, however, is the great disparity between what Ocean City says is the value of those duplicate services and the county’s calculation.

Ocean City’s put the number at $17 million annually and Worcester County’s most generous estimate has been $3 million, but lately that number has been revised downward.

For years, Ocean City officials have sought a “tax differential,” which essentially would be a separate and lower county tax rate for resort property owners than what other county residents pay.

Worcester County, however, provides municipalities with unrestricted grants — funds that can be applied wherever the municipality may need them. Ocean City’s 2015 grant was a touch more than $3 million, according to the city.

Seeing that the tax differential idea was gaining no traction, Meehan gave the commissioners an alternative wrapped in a memorandum of understanding that called for an increasing grant amount over a number of years.

Those grants would be based on the ratio of taxes a municipality pays to the county versus the percentage of those taxes returned to the municipality.

Meehan’s memorandum showed that Berlin receives almost 22 percent of its property and income taxes back from the county. Ocean City gets back only 4.56 percent back, according to the city’s calculations.

Under the terms of the memorandum, Ocean City would see a 3 percent increase in that return every year until 2019, when a new rate would be negotiated. This would bring the percentage returned to Ocean City by means of grant funds to almost 20 percent of the amount paid in taxes that year.

If the resort were to get its proposed 2019 share this year it would mean $13.5 million in grants from the county, instead of $3 million.

Meehan’s pitch, however, was challenged by County Administrator Harold Higgins, who in his Feb. 27 response to Ocean City’s proposal said, “County staff has calculated the tax setoff at a range of between $2,156,605 and $3,305,371. In FY15, County grants to the Town of Ocean City totaled $2,961,956. It is therefore my recommendation to continue to issue local grants to the Town of Ocean City in accordance with past practice.”

Procedurally, the county needed to address the issue with a “Statement of Intent,” which it did this past Tuesday.

“With respect to the level of the proposed tax setoff,” Higgins wrote, “we find that of the services referenced in the Town of Ocean City’s differential request, there are only two services which the county does not provide in Ocean City…”

Those services are the fire marshal and Development Review and Permitting at a combined cost of just more than $1.3 million, according to Higgins.

“We find the issuance of grants,” Higgins concludes, “to the Town of Ocean City in the amount of $2,961,956 in FY15 in lieu of a tax differential is a better solution.”

Higgins also drafted a letter for the commissioners that rejected Ocean City’s proposal, but the ensuing debate over its contents resulted in the commissioners’ decision not to send it.

Commissioner Joe Mitrecic of the Ocean City district particularly did not like its tone.

“I was taken aback by the letter, which went on to include a section about the memorandum of understanding that I don’t remember this body acting on. It went farther than I would have liked, and I ask that it not be sent in this form,” he said.

During Mitrecic’s quarterly report to the Ocean City Council the night before, Mayor Rick Meehan also criticized the county’s move..

“[The county’s response] goes on to dispute our claims about tax differential without even having sat down to have the conversation. It’s ludicrous and pompous … for the county administrator to put that in writing that the Mayor and City Council [of Ocean City] are seeking less money,” Meehan said.

Mitrecic had words for Higgins in particular.

“Although I thought the MOU was fair, the letter has already been drafted to deny it, so I’m not sure why we’re even having a discussion. Mr. Higgins, it seems, has made up our minds for us,” he said.

Meehan also objected to the way the letter was written, especially a section that indicated that the mayor and council might be able to argue their case at a scheduled public forum on the county budget.

That portion of the letter, as it turned out, was a legal formality, according to County Attorney Sonny Bloxom, and did not preclude a separate meeting between representatives of the city and county at some earlier date.

That remains a possibility, as Meehan said at Monday’s council meeting that Commissioner President Jim Bunting had promised to meet with the resort officials before the public budget session.

During the commissioner’s meeting on Tuesday, Bunting signaled his intention to follow through on that pledge.

 

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