(April 4, 2014) City Council heard the first draft of the town’s 2014-2015 fiscal year operating budget this week, with City Manager David Recor’s financial plan hinging on a proposed one cent tax increase above the constant yield rate, as well as a windfall $1.3 million savings from bus fare changes.
These are needed to support another $1 million hike in salary and benefits expenditures, as well as more than $270,000 to support the new “City Watch” Boardwalk surveillance camera system.
Tuesday’s presentation served as a starting point for elected officials’ review and revision of the budget prior to its final passage next month. The Mayor and Council’s first budget hearing was scheduled yesterday afternoon, after press time.
Critically, this week’s proposed budget would raise the city’s property tax rate to 48.04 cents per $100 of assessed value – one penny more than the 47.04-cent rate calculated to bring the town the same real-dollar revenue as the 2013-2014 fiscal cycle.
The total assessed value of the city’s taxable properties fluctuates every year, due to the phase-in of triennial state re-assessments. Thus, every year, the state provides to the city a tax rate – known as the constant yield rate – which has been calculated to bring in the same total dollar value of tax revenue as the previous year.
The city’s tax rate for 2013-2014 was 47.2 cents, but due to a 0.33 percent increase in property value, the town would receive the same $41.9 million in tax revenue for 2014-2015 by charging 47.04 cents.
However, the extra penny above constant yield will give the city an extra $850,000 of taxpayer money to work with, increasing this year’s projected property tax revenues to $42.7 million.
“We are hopeful for more growth in our assessable base, but we all know there are a lot of demands for our financial resources at the moment,” Recor said.
Total expenditures in the proposed budget increased 2.5 percent over the last fiscal year, with expenditures for the general fund increasing 3 percent, Recor noted.
The portion of the city’s government funded by unrestricted and non-specific revenues is referred to as the general fund – comprising $79 million of the $151 million budget. The city also maintains a number of service and enterprise funds, which, as Recor explained, “are driven by user fee revenues and are operated similarly to a commercial business.”
Some of these funds, such as the water and wastewater departments, are entirely self-sustaining and independent of the general fund.
Others – such as the transportation division, or the convention center – operate at a loss and require a substantial contribution from the general fund to stay afloat.
Crucially, the transportation division’s general fund subsidy is being reduced by more than $1.3 million, from over $1.7 million in 2013-2014 to just under $400,000 in the coming fiscal cycle.
This is made possible by a projected $1.47 million gain in bus ridership revenue, which is being anticipated as a result of eliminating the $1-per-boarding option and having all riders purchase the $3 day pass, whether they plan to ride all day or just once.
Although not a “hard” price increase, this would essentially triple the revenue from single-fare riders – but would likely cause some to not ride at all.
The projected revenue increase, from $2.6 million in fares this year to $4.1 in the coming cycle, includes an estimated 25 percent decline in ridership, according to city Budget Manager Jennie Knapp.
However, the city is still taking a considerable risk balancing its budget by estimating such a wide margin – a 56 percent revenue increase in a single year.
But the town will be facing a number of guaranteed operating increases this year, most notably $768,549 in salary increases and an associated $335,423 increase in funding pension and post-retirement insurance benefits.
In 2013, the city inked contracts with the Fraternal Order of Police and International Association of Firefighters that guaranteed incremental raises over the next several years. Employees outside of the public safety unions are receiving roughly similar increases, averaging 2.89 percent in fiscal year 2014-2015 for the 81 percent of city employees who have not yet reached their salary caps.
Further, Recor’s proposal increases the budget for the Ocean City Police Department by $633,745, bringing total police funding to over $19 million, 25 percent of the entire general fund.
The budget also supports the OCPD’s new “City Watch” initiative for monitoring the surveillance cameras purchased last year for the Boardwalk. The city will be hiring three new part-time communications dispatchers and a new full-time communications operator to run the system at a cost of roughly $70,000. Installation costs not covered in this year’s budget add another $200,000.
The OCPD also plans to reclassify eight public safety aides as custody officer positions for the city’s detention facility, at a cost of $32,513, as well as hire an additional four PSAs to perform front desk duties, allowing the four officers there to be re-assigned to patrol, at a cost of $40,701.
The budget also includes $1.87 million for street re-paving and improvement, and another $2.37 million for capital projects not covered by bonded funds, such as bulkhead repairs.