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Ocean City, Worcester still at odds over routing of tourism grant

(Nov. 8, 2013) If the rule of thumb for retailers is that it’s never too early to start shopping for Christmas, then the rule of thumb for government is that it’s never too early to start fighting about next year’s budget.

That would be the situation for the coming fiscal season as well, as a number of officials have indicated that Worcester County’s tourism grants to Ocean City will be the issue du jour.

“For 99.9 percent of people, they’d be very happy [with the current arrangement],” said Worcester County Commissioners President Bud Church. “I’m not sure where the city’s discontent with the county comes from, but it’s unfounded.”

To hear the city tell it, however, the county is placing undue restrictions on the city’s tourism dollars in an attempt to piggyback off the resort’s marketing.

“It’s essentially de-valuing our expenditure of $270,000 in advertising,” said Ocean City Mayor Rick Meehan.

The controversy stems from a unique financing arrangement pioneered last fiscal year by the county. Before the 2009-2010 fiscal year, the county gave the city $300,000 for tourism spending. After the economy collapsed and property values – and the county tax base – that number was cut 10 percent to $270,000.

For the 2012-2013 fiscal year, however, the county technically gave the city nothing. Instead, the county earmarked $270,000 of its own tourism dollars for use exclusively by Ocean City – but that money stayed in the county’s accounts. The city tells the county what it wants to buy and the county writes the check

The positive aspect of that is it generates more money overall for tourism promotion. The State of Maryland bases its own county-level tourism funding on a marginally increasing matching formula. The more a county spends of its own money, the more the state contributes to that fund.

According to Worcester’s tourism office, the state’s contribution to the county jumped $73,000 to $169,000 in grants simply because the city’s tourism grant was listed on the county’s books. The city still gets its money, but the county gets more.

“The county’s reasoning was that by doing so, we got additional funds from the State of Maryland for advertising,” said Worcester Chief Administrative Officer Harold Higgins. “It was devised as a mutually beneficial scenario.”

However, the county also placed a further stipulation on the $270,000 earmark, requiring that the county’s own tourism Web site, beachandbeyond.com, be billed alongside the city’s ococean.com site.

Explaining or otherwise denoting the difference between the two sites and their respective sponsors, the city says, is almost impossible to do in short TV spots or radio ads. The county’s stipulation essentially restricts those dollars to being used for print advertising, where it can clearly be shown whose Web site is whose.

“We’re spending $5 million to promote ococean.com,” Meehan said. “We don’t want to be saddled with putting up two Web sites.”

Due to the city’s gripe, the county will be giving the city an additional $300,000 in the current fiscal year that will go straight into the city’s tourism account, with no restriction. The $570,000 combined value of that extra contribution and the earmarked funds held by the county tourism bureau is more than the city has ever gotten in marketing dollars from the county, even during the early-2000s boom years.

Meehan, however, said he is still frustrated by the county’s insistence that part of the money be routed through its own tourism bureau.

“Honestly, I’d rather compensate them for the extra $70,000 they get from the state, and just take $200,000 instead that we can use however we want,” he said.

But many in the county are apparently skeptical that the city’s insistence on not using that specific $270,000 on print advertising isn’t just a means to make waves and exert its fiscal independence from the surrounding jurisdiction.

“I don’t know where his [Meehan’s] argument is,” Church said. “It’s been brought up with the county commissioners, but I honestly don’t’ see it changing.”

“I’m aware that the mayor and the commissioners have gone ‘round about it,” Higgins said. “I know [the city] has an advertising company [MGH Advertising] that they would rather funnel all their money through … and we understand that desire.”

The county’s tourism grant to the city is just one part of the ongoing battle between the two entities over matters of finance. The city has long desired a tax differential agreement with the county, whereby properties within the city limits would pay a lower tax rate to the county than properties elsewhere in Worcester.

City properties should be contributing less to the county, city officials argue, since resort government provides a number of its own services that replace the same services offered by the county. For instance, the city runs its own police and fire services, as well as zoning and building inspection, but still pays a full burden of county property taxes that fund similar county-level services that are only used outside of the city.

According to the city’s most recent study, it pays $17 million in property tax to the county that pays for services resort residents do not need or use. In order to compensate for this, the 2012-2013 fiscal year property tax rate, levied by the county in Ocean City, should be reduced, theoretically, from 77 cents per hundred dollars of assessed value to 68.7 cents. In order to make up the gap, the rate for the rest of the county would have to be boosted to 95.6 cents.

The obvious downside to this proposal is that while the reduction in taxes would benefit most high-value resort properties, which contribute the bulk of tax dollars, it would devastate owners of lower-value property, including single-family homes, elsewhere in the county.

Worcester County has an assessed taxable property value of nearly $15 billion, more than the rest of the Eastern Shore combined, Of that, Ocean City accounts for more than $8.5 billion. By comparison, the rest of the county’s incorporated municipalities – Pocomoke City, Snow Hill, and Berlin – have a combined value of less than $800 million.

In order to satisfy the city, the county offers a hefty volume of grants – roughly $4.3 million this year – to the city. But many City Hall officials, such as Meehan, submit that the county would be better off deferring to the city instead of appeasing it.

“Look at it this way – they’re building a huge new Holiday Inn in West Ocean City,” Meehan said. “The county is getting thousands in permitting fees and thousands more in taxes every year from that. But the people are staying there because they’re coming to Ocean City.”

 

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