OC pitches plan for increased grant funds in lieu of tax differential

(March 6, 2015) No one was surprised when Ocean City Mayor Rick Meehan asked for a tax differential as the resort’s annual budget request, but several heads turned when he produced a prototype memorandum of understanding between the city and county detailing what an alternative to a differential might look like.

The MOU was hinted at near the bottom of a Dec. 3, 2014 letter signed by Meehan requesting a tax differential hearing and made public as part of the commissioner’s packet before the regular meeting last Tuesday.

Historically, Worcester County provides to Ocean City, in the form of an unrestricted grant, reimbursement for services determined to be duplicates of county-provided services.

Ocean City would like to see its grant increased. According to a study conducted in 2013 at the behest of Ocean City by the Municipal and Financial Services Group, there is a $17 million disparity in the tax rates.

Ocean City claims the county duplicates the following services: Development Review and Planning, Sheriff, Emergency Services, Fire Marshal, Public Works (maintenance, roads, boat landings) Environmental, Recreation, Parks and Tourism.

In real terms, to cover the perceived shortfall, Ocean City’s tax rate would be cut $.083 per $100 to $.687 while the remainder of the county’s rate would rise $.186 to $.956 per $100 starting July 1, 2015.

County Administrator Harold Higgins, responding to Meehan’s letter in December, countered Ocean City’s request by declaring it his opinion Ocean City residents benefit from all of the services provided by Worcester County except for the Fire Marshal and the Department of Development Review and Permitting.

Those services have an estimated cost of about $2.16 million. County staff, Higgins said, calculated the cost of a tax setoff to Ocean City between $2.16 million and $3.3 million, with the resort being granted almost $3 million in fiscal 2015.

“I think of this as a new day,” Meehan said during Tuesday’s meeting, “I’m here to resolve differences and improve our working relationship.”

According to Meehan, Ocean City gets back about 4.5 percent of its taxes back from the county, while Berlin gets back almost 22 percent, Pocomoke City sees a 24.3 percent return and Snow Hill gets 71 percent back. Ocean City, according to both town and county officials, represents 60 percent of the assessable property tax base in Worcester County.

“I want to recognize the disparity but support the other communities,” Meehan said, “Do we expect a check for $17.1 million? No.”

The real solution, Meehan said, would come from his proposed memorandum of understanding.

The MOU “establishes a funding formula and predictable methodology for determining annual county grant funding paid to the Town of Ocean City in lieu of further discussion regarding tax differential and/or property tax set-offs during the term of this agreement.”

Essentially, the city is seeking three-percent bumps to its grants per year for the next five years, increasing the percentage of return from 4.56 percent to 7.56 percent during fiscal 2016. It would continue in this fashion until 2020 and a return of 19.56 percent.

In dollars, the first year under the agreement would boost the resort’s grant to about $5.1 million. During the final year, the grant amount would be almost $13.2 million.

The county would also continue funding for Ocean City’s ambulance and fire service.

At the end of this agreement, renegotiation would occur. The commissioners accepted the proposal for review, and are likely to include discussion of this plan during Ocean City’s budget hearing later this spring.

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