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Ocean City

Twisting of tax numbers by council politics still irks city staff

(Aug. 9, 2013) Although City Manager David Recor ended up referring to the exchange as “disruptive and embarrassing” by the close of Monday night’s meeting, the mayor and City Council’s most recent exercise in debating facts would probably best be described as entirely speculative.

As they often do, the resort’s elected officials wasted no time this week attaching their own spin to the city’s revenue figures, whose significance has become central to the continuing political rivalry in City Hall.

“It seems that any time we try to present information, it becomes a debate,” Recor said. “It’s not a debate … this is good information.”

City Budget Manager Jennie Knapp gave the council a run-down of the year-end figures for the “other taxes” budget category, which was criticized recently by local landlord and frequent council critic Tony Christ as being over-estimated.

Although the city will not be realizing as much of a revenue boost for the 2012-2013 fiscal year as it has in the past, Knapp found, the additional money will still exceed projections.

Although the vast majority of the resort’s tax revenue comes from property taxes, it also receives a share of a number of other sales and use taxes that are collected by the county or state and partially re-appropriated to municipalities.

Foremost amongst these is the room tax, which brought the city $2,606,936 for June 2013, a mere $21,354 percent boost over the $2,585,582 garnered in the same month last year. That figure, however, was a whopping 14 percent boost – more than $350,000 – over the $2,256,495 from June 2011.

“The 2012 season turned out to be exceptional for revenue,” Knapp said. “We’re not seeing the same gains as we did last year, but we’re still seeing an increase.”

When combined with other tax-related non-property income, such as casino profit shares and highway user fees, the city’s “other tax” total will come out roughly $1 million higher for the 2012-2013 fiscal year than the budgeted number of $14.5 million.

June 2013 ended a streak of decreases for the resort’s room tax, which had been down every month since last October. August and September of last year were up considerably over the year prior, however, due in part to the fiscal damage done by the Hurricane Irene evacuation in August 2011.

Because the fiscal year runs from July to June, the 2012-2013 fiscal year room tax will still see a 2.74 percent increase over the prior fiscal year, despite having faltered in the off-season.

But after Council President Lloyd Martin commented that the numbers represented a “steady flow” of progress, Councilman Brent Ashley posited a less rosy picture.

“How would you explain the fact that the population count is down, but the room tax is up? Does that mean we’re charging more?” Ashley asked.

“If the hotel/motel association [the Ocean City Hotel-Motel-Restaurant Association] says that our average rate has increased five or six dollars this year … or if some condominiums that used to rent by the week or month and are now renting by the day and paying room tax because of it, that would also increase your room tax.”

“I don’t know that there’s a definitive answer to how many people are here,” Knapp replied.

“What I’m saying is that you’re talking about an economic [statistic], not necessarily a visitation statistic,” Ashley said.

“Well, ‘Mr. Negative’ had the negative side, so I’m going to have the positive side,” Mayor Rick Meehan countered.

“There’s a big difference between being negative and telling the truth,” Ashley retorted.

Both, however, pointed to anecdotal evidence or limited samples in order to make their respective points.

“I was in a meeting … where the comment [by the HMRA] was that they think their members have increased rates on weekends only,” Meehan said. “I was speaking with another operator … who said his occupancy was up, his room-nights were up, and his rates were actually down.”

Meehan also said he had received information from Coldwell Banker Rentals, the resort’s largest rental broker, indicating that condominium occupancy was down from 2012, but still higher than 2011, likely due to foul weather discouraging last-minute bookings.

“The businesses that offer what the public wants and live up to the expectations of the visitors are doing well,” Meehan asserted. “Those that aren’t, and that only rely on the overflow and haven’t kept up … maybe aren’t. That’s economics, guys.”

“I don’t care how you sell it … but it’s not there,” Ashley said. “You can take a walk with me down the Boardwalk and talk to everyone who is hurting.”

“These [room tax numbers] are reflective of the fact that the cost of people coming here and the expense of coming here is up,” said Councilwoman Margaret Pillas. “I have to respectfully disagree with you, mayor.”

“I knew you would,” Meehan quipped.

Actual data from June’s Smith Travel Report, which collects and separates data from franchise hotels, could be used to support either side. Occupancy during weekdays was down 3.8 percent from June of last year, but up 0.8 percent on weekends. Conversely, weekday rates were down 0.3 percent, but up 4.6 percent on weekends.

This led to a 4.0 percent drop in revenue per available room – occupied or not – during weekdays, but a 5.4 percent boost on weekends. Overall, the city’s average daily room rate of $175.88 continued to far outstrip its competitors, with the next highest of what Smith Travel considers Ocean City’s competitor resorts being Virginia Beach at $144.91.

Ashley’s theory about condominium registration also may hold some water. The town requires any condominium unit owner offering vacation rentals to apply for a license that tracks noise violations. The license fee also goes on the books as room tax paid.

According to the city’s license inspector, Michael Sherman, this number rises by roughly 100 to 150 licenses per year, currently standing at 8,253 for 2013 versus roughly 7,400 on the books in 2005. This is largely because of Sherman’s own efforts in scouring online listings for units that do not check out with his own license registry.

“I’m constantly checking all the Realtors’ websites, Craigslist, and so on,” Sherman said.

However, Ashley also pointed to reductions of demoflush estimates, which project the city’s population based on wastewater flows, as indications of reduced visitorship. Such numbers have come under intense discredit recently as being inherently flawed.

As Councilman Dennis Dare again pointed out this week, the installation of water-saving appliances and fixtures since the 1970s, when demoflush methods were first developed, has likely caused an artificial decrease in the estimates. Recent reductions in recirculating wastewater at the city’s sewage treatment plant have likely done the same.

But significant decreases over last year, others have said, cannot be explained by the installation of low-flow toilets in the past 12 months.

“I don’t know how you’d justify a drop of 10 or 12 percent,” Pillas said.

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