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YEAR IN REVIEW: City’s wallet sees another year of ups and downs

(Dec. 28, 2012) With most of the country in dire financial straits for the fourth consecutive year, Ocean City – like other municipalities – continued to trim expenses and hedge revenues during 2012, while still trying to maintain the resort’s considerable publicly funded amenities.

Finance, however, was already a hot political topic going into 2012. The City Council’s two erstwhile factions continued to show drastic differences in what they believed would create revenues and savings for the city and in what period of time that would happen.

Much of the debate centered around the city’s personnel costs. In the spring of 2011, the council’s then-majority voted to reorganize the employee benefits structure, closing the city’s pension plans to new hires and replacing the retirement compensation system with 401(a) savings accounts. Without new members paying into the pension trusts, the city would have to make increased payments to close the gap, but the result would be the elimination of long-term liability.

In a similar fashion, the council also began the year after having made the contentious vote to incentivize high-deductible health insurance plans and transferrable health savings accounts over higher-premium plans, as well as to cap its contribution to retiree health coverage. How the decisions brokered in that environment will play out has yet to be seen.



April 10: Mayor Rick Meehan, serving at the time as interim city manager, submits a proposed budget for the 2012-2013 fiscal year that largely holds the line on the city’s spending and maintains the cutbacks made in previous budgets as a result of the 2008 recession. However, it is noted that the 2012 re-assessment of property values in the resort has lowered the town’s tax base from around $12 billion to roughly $8.6 billion, a reduction that will be phased in over the next three years. The tax rate was raised to 46.85 cents per $100 of assessed value, versus the 39.5 cents of the previous fiscal cycle.

April 18: After some debate, the council approves a $1,000 cost-of-living bonus to be given to all of the town’s 524 employees for FY13. The move was seen largely as a token of good faith to municipal employees who had borne several cutbacks since 2008. However, the payout did not stop a collective bargaining push by the general employees, nor the active campaigning in the coming fall of the city’s police and firefighters’ unions against the council’s majority faction.

May 7: The council votes – in another 4-3 split – to reduce the tax rate by one cent, to 45.85 cents per $100 of assessed value. The majority submits that the $863,000 revenue reduction is un-needed money that should be returned to the taxpayers. But their opponents contend that the reduction will come from the city’s operating reserve, a move that could affect credit and bond ratings while the average taxpayer would only see $20 off the tax bill.

Aug. 14: Pension actuarial reports from consultant Cavanaugh Macdonald show that the city’s public safety and general employee’s pension funds have a higher funding ratio – the comparison of current assets to projected costs – than last year, with 82.4 percent for the general employee fund and 76.6 percent for the public safety fund. Some concerns are still debated, however, particularly in regards to the accuracy of the fund’s projected investment returns, and an actuarial smoothing process that currently places the value of funds on paper higher than that of their current market value.

Sept. 25: Bolton Partners, the city’s insurance consultant, says the city’s health coverage costs will increase less than expected – around 3.9 percent, as opposed to 8 percent, meaning that expenditures will be $100,000 less than anticipated. The major reason, Bolton says, is that the move to encourage higher deductable plans and HSAs has lowered the overall value of claims employees are making on the plan, causing insurance providers to offer a lower premium rate. The revelation is touted as a victory by the then-majority of council.

Nov. 26: The council votes to move forward with requesting tax differential rights from the state. Such a policy allows residents of sub-jurisdictions of a county, such as cities and municipalities, to pay a lower tax rate than other county residents in instances where the town and the county offer duplicate services. According to Ocean City’s 2007 study, it pays for $13.8 million for county services that it does not receive.

Dec. 4: The city’s final records for the 2012 fiscal year are revealed in its Comprehensive Annual Financial Report. FY12 resulted in a net loss in the general operating reserve, from a value of 20.2 percent of budget at the end of FY11 to 17.5 percent.

However, this is much less than anticipated, meaning the town will be starting on its FY13 expenditures further into the black than expected.

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