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Ocean City

Resort tax rate remains stable

(May 8, 2015) Barring some sort of major upset, Ocean City’s 2016 fiscal year budget will pass its final reading in two weeks without any major changes from what was introduced.

The council voted six-to-one this week to approve the budget on first reading. The move was considerably different from the past several years, when at least a few budget issues have been hotly contested.

Even the single nay-voter, Councilman Matt James, said he “thought that David [City Manager David Recor] and the rest of the staff did a great job of keeping the budget status-quo.”

However, James said after the meeting, he is still hesitant to go forward with a budget that puts off, but does not address, some pervasive issues with the city’s spending.

“Every voter I’ve spoken with has made a point to ask why taxes would need to be increased,” James said. “There are a lot of people who look at the budget and find there are places where we can cut.”

City taxes will not be going up by a great margin – only about three-quarters of a cent, from 47.04 cents per $100 of property value currently, to 47.8 in the coming budget year.

This rate maintains a constant yield, meaning the city will pull in the same amount of money in property taxes from year to year. The slight rate hike next year will compensate for a drop in the overall assessed value of city real estate, with the total value of the entire town standing around $8.39 billion.

However, each year, the city seems to have less and less available of what could be called discretionary spending. During this year’s budget sessions, the council had around $1.5 million in surplus revenues to allocate to ongoing capital projects and improvements.

But this is a relatively slim margin compared to the overall $78.3 million that makes up the city’s general fund budget. These monies, moreover, go

toward covering ongoing operating costs, and don’t cut into the $31 million list of non-status quo items that Recor has identified as being needed over the next three years.

The idea that taxes would need to be raised, even if only by a bit, in order to tread water does not sit well with some, including James.

“There’s a tendency among some of the people [on the council] to say ‘we have to keep taxes at this amount or we’re going to cut services,’” James said. “We’re going to have to start charging for trash pickup – that’s the first thing they think of. But that’s kind of a misdirection, because, of course, everyone wants their trash picked up.”

Rather, James said, moving forward will require work on the city’s payroll. Most of the city’s financial gains for the 2016 budget have gone toward increased personnel expenses, because of the two percent cost-of-living adjustment (COLA) slated to be granted to employees in the coming fiscal year.

“I’m not against raises, but we definitely have a great expense in payroll and benefits,” James said. “It’s hard to put abstractly … but I would rather see fewer, more qualified people. If you have someone who’s able to do more, they should earn more.”

Like many government entities, the Town of Ocean City has historically given out raises as either across-the-board COLAs, or as step-scale increases granted based on tenure. Unless a job is re-classified to a higher pay grade, merit raises are uncommon.

“Say I’m hiring two houseman positions,” said James, whose family runs the Carousel Hotel Group. “If one employee cleans more rooms than the other, I’m going to give the more effective person a raise and cut back the hours of the less effective person. If you have someone who’s more productive, it’s worth paying them more.”

“The reason for using COLAs, typically, is to retain employees who might go elsewhere,” James said. “But I don’t think Ocean City has a retention problem with its employees.”

Notably, the city’s comprehensive salary and benefits study, commissioned last year from Management Advisory Group International

Inc., has not yet been made public despite the impending salary scale adjustment.

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