Eschews slight drop with constant yield
(May 10, 2019) Ocean City Councilmembers voted along the same lines Monday night that they did three weeks ago to move off the constant yield tax rate and pass a first reading of the $130 million fiscal 2020 budget.
The new tax rate is the same as the previous fiscal year’s levy, $0.4656 per $100 of valuation, but some on the council called that a tax increase, because it marked the first time in many years that the city stray from the constant yield rate.
The slightly lower constant yield of $0.4585 would have generated the same amount of revenue as during fiscal 2019 because of a 1.55 percent increase in assessments. In dollars, the assessable base will increase from $8.8 million to $8.9 million, according to the meeting agenda packet.
The projected fiscal impact of keeping the tax rate the same as the previous fiscal period is $638,464 in additional property tax revenue.
Budget Director Jenny Knapp said the constant yield only requires one hearing, so that number is now set. As for the fiscal 2020 budget, another public hearing and a second vote is scheduled May 20.
According to the meeting packet, the proposed $130.4 million budget includes an $86.2 million general fund. Revenue from real property taxes is $41.8 million or 48.5 percent of the general fund budget.
Also included in the budget is a proposal to raise the room tax from 4.5 percent to 5 percent beginning Jan. 1, and increase that is expected to generate $604,450 in additional revenue.
About $2.74 million in budgeted capital projects included $2.5 million for street paving and $100,000 for storm-drain cleaning.
Additional funded projects were $100,000 toward the Atlantic General Hospital Capital fund, $233,000 to repair the Eagle’s Landing bridge, and the retirement of $498,000 in airport debt.
During a public hearing, former City Councilman Vince Gisriel said Councilman Tony DeLuca was right in his previous assessment that maintaining the local tax rate rather than going with the constant yield amounted to a tax increase.
According to Gisriel, a Feb. 13 staff memo said the town had $6.4 million in reserves over the 15 percent of budget requirement. An April newspaper article suggested the town still had $4.8 million over the requirement by that point, he said.
“You’ve had all this extra money, and I don’t know where and how it’s being spent,” he said.
Another man said the city spends too much money duplicating services also provided by Worcester County, specifically singling out the 911 call center.
The hearing was closed without further comment.
Councilman Matt James, who previously voted against moving off the constant yield, said he would vote against the budget because the new tax rate came about late during budget hearings. He also said the number agreed upon was arbitrary.
“I don’t agree with the route we took at the end of the budget hearings … with the constant rate. I think we were just looking for some extra money, and I think the whole process could’ve been a little bit better if the staff who prepares the budget would’ve known that the intent of the majority of the council was to raise taxes.”
DeLuca, the other previous “no” vote, also said he would stand his ground, citing philosophical differences.
“I do not support the tax increase for nonresident property owners and/or commercial properties,” he said. “I support revenue increases not including any property taxes, i.e. [the] room tax, parking, franchise fees, things like that – I support revenue building, other than taxes.”
Councilman John Gehrig said several expenses rose in the proposed budget, including the new agreement with the International Association of Fire Fighters and the State of Maryland’s mandatory minimum wage increase, the latter of which he compared to being “kicked in the gut.”
“We have increased expenses that are not of our doing,” Gehrig said, adding it’s “irresponsible not to be proactive” in meeting those expenses.
Gehrig said the City Council also wants to raise its reserve fund balance and keep up with a slew of other rising expenses.
“We’re supposed to do that and be like Arthur Fonzarelli, (of the television sitcom “Happy Days”) and hit the jukebox and the music just plays, but we can’t do that – the money just doesn’t come out of the machine that way,” he said.
Councilman Mark Paddack said the increase is small, essentially $638,000 on an $86 million operating budget, and accused DeLuca and James of political pandering.
Paddack said he ran on not raising taxes, but that he “got educated” through the budget process. Like Gehrig, he also invoked the minimum wage hike, which he said the state rammed down the cities throats.
“I don’t want to be like my colleagues in the county and the smaller communities to the west of us, where we have to talk about, respectfully, 18 percent tax increases,” Paddack said.
He added spending additional money on the new fire fighter agreement was “the right thing to do for the right employees at the right time,” and also defended additional money for more storm-drain cleaning.
“I’m going to vote for this because it’s the right thing to do, it’s the prudent thing to do … [and] I am not going to stand for political pandering,” Paddack said.
James immediately took issue with Paddack’s attacks.
“I’m not sure what your problem is with me,” James said. “I was pretty clear that I support taking care of our town … [but] I don’t like the process in which it happened. I don’t like that the last day of the budget process, we went away from [a] constant yield and went to a constant rate. Who’s to say last year’s number was the right number to pick?
“I don’t know what your issue is, but get over it,” he added.
DeLuca, also addressing Paddack, said, “I think it’s interesting that you would say … ‘I ran on not raising taxes, but I did, and I’m sorry.’”
Council President Lloyd Martin said he supported the budget and the rate increase. He said an increase for commercial properties and nonresident taxpayers was fair, invoking the talks of “buying a trash truck for 20 buildings” mentioned as a possibility during budget hearings by Public Works Director Hal Adkins.
“Those costs are coming from these people who may not live here year-round, but they come at a cost and those trucks aren’t getting any cheaper,” he said.
Martin said the City Council needed to plan for the future, also citing the necessity to increase reserves and to plan for the potential of hurricanes that have devastated other coastal communities.
“What we do here in looking at this is proper planning and we need to continue to do this,” he said. “It’s not a huge increase to any one person, but it’s a solid plan to move us into the future. That’s why I’m going to support this.”
Just prior to the vote, Gisriel was allowed one last word, which he pointed at Paddack.
“When you run on the premise that you’re not going to raise taxes and then you’re confronted with what you … perceive is a calamity, you just sharpen the pencil and figure out a way to do it – you don’t go back on your commitment to the people,” he said.
The budget first reading was approved 4-2, with DeLuca and James opposed. Councilman Dennis Dare was not present during the meeting.