(Nov. 13, 2020) After the outstanding response to its primary residence incentive pilot program, Ocean City officials have agreed to allot an additional $25,000 to fund it for the remainder of the fiscal year.
The program had been several years in the making, as the City Council wanted to offer an incentive to draw primary residents to the resort, where it costs more to build as compared to neighboring vicinities.
The primary residence incentive program (PRIP) offers two incentives: a building permit fee waiver of up to $7,500 for new or substantially improved residences, and a real property tax rebate of up to $2,500 over a period of five years for new primary residents.
Part of the pilot program’s approval included a look-back period, which allowed applicants from the previous fiscal year, July 1, 2019 to June 30, 2020, to be eligible.
Planning and Community Development Director Bill Neville said since the program’s launch in July, nine applications had been approved and the annual budgeted amount of $50,000 had been depleted.
Meanwhile, “In the intervening time we have received a number of requests,” Neville said.
This meant Neville would need an additional $25,000 to continue approving applicants in the current fiscal year. Otherwise, those requests would be put on hold until the next fiscal year.
Neville also clarified that the program was not funded through taxpayer dollars.
“Our budget manager has identified that when we’re talking about the building permit fees as a credit or as a rebate we’re really only talking about money that has been paid by an applicant or would be paid,” Neville said.
The same holds true for the tax rebate, as it’s a reimbursement of property tax the individual applicant has paid to the county.
An application for the tax rebate is only approved once the city confirms that the builder has paid his or her property tax with the county, Neville said.
He also responded to criticism over the lack of advertising, stating that the combination of press coverage and word of mouth made it unnecessary, as evidenced by the number of applications.
He also reiterated that the program is in its trial run, and if it proves to be a success, then advertising beyond the region might be conducted.
“Just looking at this, I would say the word is definitely out,” Council President Matt James said.
Councilman Tony DeLuca moved to approve the request, and asked Neville if anyone had been denied because of low funds.
“Not because of funds,” Neville said. “That’s why we came to you.”
“Good, that’s what I want to hear,” DeLuca said. “That’s [request more funds] what you need to do again after we approve this $25,000. If you do [run out of funds] you need to come back to us again so we move it to $100,000.”
Councilman Mark Paddack asked about fraud protection and whether an applicant had to sign an affidavit confirming his or her commitment to living in Ocean City.
“Yes, that’s one of the required documents that has to be signed, notarized and submitted with the application before it can be approved,” Neville said.
Additionally, Neville said he and his staff would be reevaluating the tax rebate annually to see if the applicant remained eligible for the reimbursement.
Furthermore, Neville said his staff would check to see if the property owner applied for a rental license and is renting the space. If so, he or she forfeits eligibility in the program and the incentives would be revoked and a refund to the city required.
Neville acknowledged that the enforcement aspect of the program had not been developed quite yet, leading Paddack to encourage Neville to resolve that issue quickly.
There was some confusion over who qualified for the program.
“You said this is for new homeowners, but this could be someone who is currently a homeowner and buys a new home or builds a new home too,” Gehrig said.
This was based on the “substantially improve a property” stipulation of the program.
Neville used the example of a seasonal homeowner who is improving a piece of property to convert it to a primary residence.
However, Gehrig wanted to clarify if an existing permanent resident qualified for the program.
James gave the example of a primary resident who owns a townhome, sells it and then builds a property on a vacant lot, “Yes [that qualifies], one of these line items is that exact condition,” Neville said.
“You just said if I wanted to improve my home by more than 50 percent, I wouldn’t qualify for the impact fee [waiver],” Councilman Peter Buas said.
Neville said he did not believe that would qualify because it was a stationary improvement, but needed more time to solve that question.
Paddack said the council had approved that condition in earlier conversations, but DeLuca countered if it had, it had done so erroneously, as the intent of the program was to attract new primary residents.
“I’ll let you know if we had any of those go through or got denied,” Neville said.