Budget

City Budget Manager Jennie Knapp said Ocean City's fund reserves should help it outlast the economic damage being caused by the COVID-19 pandemic. 

Years of frugal spending, saving and cost reductions means lots of backup money

(March 27, 2020) Is Ocean City in a good enough financial position to survive the COVID-19 pandemic? The short answer: yes. 

“Of course it depends on how long this continues, but the unassigned fund balance on June 30, 2019 was $21 million,” City Budget Manager Jennie Knapp said.  

Every year, the city collects the difference between the city’s revenue and expenditures and puts it into a savings, or fund balance, account. 

“Our reserve policy is to maintain a minimum of 15 percent of our expenses for something like this [the pandemic],” Knapp said. “We’ve always thought of it as recovery from a hurricane … or another natural disaster. This is going to have a very similar effect on town, in fact it may have a prolonged effect.”

Knapp said there were a variety of factors for the city’s large savings pool. 

“We’ve maintained a very lean staff since we reduced staff in 2008,” Knapp said. “The last time that we had a recession, we cut almost 100 full-time positions, and we have not replaced those positions. We have just absorbed the work with the current staff that we have.” 

She also credited City Engineer Terry McGean for finding and participating in cost-saving energy programs, such as the city’s solar energy contract and LED lighting contract. 

The latter saved Ocean City $385,000, McGean revealed to the mayor and City Council in February. 

“A lot of the departments ... but particularly our main departments have come up with ways to reduce expenses,” Knapp said. 

Knapp also pointed to the city’s budget process, which is stringent. 

“We look at each line item in the budget, and we determine what a typical year is, what are they [departments] asking for and whether or not we put that in,” she said.

With that is the city’s habit of using fund balance to pay for maintenance and capital improvement projects, rather than incorporating those projects into the tax rate.

“We have relied on utilizing any excess funds that may exist in order to continue those projects, so we’ve been very conservative with the projects that we’ve done over the past decade,” Knapp said. 

This combination of frugal spending, reducing costs and good saving habits is what has allowed the city to be in a secure financial position year after year. 

“There’s going to be things that affect the business of the Town of Ocean City,” Knapp said. “The work on the bay bridge for instance — people may make the decision not to come to Ocean City, but to go to a Jersey beach because it’s closer. There are so many factors that affect tourism in Ocean City.”

Accounting for these variables, Knapp said while a pandemic like this hasn’t occurred since the Spanish Flu in 1918 when the resort was in its infancy, the city’s consistent financial habits have prepared it to handle even the unprecedented. 

In the future, Knapp said one way the city could help maintain and build its revenue would be through its advertising budget. 

Knapp explained that when the resort was in recession caused by the 2008 housing crisis, resort leaders were able to mitigate economic fallout by pooling money toward advertising.

“Our tourism was increasing at a time when others were losing ground,” Knapp recalled. “I think that’s very important to continue that effort coming out of this.”

Overall, while the pandemic is hurting the local economy, Ocean City is in a much better position than some of its neighbors and competitors.  

“I would say many municipalities that have strictly tourism-based economies are not in the financial position we are in now,” Knapp said.

Josh covers everything Ocean City government and crime. He graduated from the University of Richmond in 2019 with a B.A. in French and Journalism.

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