OC Hopes Sunny Summer Will Cure Revenue Woes

OCEAN CITY – City officials hope to see a hot, sunny summer of 2018, not only to help local businesses in the resort, but also to help build the city’s budget surplus for future years. 
A series of rainy weekends in 2017, and – about as bad from a tourism perspective – forecasts of rainy weekends, meant fewer visitors in July and August.
That meant a drop in beach-tag fees and revenue from parking meters and parking lots last summer, City Finance Director Frank Donato told City Council at its most recent meeting, March 8, during a detailed presentation on revenue and spending in the proposed budget for 2018.
Mayor Jay Gillian’s administration has proposed a $79.98 million budget, which would increase spending by about $1 million over last year. City Council’s first vote is set for 7 p.m. March 22 in City Council Chambers on the third floor of City Hall, 861 Asbury Ave. A public hearing and final vote are expected at the April 26 meeting when members of the public can weigh in on the spending plan.
Spending and taxes are up in the budget proposal, which would spend a little over $1 million more than the city did in 2017. Donato said that the budget falls comfortably within state-imposed caps on spending and tax increases.
As proposed, the budget would increase the local purpose tax rate by close to a penny, setting a rate of 45.89 cents per $100 of assessed value, compared to 44.9 cents last year. If council approves the budget as proposed, that would mean the owner of a house assessed at $500,000 would owe $2,294.50 in municipal taxes this year, about $50 more than in 2017, plus school and county taxes.
As outlined in Donato’s presentation, close to half of the total taxes collected in Ocean City goes to fund municipal operations, with roughly a quarter each going to the county and the school district. Homeowners also pay a small percentage of each tax dollar to the municipal library and to the Cape May County Open Space Fund.
During his presentation, Donato started on revenues and later discussed city spending.
“Overall it was not a great year for revenue for us,” he told the seven members of City Council.
The city came in above budget for revenue overall, but parking and beach fees, the two biggest moneymakers aside from property taxes, were down compared to what was expected. Parking fell a few thousand dollars below the goal for 2017, with beach tags coming in $79,000 short.
That’s not to say no money came in. The two line items made more than $3 million and $4 million last year, respectively. The total local revenues came in at $14.8 million, slightly over what the city budgeted.
“What we’d like to see is a few hundred thousand dollars in excess” compared to the city’s budgeted number, Donato said. Instead, the city came in $2,838 above the budget for last year, which he described as an all-time low as far as he could remember.
Fines and court costs were under projections by about $39,000, which Donato indicated could reflect Gillian’s instructions to police to avoid being overly eager to issue tickets when it can be avoided, seeing “friendlier, gentler” enforcement for minor infractions.
Revenue from the city’s Aquatic and Fitness Center brought in more than expected, mostly from memberships. The center brought in more than $1 million last year. The construction code office saw a drop in fees, coming in at a little over $1 million, or $67,826 under expectations for 2017. Council member Keith Hartzell questioned this, because the administration had indicated the city’s overall assessed value had climbed, which often means there is a construction boom underway.
Donato said there was a lot of construction in the town last year, but much of it was expensive single-family properties, which meant there were not as many building permits, but they did have an outsized impact on the town’s overall value.
“What we’re seeing lately is a lot of larger, higher-end residential construction,” Donato said. “Big beachfront and bayfront houses, sometimes on double lots. You’re seeing 4,000-5,000-square-foot homes. The values are up, but not necessarily the amount of permits that are going through the code office.”
Ocean City added about $135 million to its ratable base in 2017, bringing the total assessed value of the town to $11.69 billion, which shaved about half a cent off the tax rate. Donato said that last year, the city had the third highest assessment for a municipality in New Jersey. The total assessed value of the town is down compared to the highest levels from 2008 to 2011, but they have been climbing by hundreds of millions of dollars a year for the past several years.
Anemic revenue meant a small surplus to use to offset this year’s budget, Donato said. The fund balance for this year’s budget comes in at $5.8 million, down about a half-million dollars from the year before.
The 2018 budget proposal uses $3 million of the fund balance in this year’s budget, leaving $2.8 million in surplus. That uses less than in previous years, and still leaves the lowest surplus the city has had in years, the lowest since 2013 when the city was recovering from Hurricane Sandy and looked to its budget surplus to cushion the blow.
The city hopes good weather this year, especially in July and August, could help build those numbers back up. “It’s something we definitely want to try to turn a corner on,” Donato said.
Overall, spending is up 1.52 percent in the budget proposal compared to last year, which includes increases to debt service, spending on health insurance and pension costs. The city is set to spend $13.4 million on debt for 2018, including $10 million on bond principal. Under Gillian, the city has spent big on capital improvements, undertaking road and drainage projects, rebuilding much of the boardwalk and dredging back bay lagoons, along with other projects. Health insurance has seen a steady increase over the last decade. It is expected to cost $8.6 million this year.
With 258 full-time employees, Ocean City is set to spend slightly less on salaries and wages in 2018. That’s budgeted for $29.9 million in the spending proposal.
The operating expenses for the city’s legal department see a jump of more than 80 percent in the budget, going from $242,300 last year to $429,500. Donato told the council that was primarily due to a single lawsuit. After the meeting, city attorney Dottie McCrosson said the spending related to former lifeguard Paul McCracken, who alleged age discrimination. Reports from last summer indicate McCracken won a jury award of $127,998.
To contact Bill Barlow, email bbarlow@cmcherald.com.