OC Supports Legislative Action On Tax Differential
OCEAN CITY – The Mayor and City County granted approval to submit a Legislative Action Request that would move the town forward in possibly receiving relief from Worcester County through a tax differential that comes to about $17 million.
According to City Manager David Recor, in 2012 Maryland Municipal League (MML) Legislative Committee Chair Bruce Williams formed an eight-member workgroup to examine double taxation in Maryland and present findings and recommendations to the committee and MML membership.
The current law divides municipalities into two groups, one group that may provide double taxation relief to municipalities and one group that shall provide relief.
The workgroup recommends that MML pursue legislation that will delete provisions that divide groups and impose the same standard so property tax setoffs are applicable to all counties.
According to the workgroup’s Final Report, the proposal would amend current law to provide that no county may impose a property tax on municipal property owners to pay for services that a municipality provides.
In Ocean City’s case, a Tax Differential Study was conducted by The Municipal & Financial Service Group (MFSG) to come up with the potential impact a tax differential would have on the town’s taxpayers.
According to the study, on an annual basis the Town of Ocean City meets with the Worcester County Commissioners for the purpose of requesting a tax differential of County real estate taxes. Ocean City has based its requests for a tax differential on the rationale that certain county services and programs were neither available nor provided to Ocean City residents by the county because Ocean City provided those same or comparable services and programs to its residents.
Ocean City’s requests are supported by several studies prepared by the Institute for Governmental Services (IGS) that found duplicated services in the areas mentioned above. Worcester County has been reluctant to grant the city’s requested tax differential and has instead responded with a variety of grants.
However, these grants only offset a small fraction of what the tax differential should be, based on the fact that Ocean City constitutes almost 60 percent of the assessable real property tax base in Worcester County yet receives a disproportionately small share of county services and programs.
The study explains, using Worcester County’s adopted Fiscal Year (FY) 2013 budget as a starting point, MFSG categorized county services into two classes. First are those programs and services that are available and provided to Ocean City residents, and second are those services and programs that are not available or provided to Ocean City residents.
MFSG identified the costs related to each program and service. MFSG documented any programs or services that were partially available or provided to Ocean City residents and documented the basis for allocating the budgeted expenses related.
MFSG identified several county services or programs that are not offered to, provided to and/or utilized by the town and its residents, such as the Worcester County Tourism, Public Works, Recreation, Emergency Services, Fire Marshal’s Office, Development Review and Permitting, the Sheriff’s Office and Environmental Programs.
Based on the assessed valuation of real property tax in Ocean City and in the remainder of Worcester County, MFSG calculated the “real” property tax rate for the entire county and a supplemental tax rate for those portions of Worcester County exclusive of Ocean City.
MFSG’s analysis indicates that for FY 2013, Worcester County will need to collect $119,678,288 in property tax revenue. MFSG analysis indicates that $102,531,947 of the property tax collected should be paid by all county residents including those in Ocean City, but that $17,146,341 in property taxes should not be paid by Ocean City tax payers.
That $17,146,341 is therefore the expense amount that calculates the tax differential of $0.269, which adjusts the $0.770 countywide property tax rate to $0.687 for Ocean City and $0.956 for the remainder of Worcester County.
“This is something the council can support that would benefit all of our taxpayers, and something that we have pursued a number of times. I have actually been before the committee a couple of times presenting this to them and trying to get them to take this as an initiative of the MML unsuccessfully but it looks like at this point in time we have a better chance to get that to move forward,” Mayor Rick Meehan said. “As citizens and taxpayers, if we all want to work together on something … this is what we should be working on together. This makes a difference. This is something we need to do and we need to pursue, and I think everybody should get behind it as it would really benefit our taxpayers.”
The council voted unanimously to authorize the completion of a 2014 MML Legislative Action Request on behalf of the town supporting the workgroup’s recommendation.