At The Shore

A Bad Year for Ocean City?

It's nice to see the sun after so many days of dreary gray clouds and fog.  I notice that everyone over in Ocean City seems to be getting ready for the summer season; fixing up all the stores and hotels and generally sprucing things up.  It's good to see.

But what kind of season is it going to be?  It seems to me that there are a number of factors which might combine to make the season less successful than usual. First and foremost, of course, is the price of gasoline.

The price of gasoline in Maryland and nationwide continues to rise and has reached a point where it is actually starting affect demand.  Almost everyone who vacations in Ocean City reaches there by car.  As the cost of gasoline rises, the cost of getting to Ocean City and back also rises. 

But more importantly, the increase in the cost of gasoline is straining middle class family budgets.  Sure, a 300 or 400 mile round trip to Ocean City will consume a fair amount of gas, but many families are traveling that far every week just to get to work and back.  In addition to gasoline, families are also paying higher costs for electricity, food and a variety of other things. 

The reality is that the real income of many middle class families - the bread and butter for Ocean City - has declined over the past several years. In a recent survey by the Pew Research Center more than half said they had had to cut spending because money was tight.  Fifty-four percent of middle-class respondents said that they had lost ground economically over the past five years. 

Some say that people will respond to high energy prices by vacationing close to home rather than taking longer trips and that such a decision would help Ocean City because it's close to several major metropolitan areas.  But I think it's just as likely that people will vacation at home or cut their vacations short - going away for three or four days rather than a week or two.  There's already evidence that many visitors to Ocean City are coming for shorter periods instead of the one or two week vacations of the past.

And then there's the cost.  The price of lodging in Ocean City has skyrocketed over the past several years as the price of real estate reached stratospheric levels.  Of course, real estate prices have dipped over the past year, but I haven't seen any evidence that rental prices have dropped.  Indeed, the Ocean City town fathers, in their wisdom, decided to increas the room tax this year so they could advertise in additional markets. 

Then, of course, there's the shortage of H2B visas for temporary workers.  While this won't affect most businesses - the exchange students here on J1 visas will still be here in great numbers, it will have an effect on certain large employers. 

New fishing restrictions will also have a negative effect.  And the cost of fuel for the long fishing trips out to the gulf stream will sharply increase the cost of those trips.  While the effect here may be marginal, it is the cumulative effect of all of these factors that we need to keep an eye on. 

So let's hope the price of gas is contained, that people in the DC/Baltimore/Philadelphia area feel a need to get away to the ocean this summer and that the cost of lodging in Ocean City trends down a bit.  Because a bad year for Ocean City would also be a bad year for all those who depend on the summer season for their jobs and income.

[The picture is of a gasoline rationing coupon that was printed by the government as a standby measure for the gasoline shortage of the late 1970s but was never used]

Ocean City Tax Differential

 

It's been a couple of months since we last heard about Ocean City's request for a tax differential.  As you might recall, the elected officials of Ocean City were requesting a reduction in property taxes for real estate in the city because the town pays for many services that the county would otherwise be providing.  It seems only fair, they reasoned, that property taxes in Ocean City should be reduced to reflect that fact. 

And they had a point - there are some services that Ocean City provides directly, thus relieving the county from providing them.  So, to allow property owners in Ocean City to avoid paying twice for the same services, their county property tax rate should be reduced.  Makes sense.

But then Ocean City presented its actual proposal.  They wanted a reduction of six cents in the property tax for Ocean City property but, since Ocean City real estate accounts for the majority of the assessed value in Worcester, that would have meant an increase of sixteen cents in the property tax rate for every other property owner in Worcester County to make up the difference.

The town fathers of Ocean City hired a consultant to prepare their case and document where the city residents were paying taxes for services they weren't receiving.  But the 'consultant' failed to consult the county financial staff over at Snow Hill and, as a result made numerous mistakes on the analysis.  The county financial staff prepared their own analysis (found here) which documented the mistakes in detail and also showed that Ocean City's tax differential request is thirteen times the state average.

It's worth looking at the political aspect of the request.  While the majority of real estate value in Worcester County is in Ocean City, the majority of voters are elsewhere.  In fact, less than a quarter of county voters reside in Ocean City, so it's no surprise that the County Commissioners haven't gone along with the town's request - that would be political suicide for most.

Ocean City leaders state that, if the county doesn't approve their request, they will seek legislation at the state level to force the county to approve a differential.  But again, it doesn't seem they will have the votes to do this.  Ordinarily, the General Assembly will only approve legislation affecting a single county or jurisdiction if the delegation from that county approves of it, and it's unlikely that the two delegates and the state senator who represent Worcester are going to go along with this.  After all, there aren't a lot of votes in Ocean City.

I suppose that Ocean City could appeal directly to those who own property in Ocean City and live elsewhere in Maryland to pressure their legislators to approve a tax break for their second homes, but in this political climate, I think that's a long shot.

So we'll wait and see how this plays out.  One thing for sure, the town's ham-handed initial approach to the county didn't make them any friends and will make it much more difficult to eventually get what they want.