Visitors to Ocean City are often struck by the contrasting fortunes of the vacant Ocean Plaza Mall on 94th Street and the bustle of development along U.S. 50 in West Ocean City, with its new Walmart and other big-box stores. There are a number of reasons for this, but one in particular sticks in the resort town's collective craw: double taxation.
In essence, property owners in Ocean City have been subsidizing sprawl development outside town limits, a self-destructive policy that can only be described as dumb growth. How? Through a tax system that unfairly penalizes those who own property in Ocean City while underwriting the costs of county services for those who do not.
Here's the problem. Ocean City government is financed chiefly through a 46-cent property tax per $100 of assessed valuation paid on top of Worcester County's 77-cent property tax rate. Yet town residents don't receive the same services from the county as other county residents. The town pays for things like police protection, a fire marshal and a recreation department.
To make things fair, Ocean City should receive a rebate for those services it provides for its residents instead of the county, and it does — but only a modest one, grants totaling a little more than $3 million annually. A 2007 consultant's report calculated that town residents should be receiving closer to $13 million in payment (or better yet, a reduction in their county tax bills) each year.
Such battles between municipalities and counties over tax differentials are common enough in Maryland. In the mid-1980s, residents of Annapolis took Anne Arundel County to court over the issue and won. Seventeen of Maryland's 23 counties offer some form of tax "set-off" (either a payment or tax reduction) for municipalities.
But Ocean City's circumstances are different. The resort town has a huge tax base but a relatively small residential population. The vast majority of condos, homes and businesses in Ocean City are owned by people who don't live there full-time and therefore don't vote there. That gives the Worcester County commissioners, the seven-member board that governs the Eastern Shore county, precious little incentive to correct the situation.
Meanwhile, the millions of dollars collected from these out-of-county taxpayers allow Worcester County to keep its tax rate artificially low (the second-lowest in Maryland on top of the county's rock-bottom income tax rate). So why locate a new home or business in the town limits when you can build one in West Ocean City or other communities in Ocean City's vicinity and pay much less in property taxes?
That misdirected tax policy poses a serious threat to the resort's long-term viability, and earlier this month Mayor Richard Meehan sent a letter to the commissioners requesting a meeting to discuss creating a differential in the fiscal year beginning July 1. The town is prepared to hire yet another consultant to calculate the size of the tax break. The hope is the county will recognize that Ocean City may be a "golden goose," but its resources are not unlimited.
Here's another option: The town should take its case to the Maryland General Assembly next month. A lot of those out-of-county Ocean City property owners live in communities like Columbia, Towson, Bel Air and Baltimore. That makes the tax issue not just a local matter but one that affects a lot of Marylanders who are likely none too pleased by the status quo.
While we appreciate Worcester County's desire to keep its taxes low, particularly in the current economy, it's not in anyone's best interest to subsidize sprawl development while penalizing those who have invested in Ocean City. Does the county really want to lose more rural farmland to shopping centers instead of redeveloping distressed properties in the town?
It's also a simple matter of fairness. Alternatively, Ocean City could close its town hall, disincorporate and force Worcester County to provide all those services that town government now provides. That would be a disaster, of course, but at least it would mean town property owners would no longer be treated like a beachfront ATM.