Staff Writer

An ambitious new funding model might help Ocean City pay its eight-figure share of its proposed youth sports complex, one which now has an operator and an architect on board – but no place yet to put it.

A public-private partnership known as a Business Investment District (BID) could be utilized to generate revenue for the long-proposed sports complex using a special assessment. It also could supplement or replace the town’s expected funding source, an existing 5 percent tax on hotel rooms.

“Rather than raising property taxes and/or some other method of attack, this is a voted-upon initiative that property owners and local businesses would decide whether they’d want to fund a certain project,” said Tom Perlozzo, Ocean City’s director of tourism and business development.

To get a BID going, resort officials would have to ask state legislators to write an enabling law that creates a specific area on a map, or district, inside which a project-specific fee could be charged by businesses and passed along to consumers.

And, unlike the room tax, it doesn’t have to just be for hotels and could funnel down to other businesses like retailers or restaurants. For Ocean City, the district would encompass the entire town.

Perlozzo presented the idea of a Business Investment District to the resort’s Sports Complex Task Force, which met Monday at the convention center. It was the group’s first meeting in a year.

However, the decision of whether to pursue a Business Investment District as a revenue source for the sports complex lies with Ocean City’s mayor and town council, not the Task Force, according to Perlozzo.

“There’s a special committee that would form to manage the project,” he said. “The government is out of it. They collect all the money, and it goes to the special project. For this it’s the sports complex but it could be any large capital improvement.

Research by Perlozzo and his team shows there are about 162 districts like this already in the United States, including New York City, Philadelphia, and Baltimore, where their BID is for just for downtown hotels.

“The state has seen the Baltimore City (legislation), and it would be easy just to follow and get that,” he said. “We’ve actually reviewed the bill. We’ve got case study after case study looking at what various towns and states have used. Again, it’s a viable option.”

Factors like how many years it would last and what percentage or dollar amount gets collected are variable based on need. Rates can also vary based on the business; Perlozzo said a hotel could charge users one amount, and a short-term rental like an AirBnB might charge a different amount.

“It’s in its very early stages, but it’s a definite opportunity to fund the sports complex,” Perlozzo said. “The whole goal, it’s always been, if the state funds the facility by 80 percent, we fund the other 20 percent through this mechanism. The operations that were presented will pay for themselves. This is not going to cost the taxpayers any money. It should be a win-win for everyone.”

Aiming to zhuzh the resort’s hospitality economy by capturing a share of the thriving youth travel sports market, the sports complex has been one of Ocean City’s white whales for several years. In 2019, Ocean City commissioned a market and economic analysis by the Maryland Stadium Authority (MSA), one that had to be re-thought after the COVID-19 pandemic.

Ocean City now has an 80/20 partnership with the MSA to fund the project. The MSA has contracted with an architectural firm, and design work is scheduled to begin early next year, according to MSA Executive Vice President Gary McGuigan. An updated cost estimate will come after environmental and logistical challenges, like easements or archaeological issues, are assessed.

The location of the sports complex remains up in the air. The MSA says its architect will evaluate the costs and infrastructure needs at three proposed locations: a 95-acre property along Route 50 next door to Stephen Decatur High School, a 150-acre parcel just west of Berlin, and a 147-acre parcel near the intersection of Routes 113 and 589. The sites were made public through the MSA’s request-for-proposal process.

On an 80/20 split with the state, Ocean City’s share of a possible $150 million project could be $30 million, an amount that would be paid for by bond financing.

To cover the annual debt service on the bond, estimated to be $3 million, Ocean City officials had been planning to rely on revenue from its room tax. Resort officials even had the room tax’s 5 percent cap lifted by way of state legislation, pushing the revenue source to a possible 6 percent collection rate.

But there’s a hiccup: in order to secure that 6 percent rate, Ocean City has to get approval from Worcester County’s Board of Commissioners, and approval has to be unanimous from all seven member. If not, the 5 percent rate remains unchanged, an outcome Ocean City doesn’t want.

Privately, resort officials worry they don’t have the votes for unanimity at the county level, which is why the Business Investment District is being floated as another tool in the toolbox as a revenue generator for the sports complex.

“In order to move the project forward, we need to have an alternative mechanism,” to the room tax, Perlozzo said, “and this allows that to happen.”

Another step forward in the process is that Ocean City has hired an operator for the sports complex: a specialty outfit called Sports Facilities Companies (SFC). Jim Arnold with SFC presented his findings to the Task Force at Monday’s meeting.

Arnold said they’ll be marketing the facility for at least 18 months before it opens, by hitting major trade shows and talking to major event operators to get deals done.

“We see no reason why this complex isn’t at capacity before we even open the doors,” he told the task force.

The sports complex would be both indoor and outdoor. An estimated 147,000 square feet of indoor space would include space for 10 basketball courts that are convertible to 20 volleyball courts, as well as a 5,000 square foot room for community rental.

On the outdoor side, there would be fields for baseball and softball that could convert to a full-size soccer or lacrosse field, giving the complex the ability to host up to eight high school baseball games or up to 16 youth baseball or softball games. Exterior space also would include support buildings, concessions, restrooms, as well as an outdoor gathering space.

“One of the big things we’re seeing in these complexes around the country is, much like that indoor space where people want to step away a bit, is some dedicated spaces to families that come from tournaments to be able to kind of – well, get away from the athletic experience and get more into kind of the bonding and family and entertainment aspects,” Arnold said.

Main revenue from the sports complex would come from field rentals, while other revenue streams could include food and beverage sales, gate fees or parking, retail merchandise, on-site vendors, or sponsorships and naming rights.

He said its first year would break even, but from there on, there could be upwards of $1 million in operational revenue. As far as economic impact, the sports complex could see $52 million in Year 1 direct spending, growing to $87 million by Year 5, with the potential for $125 million over 20 years.

“I’d say this is probably one of the more exciting opportunities I’ve seen in quite some time in the industry just based on the market conditions,” Arnold said. “The gaps that are currently there, just not a whole lot of competition in terms of size and scale around an area.”