February 2018 progress by Ocean Pines Progress

Board ready to OK budget with $30 assessment increase The Board of Directors is close to approving an $11.5 million budget for 2018-19 that would impose a $30 increase in the base lot assessment, raising it from the current $921 per year to $951. In a Feb. 7 budget work session, a slim board majority of four directors rejected an even higher increase in the assessment, to $960, advocated by Directors Ted Moroney, Pat Supik and Cheryl Jacobs. Director Slobodan Trendic was the lone opponent of any assessment increase.

~ Page 6

OPA targets ‘cadillac’ health care benefits for employees Faced with a burgeoning operating deficit for the current fiscal year and a realization that its ‘cadillac plan’ health insurance benefits for full-time employees are far outside the mainstream, Ocean Pines Association directors are moving ahead with changes to the plans that could save the OPA roughly $100,000 in the 2018-19 budget year in a first phase and twice that in the year after that.

~ Page 10

Former acting GM deflects blame for operating deficits Expressing disappointment and dismay with the perception by many that his tenure as acting general manager for much of this past year is a direct cause of an Ocean Pines Association operating deficit for 2017-18 that will substantially exceed $1 million, Brett Hill is fighting back.

~ Page 19

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Bailey, board opt for managing partnership to run Yacht Club, Beach Club amenities Board negotiating with Berlin restaurant firm, the Matthew Ortt Companies, but former Yacht Club manager Joe Reinhart is still in the mix By ROTA L. KNOTT Contributing Writer he Ocean Pines Association is negotiating with a Berlin-based restaurant management firm, the Matt Ortt Companies, to manage the Yacht Club and Beach Club in what General Manager John Bailey is calling a “managing partner” role. Another potential managing partner, former Ocean Pines Food and Beverage Manager Joe Reinhart and a partnering chef, remains in the race, Bailey and OPA President Doug Parks confirmed in a Feb. 10 special board meeting. The board met with Matt Ortt representatives in executive session on the afternoon of Feb. 10. Parks said no contract would be signed during that meeting, the purpose of which was to negotiate contract terms and to determine whether Ortt would be the right fit for Ocean Pines. If the negotiations go well and a board majority feels comfortable in approving a contract, it could be voted on during the board’s regular monthly meeting Feb. 25, Parks said. He also pledged to have both contenders make presentations to the OPA membership before the board makes a final decision on a contract. The Ortt company operates the well-regarded Rare and Rye restaurant attached to the La Quinta Hotel in Ocean City on 22nd Street. According to the firm’s Web site, the managing and founding partners of the firm are Matthew Ortt and Ralph DeAngelus, experienced restaurateurs in the Ocean City area. They were hired last year by the family that owns the La Quita Hotel to open and manage the Rare and

Rye. At one time they operated local Hooters restaurants. Key among the issues was the nature of incentives should Ortt do better than the $107,000 loss budgeted for the Yacht Club next year, or whether those incentives would only apply if the amenity breaks even or generates a surplus. Other issues to be negotiated would include a management fee, length of the contract, the months John Bailey the Yacht Club would be open, and a termination clause. Also to be discussed is whether Ortt would be able and willing to develop its own 2018-19 budgets for the Yacht and Beach clubs to replace the ones the board are currently reviewing. “If negotiations fail today, we may have to go back to the other one,” Bailey said. That would be Reinhart, who’s been managing a Panera Bread cafe in West Ocean City for a number of years. Whether Reinhart would still be available is a question mark. In an earlier meeting with Bailey, Reinhart said he and his partner would need an answer by the end of January in order to be fair to current employers. But former OPA Director Marty Clarke, a strong advocate of Reinhart, said there be may some give in that deadline. Clarke and others have noted that Reinhart in his last year as food and beverage manager in Ocean Pines, about seven years ago, accomplished a near break-even To Page 36

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OCEAN PINES BRIEFS Fitness center at Country Club isn’t good fit, Parks says

cknowledging that the Board of Directors had received around 100 e-mails from residents advocating for a fitness center on the second floor of the Country Club, Ocean Pines Association President Doug Parks said recently that he doesn’t believe that location is the best venue for it. OPA Director Slobodan Trendic recently suggested the fitness center as one possible alternative to a kitchen on the second floor. Trendic said that with the Tern Grille on the lower level of the Country Club, and the nearby Ocean Pines Yacht Club, the OPA doesn’t need to be adding any kind of kitchen equipment or any kind of food and beverage operation on the Country Club’s second floor. As proposed by General Manager John Bailey, the latest iteration of the second floor renovation is for a so-called warming kitchen, to replace the antiquated and no longer usable kitchen equipment there now. The “warming kitchen” concept does not involve on-site food preparation. Any food brought up to the second floor for golf-related banquets or events by other organizations would be prepared in the kitchen downstairs in the Tern Grille or at the Ocean Pines Yacht Club, Bailey has said. A warming kitchen, which would have equipment to keep hot food hot, would also most likely be equipped with a freezer or two to keep cold food cold. Bailey envisions self-serve buffets as opposed to “plated dinners” with an attending wait staff. He recently said that only ten percent of the space on the second floor would be usable for banquets. He has pushed back against the idea that he intends the upper level to be a new OPA-operated food and

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February 2018

OCEAN PINES BRIEFS From Page 3

beverage venue. While Trendic’s suggestion for a fitness center in lieu of a kitchen on the second floor generated emails to the board, Parks pushed back against the idea, at least insofar as the venue was concerned. At the Jan. 17 meeting of the board, Parks said that while the board needs to listen to community support for a fitness center, and very well may act on it in the future, he was unambiguous in his position that the second floor was not the best place for it. The board received at least one email suggesting that the Community Center’s Assateague Room was the best location, once new meeting rooms are available in the Country Club.

Bailey says Tern Grille ops close to break-even

OPA General Manager John Bailey said in early February that food and beverage operations at the Tern Grille that resumed in early January, after the Yacht Club was shut-

tered because of a mold infestation and financial losses, were close to break-even. The first-floor restaurant and bar operation is open three days a week, with a prime rib special on Friday nights and a Sunday morning buffet. Bailey acknowledged that the launch of the three-day schedule was rocky, with many more people showing up than could be accommodated by a limited staff. Indeed, there were reports of the first weekend that that there was no wait staff, with orders being placed at the bar. People left, unable to be served. There were also reports of prime rib in short supply. He said that over time the operation has smoothed out, with more wait staff on hand and enough food to accommodate patrons. He said data that he’s seen indicates that the operating is only a few hundred dollars in the red, essentially break-even.

Department heads to run Tern Grille, S&R food ops

General Manager John Bailey q

4 Ocean Pines PROGRESS

BJ’s donation

BJ’s donated $5 of each membership fee paid as a part of a fall promotion to the Worcester County Veterans Memorial Foundation in addition to offering special benefits for new and renewing club members. Denise Sawyer (right), director of marketing and public relations for the Ocean Pines Association, presented a check to Marie Gilmore, president foundation, on Jan. 18.

OCEAN PINES OCEAN PINES BRIEFS From Page 3

during the Jan. 27 board meeting repeated earlier statements that he intends to return management of food and beverage opeations at the Tern Grille and the Swim and Racquet Club this summer to the Director of Golf and the Aquatics departments, respectively. These operations had been shifted to the Yacht Club-based food and beverage manager this past summer, causing supply shortages at times, to the dissatisfaction of customers, who noticed and complained.

Bailey says he anticipates new drainage plan by May

Well aware that poor drainage is a problem that concerns a lot of residents, especially acute during torrential downpours when the water really has no place to go other than to low lying areas, General Manager John Bailey is working on remedies. He told OPA directors at their Jan. 27 board meeting that he and the Public Works Department would have a new plan to deal with drainage by May and that he would be meeting in February with a task force that had been assembled some time ago to address drainage issues. He said the new plan would have separate components dealing with immediate fixes, such as making sure that driveway culverts and drainage ditches are cleaned out regularly, as well as situations in which areas after a heavy rain will continue to be underwater a week or longer. In some cases he said situations will be able to be addressed by Public Works, but in other cases longer

February 2018 Ocean Pines PROGRESS

term and more expensive solutions will need to be found that could involve Worcester County and even state funding. He cited the Martinique Circle area as particularly hard hit by recent heavy rains. As for preventative maintenance, he reminded directors that Ocean Pines maintains 82 miles of roads, or 164 miles or roadside ditches, in addition to a larger network of ditches that were designed to collect and remove stormwater from the community. He signalled that the new plan to be announced in May will include a call to hire outside contractors to maintain the ditches. The draft budget for 2017-18 actually reduces fulltime employees in Public Works in anticipating of out-sourcing. The plan will also include an education component aimed at OPA members, Bailey said.

Board OKs changes to two resolutions

The Board of Directors approved two relative minor changes to board resolutions at the Jan. 27 monthly meeting, in both cases brought up by Director Ted Moroney on behalf of the Bylaws and Resolutions Advisory Committee. The revised B-01 covers the procedures to be used in revising board resolutions but expands the language to cover all Ocean Pines Association documents. The revised B-04 sets out procedures to be used to develop agendas for board meetings, with the single change replacing the term “old business” with “unfinished business. The directors without much comment and no debate approved both amended resolutions unanimously.

Valentines for Vets

Members of the Pine’eer Craft Club created Valentines for Vets at their Jan. 18 monthly meeting at the Ocean Pines Community Center. The Valentines were created especially for Veterans and will be sent to various Veteran organizations throughout the state by Linda Dearing, owner of Copy Central. Pictured are: Sharon Puser (seated), Barbara Stilwell, Kim Perrone, Nancy Burkette, and Barbara O’Connor.

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Board close to approving 2018-19 budget including a $30 assessment increase Directors say more than $500,000 in assorted cuts will be applied to the operating deficit By TOM STAUSS Publisher he Board of Directors is close to approving an $11.423 million budget for 2018-19 that would impose a $30 increase in the base lot assessment, raising it from the current $921 per year to $951. In a Feb. 7 budget work session, a slim board majority of four directors rejected an even higher increase in the assessment, to $960, advocated by Directors Ted Moroney, Pat Supik and Cheryl Jacobs. Director Slobodan Trendic was the lone opponent of any assessment increase. The budget, unveiled in its latest iteration at a town meeting Feb. 10 by General Manager John Bailey, is scheduled for final approval at the

board’s regularly scheduled board meeting on Sunday, Feb. 25, at noon in the Ocean Pines Community Center. The latest iteration of the budget is more than $500,000 less than the original $12 million version unveiled in early January by Bailey, and reflects cuts suggested by the Budget and Finance Advisory Committee and real cuts made by the board in February review work sessions. The latest revised budget calls for pay increases of two percent, 1.5 percent in cost of living increases and .5 percent merit-related. That’s down from the original three percent. The revised budget contains $71 in the lot assessment to “address” projected operating deficits over the current and last fiscal years, Bai-

ley said, avoiding the term “deficit recovery,” which directors are now conceding is essentially a misnomer. In his earlier budget draft, he was only proposing $33 in deficit recovery, but that apparently has more than doubled because of cuts from what Bailey had initially proposed. Apparently this $71 won’t be placed in a restablished deficit recovery reserve but will remain in the operating fund. That represents $600,000 in assessment dollars. Budget cuts made so far are the equivalent of a $41 reduction in the assessment, Bailey said. The board could return some of that to property owners in the form of a lower assessment, but that doesn’t too likely at this stage of the process. Bailey said the full-time equiv-

alent head count has been reduced year over year by 13.75. Bailey also said the $19 collected from all property owners for common area bulkhead maintenance has been eliminated, while the $465 waterfront differential paid by owners of most bulkheaded property owners has been retained. During the Feb. 10 public meeting, Bailey listed $326,596 in cuts approved by the board in its February work sessions. The $465 waterfront differential paid by owners of most bulkheaded property in Ocean Pines initially had been opposed by the Budget and Finance Advisory Committee. The group had argued for a waterfront assessment holiday because the OPA has a $2.5 million bulkhead and waterways reserve without an approved bulkhead replacement program in place. But in a Feb. 6 budget work session, a committee member indicated that the committee was in support of retaining the $465 differential. There was no real explanation given for the change in position, and one member of the committee, Marty

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OCEAN PINES

February 2018 Ocean Pines PROGRESS

Assessment increase From Page 6

Clarke, said he had “no idea” how it had occurred. Later he said that committee chair John Viola tried to explain that it happened after member Larry Parrone, who had argued vociferously for a one-year holiday, talked to Moroney about the issue. Clarke indicated that there had been no committee vote to reverse its earlier position. Viola did not respond to a Progress email asking for an explanation of the eleventh hour flip-flop. In its budget review, the board accepted a committee and Bailey recommendation to cancel the $19 portion of the assessment tied to common area bulkheading. It was just one of a fairly substantial number of cuts from the original $12 million budget proposed by Bailey in early January. But none of the $19 savings from that board action is actually being returned to property owners in the form of lower assessments. Instead, that and more than $500,000 in cuts outlined by Supik during the Feb. 7 work session will be “applied” to deficit reduction, ac-

cording to Supik and Moroney, both of whom struggled to define exactly what it is that board will be doing with all the savings achieved during the budget review meetings. “It’s not deficit recovery or a (deficit recovery) fund,” Moroney said, retreating from the very language that he and Supik and indeed the B&F committee, in its discussions, had used to describe how they intended to deal with a substantial operating fund deficit in 2016-17 and the current fiscal year. Bailey said the new budget will “address” operating deficits but without adding any clarity on how it is to be achieved. The operating deficit last year was roughly $360,000, but the operating fund actually showed an improvement in its bottom line because of an inter-fund transfer to the operating fund from what was called the deficit recovery fund. The latter had been abolished and defunded by a previous board. For many months last year estimated by Supik as approaching and then exceeding $1 million, the current year’s estimated operating deficit is now $1.5 million to $1.8 million, a number unveiled for the

first time on Feb. 6 by Supik at the very end of a board budget meeting. The new estimate just happened to be announced on the eve of scheduled board discussion over what Moroney and Supik had consistently referred to as “deficit recovery” with references to a deficit recovery fund during earlier board discussions. Trendic described himself as thunderstruck and utterly appalled by the new estimate. As a result, he brought roughly $1.5 million in proposed budget cuts to the work session on Feb. 7, far more aggressive than the list proposed by Supik. He said he would have been less accommodating to more tepid cuts during earlier discussions had Supik been more upfront with the latest deficit estimate, which over two years would exceed $2 million. “Let’s not say it’s a deficit recovery fund (any more),” Moroney told his colleagues. Budgetary savings will “apply to the deficit,” he added. “It’s not (deficit) recovery and it’s not a fund.” The language Moroney and Supik are using now is that the significant budgetary savings achieved in the board work sessions “apply to the operating deficit.” The change in verbiage could be

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a reaction to Trendic’s observation that the OPA Declaration of Restrictions authorize collection of assessments for current operating purposes and future needs, which would seem to preclude collecting assessment dollars for the purpose of offsetting deficits from previous years. In addition, Board Resolution F-03 authorizes a number of reserve funds, such as replacement, roads and bulkheads and waterways. There is no mention of a deficit recovery fund, which is where Carmine and previous boards “parked” assessment dollars tied to deficit recovery. Based on Moroney’s comments, it would appear that there will be no assessment allocation to or reestablishment of a deficit recovery reserve in 2018-19, which essentially means any savings from budget cuts will show up in the operating fund. The board majority effectively declined to return any of the budgeted savings from cuts to property owners in lower assessments, which were certainly possible. Supik suggested that the OPA, if it achieves the budgeted savings next year, might actually produce an operating surplus by April of 2019.

8 Ocean Pines PROGRESS

OCEAN PINES

February 2018

By TOM STAUSS Publisher n the end only three directors -- Ted Moroney, Pat Supik and Cheryl Jacobs -- were in favor of establishing a $960 lot assessment in 2018-19, with three other directors preferring the $951 that a board majority settled on during a board budget meeting Feb. 7. Only Slobodan Trendic opposed both the $960 and $951 assessment levels, arguing instead for no increase at all. Jacobs, reportedly the director instrumental in persuading her colleagues to appoint Moroney to the board upon the resignation of Brett Hill last fall, was the first director to broach the possibility of a $39 increase in the assessment over the current $920. She wondered whether her colleagues had an “appetite” for increasing the assessment more than the $30 recommended by General Manager John Bailey in a revised budget. She said she would be in favor of looking at a higher rate, maybe $9 more.

Moroney, Supik, Jacobs push for even higher assessment increase Board debates $951 versus $960 assessment for 2018-19 She said an additional $9 would not be a big deal. Moroney jumped right in to agree with Jacobs, telling his colleagues that two years of operating deficits could be “paid off” in three years rather than four. at $960. Moroney said a $960 assessment means that everyone in Ocean Pine “eats a part” of the estimated $1.86 million in this year’s projected operating deficit. That’s also true of a $951 assessment or even a $921 assessement, which he didn’t mention. “So you’re recommending $960,” Supik said, as if there was any doubt about what he was recommending.

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That prompted a stern rebuke from Trendic, who said that the OPA DRs (Declaration of Restrictions) don’t permit the board to collect assessments for application against prior year operating deficits. Nor can the board allocate savings from budget cuts to a deficit recovery reserve, Trendic said, because board resolution F-03, which authorizes a replacement, roads, bulkhead and future projects reserves, does not include or authorize a deficit recovery reserve. Supik attempted to frame Trendic’s objections as a semantic one. “It’s a problem with terminology. You’re supporting what we’ve been discussing,” she said, in reference to a substantive list of budget cuts that both she and Trendic were presenting to the board in dueling presentations. Trendic’s list of roughly $1.5 million in cuts was three times what Supik was offering. In a comment that contradicted terminology from last fall that continued into the meeting of Feb. 7, Supik then declared that “we’re not creating a deficit recovery (reserve) fund” from the savings achieved from budget cuts. OPA President Doug Parks weighed in, making it clear that instead of using budgetary savings to reduce the lot assessment, the board instead was “applying” the cuts to reduce the operating fund deficit. Telling his colleagues that he was not inclined to increase the assessment to $960, Parks warned them that they should be prepared for a backlash from property owners opposed to any increase in the assessment. “You’re going to hear people say you are asking us to pay for our (board) mistakes,” Parks said. Director Tom Herrick said he was inclined to “keep” a $30 increase, because with budget cuts including employee health insurance adjustments “everyone is contributing” to the cause. After Jacobs hinted that the

board could reduce the assessment next year if 2018-19 ends with a surplus, Parks echoed Herrick’s comment that “everyone is contributing” with an assessment of $951. “I don’t want to ask the membership any more than we have to,” Parks said, which prompted an incredulous response from Trendic, who had said there remain myriad ways for the board to get to a zero increase in the assessment or even less. He said in effect that the board could be asking much less from property owners. When Moroney said that adding an additional $9 to the assessment was not a heavy burden, Trendic responded that “that suggests we’re not looking for additional savings” that could eliminate the need for any assessment increases. He said that golf operations, currently budgeted at a $165,000 deficit next year, and the Yacht Club, budgeted for a $107,000 deficit, are areas where additional savings could be achieved. He also said that the board should expedite implementation of changes in the OPA’s health insurance package. As proposed in the latest budget iteration, the board is making changes in health reimbursement accounts, or HRAs, saving about $100,000 next year. Trendic also wants changes in premium support, to a more traditional 80-20 split for both employees and their families, in 2018-19. Previously the board of directors had voted not to implement changes in premium support plans until 2019-20. Moroney argued that a higher assessment next year could compensate for unexpected expenses that might still occur this year and that a $960 assessment would make it easier to establish a new capital fund or reduce assessments the following year. With three directors in favor of $960 and three opposed, it was Director Colette Horn who broke the tie, at the same time she urged the board to adopt 1.5 percent for employee raises next year, rather than the 3 percent included in the proposed budget. After her colleagues seemed to embrace the lower raise percentage, she delivered her verdict: She was inclined not to join Moroney, Supik and Jacobs in supporting a $960 assessment.

OCEAN PINES

February 2018 Ocean Pines PROGRESS

Bailey modifies details of proposed deficit recovery reserve Backs off five-year plan of assessment increases, suggests land sales as an alternative source of revenue By TOM STAUSS Publisher erhaps mindful that a fiveyear plan of any sort conjures bad memories among some in Ocean Pines who recall the infamous five-year established in 2010 and finally killed off last year, General Manager John Bailey has backed off of a five-year plan of annual assessment increases as a way of funding a resurrected deficit recovery reserve. In his original draft budget for 2017-18, Bailey proposed restoring the deficit recovery reserve effectively abolished by last year’s Board of Directors and funding it with a $33 increase in the lot assessment, embedding the dollars collected from that increase in the Ocean Pines Association budget for five years. Restoring the reserve and collect-

ing the $33 in the lot assessment is designed to offset operating losses in the current fiscal year and in 201617, which in early January he estimated at $1.4 million. Since then, the estimated two-year deficit seems to be skewing higher. More recently, he and members of the Budget and Finance Advisory Committee have whittled away at his proposed budget, which intially called for a $60 increase in the lot assessment, from the current $921 to $981. As a result of cuts and other changes, the recommended budget is now calling for a $30 increase in the assessment. At the meeting of the board Jan. 27, Bailey said he was only calling for earmarking $30 in the lot assessment for one year of deficit recovery, and it also wasn’t clear whether he

was still calling for the restoration of the deficit recovery reserve. Another option would be to collect the revenue and allocate it to the OPA’s operating fund, which seems to be the latest preference of directors Pat Supik and Ted Moroney. Bailey said an alternative source of funding for deficit recovery could be the sale of roughly 30 OPA-owned building lots. If the board opts to market some or all of these lots over the coming year, Bailey said the proceeds of sales could be allocated to deficit recovery in lieu of retaining the $30 or $33 portion of the lot assessment for deficit recovery in future years. In his original draft budget, however, Bailey had suggested lot sales as a way of funneling money into a New Capital reserve that he hopes

Annual contribution to OPVFD embroiled in confusion over memo of understanding

Former Acting General Manager Brett Hill told the Progress in a Feb. 8 interview that he and OPVFD official Billy Bounds last year were well along to drafting a new agreement that would govern the annual contributions. Scrapping the current MOU “would be an ideal outcome,” Hill said, “since no one except maybe the person who drafted it can actually understand it.” He didn’t think that the OPVFD would have a problem with scrapping it, either. During a recent budget work session, Director Ted Moroney opined that the OPA’s budget for fire and ambulance service budget might have to be increased for next year because of he MOU’s true-up component. Hill pushed back against that idea, calling Moroney’s statement about the possible need for additional contributions political posturing. “Ted said $250,000 of true-up needs to be done,” Hill said. “That seems to me to be rather political. Ted and the others apparently don’t know just how much was paid out to the OPVFD last year.” Hill said that Moroney and some of the other directors are probably unaware that the OPA, when Hill served as acting general manager and Mary Bosack as director of fi-

nance last year, cut a check to the OPVFD for roughly $280,000 for various capital purchases, out of a previously unknown, at least to them, bank account controlled by the OPA, that at the time contained $325,000. The account was designated to pay for the OPA share of OPVFD capital purchases. “OPA Treasurer Pat Supik authorized it, covering about $215,000 to pay off loans and $73,000 for new equipment, leaving about $47,000 in the account,” Hill said. He said he does not know whether the account has cash remaining in it or has been closed out. Confusion over the MOU and the mysterious bank account first surfaced at a Jan. 11 budget review meeting when OPA officials learned that the OPA would need to cough up roughly $147,000 in a little over a week to pay its share of rehabbing an ambulance. The revelation of the unexpected expenditure occurred in a session among members of the Budget and Finance Advisory Committee and the OPVFD board of directors. Four members of the OPA board of directors were sitting in observing the proceedings. The problem, it turns out, is that the OPA was roughly $100,000 short in its OPVFD bank account “reserve” q

By TOM STAUSS Publisher he complicated and erratically implemented memo of understanding (MOU) that is supposed to govern the Ocean Pines Association’s annual contribution to the independent Ocean Pines Volunteer Fire Department probably is going to be scrapped and replaced with something simpler. That seems to be a key take-away from discussions over the OPA’s fire and ambulance budget by the Board of Directors in early February. One key element of the MOU is a “trueup” feature designed to allow the OPA to recapture overpayments to the OPVFD during the previous fiscal year, or to compensate the OPVFD for any shortfalls. OPA representatives and OPVFD officials were scheduled to meet Feb. 9 to discuss the MOU and its possible impact on the 2018-19 budget, specifically the amount of money that the OPA will budget for the OPVFD next year. Details of the meeting were unavailable as this edition of the Progress neared its press time. But based on comments made by directors earlier in the week during budget work sessions, it seems that the OPA position will be that the MOU needs to be replaced.

to be able to create over the course of the coming year. Currently, proposed new capital projects are funded out of the next year’s lot assessment, which tends to mean that certain desirable expenditures are not funded because of a reluctance to raise the lot assessment. Bailey had suggested establishing a new capital reserve and funding it with lot sales as a way of creating a source of funding for new capital projects that, like other OPA reserve funds, is not tied directly to assessments in any given year. Bailey did not make clear whether he is abandoning his call for funding a new capital reserve with lot sale proceeds because he wants proceeds to be allocated for deficit recovery. The deficit recovery reserve was effectively abolished by last year’s board when it no longer appeared in the monthly reserve summaries that routinely are published with the OPA’s monthly financial statements. As a part of the budget for 201617, funds that had been sitting in the deficit recovery reserve apparently were shifted to the OPA’s operating fund. Several months into the 2016-17 fiscal year, the reserve disappeared from the monthly reserve summary, and it has been absent ever since. To re-establish the fund, it would appear that the board would have to amend Board Resolution F-03, which sets out approved reserve funds. They include the Major Maintenance and Replacement Reserve, a roads reserve, and a bulkheads/ waterways reserve. F-03 also retains a reference to a Future Projects reserve, which a previous board effectively defunded and removed from the reserve summary, without officially abolishing it through a revision to F-03. In some respects a future projects reserve would seem to be similar in design and purpose to a New Capital reserve that Bailey would like to create. After some initial reluctance, the Budget and Finance Advisory Committee is supporting the creation of a New Capital reserve, with the understanding that effective controls and multi-level vetting occur before new capital projects are proposed for funding from the new capital reserve.

OCEAN PINES

February 2018

OPVFD contribution From Page 9

to pay its share of the ambulance’s capital cost. Perhaps without fully understanding the implications, the OPA had agreed to pay down some unrelated OPVFD-related debt with cash that was sitting in its earmarked bank account, unaware that the cash was going to be needed for its share of needed equipment early this year. Moreover, there will be another $450,000 or so needed in the next several years for the OPA share of the cost of additional OPVFD equipment. Currently the OPA has not set aside funds for these pending capital costs. The solution for the immediate shortfall reportedly was for the OPA’s replacement reserve fund or perhaps some other source of funds to “lend” its separate OPVFD bank account sufficient cash to make its payment to the OPVFD in a timely fashion. Longer term, the in-house loan will need to be repaid and funds raised to pay for the OPA share of future OPVFD capital costs.

OPA targeting ‘cadillac’ health care benefits for OPA employees Directors hope to trim $1.1 million in medical costs in 2018-19

By TOM STAUSS Publisher aced with a burgeoning operating deficit for the current fiscal year and a realization that its ‘cadillac plan’ health insurance benefits for full-time employees are far outside the mainstream, Ocean Pines Association directors are moving ahead with changes to the plans that could save the OPA roughly $100,000 in the 2018-19 budget year in a first phase and twice that in a second phase, probably to be implemented in 2019-20. In the first of what is expected to be the two-phase retrenchment of employee health benefits, the Board of Directors in a Feb. 6 budget work session informally agreed to make its health reimbursement accounts (HRAs) less generous, eliminating two of the three available tiers and capping OPA contributions at $2000 for individuals and $4000 for families. This change won’t be noticed by employees unless they submit a claim, and even then it would depend on the amount of the claim. HRAs essentially are co-pays for costs before insur-

ance kicks in to pay medical benefits. In an approach for a second phase of changes detailed by Director Ted Moroney, the OPA would introduce changes in its benefits package in 2018-19 that would affect employees more directly with higher health insurance premiums. If fully implemented, total savings for the OPA might be $200,000 or more. In the original budget for 2018-19, medical and HRS expenses are estimated as costing the OPA $1.1 million next year. Individuals currently have their premiums paid entirely by the OPA, with family members included for higher ranking employees but a somewhat less generous contribution for family members further down in rank. Director Slobodan Trendic has said this disparity in support for family members may run afoul of federal law. As conceived by Moroney, phase two of the retrenchment plan would ask employees to pay 20 percent of their insurance premiums, with family

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Directors make tweaks to Beach Club pool passes

BUDGET BRIEFS

Warned by General Manager John and Aquatics Director Colby Phillips that they would risk reducing the revenue stream from bundled Beach Club parking and pool passes if they tried to decouple them, directors backed off during a Feb. 6 budget work session and instead seemed to support a more modest tweak designed to address a complaint heard last summer’s from some users of the beachfront amenity. The directors accepted, subject to final acceptance of 2018-19 budget later in February, a suggestion by Phillips to create a new beach parking pass this summer without any bundled pool debit cards. Her suggestion was for a $150 parking pass that would be in addition to the pool passes available last summer, one usable at all Ocean Pines pools and another with photo ID good only at the Beach Club pool. That was a response to complaints cited by OPA President Doug Parks from OPA members last summer who resented what they regarded as the “forced buy” of pool passes they weren’t interested in using. Some directors, particularly Parks and appointed Director Ted

Moroney, had pressed for completely decoupling beach parking from Aquatics, eliminating the sharing of revenue from the bundled sale of parking and pool passes. This year’s sharing of bundled revenues could produce an Aquatics Department surplus in excess of $100,000. Phillips said she would have been OK with a complete unbundling, provided that access to the popular Beach Club pool would not have been possible from “free” pool passes distributed with parking passes, an old system eliminated by the OPA last summer because of abuses that deprived Aquatics of revenues. While she said that a Beach Club pool completely untethered from parking passes would produce a healthy stream of revenue to her department, she said that both beach parking and Aquatics would suffer revenue losses because some people really like the opportunity to purchase bundled passes. Phillips said a conversation about parking and pool passes that occurred during a Feb. 5 budget work session was “disheartening” because to her it seemed that some directors

Health care

OPA President Doug Parks framed the task confronting the board as one that tries to balance competing interests, those of employees and property owners. “We’re looking to bring (insurance support) to the norm,” Parks said, “and we also have to look at our responsibility to the membership, even though we know it’s painful (to employees).” He suggested that the OPA should be moving toward an 80-20 split in premium costs with employees. He said the OPA would have to decide whether to introduce the changes all in one year, or whether there would be some middle ground. Director Cheryl Jacobs questioned Parks whether he considered the OPA’s current health benefits a “cadillac plan,” but he deflected, telling Jacobs that the package had been described that way by an OPA property owner who he declined to name. Jacobs said that “whether or not we have a cadillac plan,” employees should have the option of opting out of insurance altogether or taking the money available and buying their own policies.

From Page 10

members still supported but not as generously as occurs now. The directors essentially said some details of phase two would await the hiring of a human resources staffer later this year. Trendic early in the discussion said his research has revealed that United States’ companies typically pay two thirds of an employee’s family members’ premium costs, with employees given premium support at 80 percent. Moroney suggested that the OPA should be more generous with family members than the industry standard. Both Trendic and Moroney said during the Feb. 6 work session that they hoped the cut in benefits could be transitioned in a way that employees would have some time to adjust to the pending changes. Trendic said that only three percent of companies in the United States pay 100 percent of health insurance premiums for employees, and most of those are in Silicon Valley in California.

were suggesting that Aquatics favored bundling only because it padded the department’s bottom line. She rejected that perception of her intentions and actions, telling the directors that she and her department were only trying to obtain an equitable share of proceeds from a bundled product. If the board decides to unbundle the passes “we won’t make as much, and neither will beach parking,” she

said. Director Tom Herrick said that while he wouldn’t be opposed to decoupling, he suggested keeping the various passes and options from last summer while adding a “parking only” pass, which is precisely what Bailey and Phillips were recommending. Among the new options available last summer was a Realtor/renters pass, which she said produced roughly $40,000 in revenue, one inq

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BUDGET BRIEFS From Page 11 novation by last year’s board that was a success. That along with the other two pool passes available for $120 last summer will be available for purchase this summer as well.

Board grapples with outside use of Beach Club amenity

Well aware that its status as a 501(c)(4) tax-exempt “social welfare” organization requires its amenities to be open to the general public, OPA directors are grappling with the fact that their attorney, Jeremy Tucker, told them that some OPA practices might impede public access to the Beach Club amenity and need to be changed to avoid risk to the OPA’s tax-exempt status. Of particular concern to Tucker was the fact that outsiders can’t purchase daily parking passes at the Beach Club, a privilege that isn’t available to property owners and residents, either. During a Feb. 6 budget work session, the directors seemed to settle

on the elimination of daily parking passes at the amenity, for Ocean Pines property owners and residents and those who neither live nor own property in Ocean Pines. The idea seemed to be that by eliminating the daily parking passes, available for purchase only at the administration building in Ocean Pines, the OPA could not be accused of treating outsiders any differently from property owners and residents. In a related discussion, the directors seemed to agree with a suggestion by Director Slobodan Trendic to charge outsiders a consistent 30 percent premium for various memberships or debit cards purchased relative to those available to property owners and long-term renters. Without such a premium, outsiders effectively are charged less for use of OPA-owned amenities than property owners, Trendic said. OPA General Manager John Bailey said that was a legitimate target, but in some cases it might price non-residents out of the market for Ocean Pines amenities, classes or q

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From Page 12 other activities that are open to the public. As part of the 2018-19 budget process, the directors seem to be in support of a proposal by General Manager John Bailey to eliminate the $250 “associate” member fee available to non-residents enabling them to purchase memberships in various Ocean Pines amenities. He recommended and the board is not resisting a return to the old structure, where “associate” memberships are available at higher rates. Bailey conceded during discussion that the differential between OPA member and non-member rates are not consistent, a situation that will be remedied prior to the adoption of the 2018-19 budget.

Bailey asked to merge maintenance, Public Works

It’s usually one of the less newsworthy areas of budget review, but a Feb. 5 work session on the 201819 budget produced a consensus that two separate Ocean Pines departments, Public Works and general maintenance, will be merged at some point in the relatively near future. The Board of Directors tasked General Manager John Bailey with merging these heretofore separate departments, though managed by one individual, Eddie Wells, into a single one. Bailey told them he had already started thinking about a reorganization of OPA departments, and this merger is one that makes sense to him. But he also said that another department under Wells’s purview, the Dept. of Compliance, Permits and Inspections, probably makes more sense if its placed elsewhere, perhaps under general administration. “CPI has nothing to do with Public Works and maintenance,” Bailey said.

Postage, phones use eyed for budget cuts

Director Slobodan Trendic, in a Feb. 5 budget review session, wants to make sure that his colleagues on the Board of Directors and General Manager John Bailey do everything possible to find areas that can be cut, even line items that don’t seem to amount to much. His ideas include less spending on postage, telephones and even on

February 2018 Ocean Pines PROGRESS printing expense. He suggested cutting back on the print publication of various OPA periodicals, the quarterly report and the activities guide, from four editions per year to three, thereby saving roughly 20 percent on printing costs. Rather than continue to mail publications using expensive first class postage, he suggested using less expensive bulk mailing. Other ideas kicked around during the meeting include converting OPA print publications to mostly digital, with print copies available on request and, perhaps, for an annual subscription. Other directors suggesting eliminating advertising in media that circulate primarily out of Ocean Pines, under the assumption that just less than 90 percent of all amenities usage in Ocean Pines is by Ocean Pines property owners and residents. The exception to that might be advertising targeted at the wedding banquet business, that at one time was a lucrative source of revenue for the OPA but more recently has fallen precipitously.

Bailey open to restoring four-man ditch crews

When is a cut in personnel dedicated to cleaning out ditches not an actual cut in the amount of ditch cleaning that gets done? Answer: During budget review season in Ocean Pines, when one needs to be especially careful to listen to the details, which can be a bit confusing at times. In this instance, what had been budgeted a couple of years ago -- a dedicated crew of four individuals to clean out Ocean Pines ditches -- has been cut back to two. How is this not a cut in the actual amount of drainage ditch clean-out that occurs in Ocean Pines? It turns that of the four individuals funded a couple of years ago for ditches, only two positions are filled, according to General Manager John Bailey. “But if that’s what you want (want four people to clean out ditches), we can do that,” Bailey assured the directors, telling them that the Public Works does have four individuals who could be assigned to ditch clean-up. Another possibility is that the OPA could decide to hire an outside maintenance firm to supply the labor for consistent ditch cleaning. So far there’s isn’t funding in the budget for that, but the situation is

fluid. OPA residents have been urging more funding for drainage in next year’s budget, especially after bibical quantities of rain that have fallen in Ocean Pines over the winter.

Moroney opposes ‘holiday’ for waterfront differential

Waterfront property owners who thought the Board of Directors might give owners of bulkheaded property in Ocean Pines a one-year holiday from having to pay the $465 waterfront differential, an add-one to the base assessment that is currently $921, might want to launch a resistance campaign. A one-year holiday is not looking good, as if to prove the adage that once elected officials get a hold on your money, they really, really hate giving it up. The newest member of the board, appointed director Ted Moroney, made it very clear during a Feb. 5 budget review session that he believes a bulkhead and waterways reserve fund, with waterfront owner contributions producing the current

balance of $2.5 million minimum balance, is ideal. With more than $1 million worth of bulkhead replacement possible over the current fiscal year, there’s money available for it without collecting the differential in 2018-19, with plenty left over as a cushion for emergencies. That was the point raised by Director Slobodan Trendic and Marty Clarke, chair of the Bylaws and Resolutions Advisory Committee. The current balance of $2.5 million is courtesy of a holiday in bulkhead replacements over the last two years, at the same time that previous boards voted to keep the $465 add-on assessment for owners of bulkheaded property. Moroney pushed his colleagues in the direction of no differential holiday next year. He even nudged them in the direction of restoring the $19 in every lot owner’s assessment related to common area bulkheading that Bailey and the budget and finance committee had removed from next year’s budget. q

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protecting bulkheads, Moroney pressed his colleagues for a higher minimum balance, with only Trendic unconvinced that it’s needed.

Jacobs supports exercise equipment for trail

Director Cheryl Jacobs is trying to coax her colleagues into authorizing spending of about $10,000 for exercise equipment to be strategically located throughout the Southgate pond trail that the Board of Directors finally will get around to resurfacing this coming year. At least, that should happen, because the directors are including the long-delayed trail surfacing in the 2018-19 budget, to be funded out of replacement reserves. The exercise equipment, including a chest press, a legal press, push-up bars, and a sit-up bench, are recommended by the Parks and Recreation Department with the active support of the Recreation Advisory Committee. Because they are considered new capital items, they would be treated almost as if they were operating expenses, to be paid for out of next year’s assessment dollars. They didn’t make it into General Manager John Bailey’s proposed budget for 2018-19, but were includ-

ed in a “not funded” schedule. In addition to the equipment, the proposal includes playground mulch and 4x4s and miscellaneous materials, with a $2300 contingency. During a board budget work session Feb. 6, other directors -- Slobodan Trendic, Colette Horn and Ted Moroney -- seemed to indicate they wanted Bailey to include the equipment in an updated budget drafted. OPA President Doug Parks suggested that the 50th Anniversary Committee find a sponsor for the equipment. Jacobs noted that the expenditure would cost property owners only $1.18 in higher assessments. She did not go to bat for other recreational equipment on Bailey’s unfunded list, including a bike track, a zip track and a tri-runner, all of which are much pricier than the exercise equipment. In a year of operating deficits well in excess of a $1 million, new capital projects that impact the annual lot assessment are not popular with Bailey or the board.

Moroney opposes craft building renovation

While emphasizing that he loves the Pine’eer Craft Club and wants to

give the club new space in one of the meeting rooms in the Community Center, one that includes access to a bathroom, Director Ted Moroney isn’t keen on spending $75,000 to renovate the building. He told his colleagues that he expects this Ocean Pines landmark, which has fallen into a state of disrepair because of all-too-typical neglect, will needs lots of other repairs in the coming years. His idea is to move the club into the Community Center and then to demolish the craft building. “I definitely want them to have a space,” he said during a Feb. 5 budget review session, and in a response to a question from Director Pat Supik made it clear he doesn’t want the OPA to build the club a new building. He said he just wanted “to throw out the idea (moving the club to Community Center)” as food for thought as opposed to a solid budget recommendation. OPA President Doug Parks suggested that the money should be left in the budget “for now,” but the suggestion by Moroney indicates that the emphasis of last year’s board on renovation of older buildings might q

From Page 13 But the following day, Moroney no longer pushed for that. When the board addressed the diffrential issue during a Feb. 6 work session, Moroney’s view prevailed, with only Trendic favoring the oneday holiday, to the extent allowed in the Declaration of Restrictions, DRs for short. Initially favoring the holiday in work sessions with General Manager John Bailey, members of the Budget and Finance Advisory Committee said that they were no longer opposing it, without explaining the apparent flipflop. Member Marty Clarke sided with Trendic, however. Trendic said that rather than impose a $465 differential in 2018-19, the board should adopt an $80 or $100 fee; $80 is the minimum allowed in the DRs for bulkheads. Moroney’s rationale for keeping the differential was possible spending on bulkhead replacement in the next several years that could exceed $2 million, but even he acknowledged that spending of roughly $1 million per year would be more realistic. Citing the lack of insurance cover-

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OCEAN PINES BUDGET BRIEFS From Page 14 be eroding with the make-up of the new board.

Sports Core pool room addition killed

Not that there was much doubt about the fate of the budgeted Sports Core pool addition in the current year’s or the 2018-19 budget. But brief comments offered by directors during their Feb. 5 budget review session suggests that this room addition won’t get built anytime soon. The estimated price tag of $225,000 has essentially scared off the directors in the teeth of an operating deficit that could exceed $1 million by the end of the fiscal year on April 30. Director Slobodan Trendic wondered whether it would be kosher to define the addition as one that could be financed from replacement reserve capital because it was an improvement of an existing asset, as opposed to a new capital expenditure. New capital spending is treated in Ocean Pines as if were an operating expense, and directly affects the lot assessment in the year it occurs. Replacement reserve spending does not. Other directors pushed back against the idea that a new room addition could be defined as anything other than new capital. That designation dooms its prospects, at least until such time as General Manager John Bailey is able to find an alternative source of funding for new capital. He’s suggested the sale of OPAowned building lots as one alternative. So far, there have been no public expressions of support for that idea by the directors, almost as if they’re afraid their will be backlash among OPA members. The last time lot sales were actively marketed by the OPA there were no takers.

Board not happy with proposed golf budget

The $165,000 recommended loss in golf operations for 2018-19 met with some stiff resistance from Ocean Pines directors during a budget review session Feb. 5. Slobodan Trendic teed up the discussion by saying that the projected loss next year is heading “in the wrong direction” given that this

February 2018 Ocean Pines PROGRESS year’s loss is projected at $107,000. Trendic said golf operations need to be “net zero or profitable” or the board will need to consider alternatives, such as leasing. Director Ted Moroney weighed in with concerns that the golf course’s maintenance costs are too high, a point also made by Trendic, who pointed out that Ocean Pines’s maintenance costs are much higher than the national standard. OPA President Doug Parks wondered whether a reduction in maintenance labor costs would maintain the course properly, prompting Director Tom Herrick, who is liaison to the Golf Advisory Committee, to

suggest that “maybe we need to focus on revenue” increases instead. Moroney said that perhaps five full-time people maintaining the course is too many. Director Cheryl Jacobs speculated that the OPA may be spending so much on maintenance because of poor drainage caused by an aborted golf course drainage program. “We only did half” of the golf course -- nine out of 18 holes -- she said, referring to a drainage program that targeted the worst holes on the course for rebuilding. Moroney seemed skeptical of Jacobs’s theory. He said on a recent tour of the

course most of the drainage issues he saw were on the edge of the course -- sometimes referred to as “rough” by golf afficinados -- rather than fairways. OPA President Doug Parks said the discussion made it clear that the directors are concerned about the “trend” of golf operations and Moroney suggested that General Manager John Bailey “come back to us” with suggestions on how to reverse it. “We’re going to have to reopen discussions” about golf again before a budget is approved later this month, Parks advised. Time is running short.

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BAGEL SANDWICHES Served on Bagel, Roll or Bread Bagel with Butter ….. $2.05 Bagel with Cream Cheese …. $2.85* Your choice of plain, light, veggie, veggie light, strawberry, walnut raisin, almond, scallion, scallion and tomato, chive or olive cream cheese Bagel with Nova or Crab Spread …... $5.95 Bagel with Smoked Sliced Salmon … $9.95

LUNCH OPTIONS Homemade soup ~ Small $3.25 ~ Large $5.49 Pot pie .............................................… $5.49 Quiche .............................................… $3.75 Pizza bagel ~ Plain $3.25 - Pepperoni $5.49 Bagel Dog ............................................. $3.35

Fruit Cup ............................................... $3.99 Yogurt Parfait …................................... $3.99

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Served on Bagel, Roll or Bread • Includes a side of macaroni salad and a pickle Ham …………............................………. $7.45 Taylor Ham ……...........................…….. $7.45 Turkey ………...................................….. $7.95 Roast Beef …..................................…… $7.95 Cappicola …….................................….. $7.45 Genoa Salami …................................… $7.45 Italian Combo …...........................……. $7.95 (Roast Beef, Cappicola, Salami and Provolone) Roast Beef & Turkey ……................….. $7.95 Liverwurst …...............................……… $6.85 Bologna ……................................…….. $6.85 Egg Salad …............................………… $6.95 Tuna Salad ………..........................……. $7.75 Whitefish Salad …..................…………. $7.45 PB&J ……………….........................……. $3.75 Grilled Cheese …….......................……. $4.95 Add cheese to any sandwich for only 60 cents

Plain • Cinnamon Raisin • Sesame Onion • French Toast • Garlic Honey Wheat • Asiago • 7-Grain Berry • Poppy • Almond Everything • Everything Wheat • Rye Marble • Egg • Pumpernickel Sundried Tomato 1 Bagel ………...........................…. $1.25 Half Dozen Bagels …...............……… $7 Dozen Bagels ………............…… $13.50 Cinnamon Crunch Bagel ….....….. $1.75 N.Y. Kaiser Roll ……............….. 65 cents Portuguese Roll ……........…….. 65 cents *Irish Soda Bread Loaf $6.50 • Slice $1.50 * Special Order

FRESH PASTRIES Lemon bar ……..............................…… $2.25 Linzer Tart ................. Small $1.25 - Large $2 Muffin …….........................……………. $2.75 Brownie ….................................……….. $2.25 Turnover ………..........................……… $2.80 Croissant .............……….............. $2.80 Cinnamon buns .................………. $2.80 Minicheesecake...........……………. $3.50 Éclair ………..............................….. $2.90

WHIPPED CREAM CHEESES Plain • Light • Veggie • Light Veggie Strawberry • Walnut Raisin • Almond Scallion • Scallion & Tomato Chive • Olive Plain Cream Cheese ½ lb. …......… $3.20 Flavored Cream Cheese ½ lb. ...... $3.95 Nova Cream Cheese 1 lb …………$10.90 Crab Cream Cheese 1 lb. ……...…$10.90

All prices subject to change

11304 Manklin Creek Road, South Gate Ocean Pines (Manklin Creek Road & Ocean Parkway)

OCEAN PINES

Facilities manager lays out details of bulkhead replacement $1 million a year for two years projected, with millions more to follow By ROTA L. KNOTT Contributing Writer n an effort to ensure the safety, stability, and structural integrity of the community’s bulkheads, the Ocean Pines Association has developed what it bills as a 35-year, long-term strategy for repair and replacement of the waterfront structures at a cost of approximately $1 million per year for the next two years. It’s unclear what might happen in the years that follow, or even whether the OPA will be able to accomplish what’s envisioned in the nearer term. Kevin Layfield, OPA director of operations and facilities, presented an update on the bulkhead program and the association’s long-term strategy for shoring up the waterfront structures during a Jan. 27 Board of Directors meeting. A written report appears on the OPA Web site. Overall, Layfield said the estimated cost for bulkhead program through April 30 of this year for seven properties is $204,272, and from May 1, 2018 to April 30, 2019 for nine properties is $371,872. Also, the OPA’s 2016 reserve sStudy indicates a need for bulkhead replacement on an additional 22 properties for an estimated cost of $418,880, according to Layfield. From May 1, 2019 to April 30, 2020 the new replacement strategy calls for 17 properties at a cost of $722,100. The reserve sStudy indicates an additional 19 properties, at a cost of $358,700, to be addressed. The following year, from May 1, 2020 to April 30, 2021, bulkhead replacement is envisioned for 124 properties at a total cost of $2,604,000, and from May 1, 2021 to April 30, 2022, and additional 101 properties are planned for bulkhead replacement at a cost of $2,191,700.

“The rot and corrosion doesn’t stop when we don’t do the work,” Layfield told board members. The bulkhead program has been on hold due to protracted contractual negotiations. “If I don’t get a lot done one year it just piles on to the next year.” But Layfield also told the directors that spending more $2 million

or more in the out years probably would not happen. His written report essentially leaves that question to future boards. “Reasonably it sounds like, not even going to worst case, we’re looking at about a million dollars a year for the next two years,” Director Ted Moroney said regarding bulkhead repairs and replacement. Layfield confirmed that estimate and said, “Once we get caught up, I think we’ll see everything level out. Everything will be a lot more accurate and I think the numbers will go down considerably.” He said the bulkhead program is divided into two categories, those that are in such distress that the need to be replaced and those on which temporary repairs can be made to extend their lifespan until such time as they can be replaced as part of a larger section. He said staff evaluates the condition of the individual sections of bulkhead to determine whether they only need minor repairs or should be scheduled for full replacement. Many repairs can be handled in-house, he said, including issues

with settling soils behind the bulkhead, broken or missing cap boards, holes or missing sheathing boards, or broken tie rods. Replacement is warranted when a bulkhead has reached the end of its estimated 30-year life cycle and has more extensive structural problems. These include if the bulkhead is beyond scope of repair due to rot, worm infestation, storm damage, or tie rod corrosion; has a large hole, or is deemed necessary for replacement due to replacement of adjoining bulkheads. Layfield said in the past when short sections of bulkhead were replaced and connecting sections left in place, that’s where there have been structural failures. He said it is better replace longer runs of bulkhead on at least five or six lots at minimum. Moroney asked if the OPA is tracking independently the cost of bulkhead repairs made by Public Works. He said expenses for those repairs should be charged to the bulkhead reserve fund rather than out of the public works department’s operating budget.

“If it’s reserve replacement that we’re doing in house that’s how that ought to be funded rather than out of the normal operating budget,” he said. Director Slobodan Trendic said it sounds like the bulkhead reserve fund is used not just for repairs and maintenance but also for capital replacement. Trendic suggested the board review that issue since the association is preparing to launch a new bulkhead program. “Do we separate repair and maintenance versus capital replacement?” Moroney agreed and said “I do think we need to look at the whole program there to see where we stand funding wise long term…” For last year’s bulkhead program Layfield said the OPA issued a request for proposals in February 2017 and the low bidder was Hi-Tide Marine. However, work was postponed until the fall of 2017. The county, state and federal approvals are to replace 2,000 linear feet of timber bulkhead with vinyl in August 2017 and are valid for two years. Work was again scheduled to begin in October but was delayed due to a contractual dispute. It finally got under way in December. The estimated cost based on the contract price of $272 per linear foot is $326,400, and includes stabilization behind bulkhead, a portion of the bulkhead replacement project that q

February 2018

Long-term bulkhead plan ‘strategy’ seems more like short-term tactics Plan outlines spending through April of 2020, after that is a question mark By TOM STAUSS Publisher he just released multi-year bulkhead plan is billed on its cover sheet as a long-term strategy, but buried in its contents amid lots of striking photographs of still functional but showing-its-age bulkheading is a suggested path forward that is long on short-term tactics but short on specific longer-term recommendations. The report seems mostly to focus on a clean-up of the original 30-year bulkhead replacement plan, specifically in Wood Duck Isle, where former Acting General Manager Brett Hill last year said there was a multitude of failing bulkheads requiring the expenditure of millions of dollars to replace. The just released

bulkhead report doesn’t really confirm the urgency of bulkhead replacement in Wood Duck, only that it should be done over an unspecified period of time. In the out years, in fact, there is pervasive vagueness. As if to underscore the non-urgent nature of Wood Duck Isle bulkhead replacement, the report recommends two years of replacement work that seems indistinguishable, at least in so far as cost is concerned, from the original 30-year replacement plan that more or less concluded a couple of years ago. That old plan spent $800,000 to $900,000 on bulkhead replacement throughout Ocean Pines, more or less the same amount that was collected every year in the $465 waterfront differential paid by most own-

ers of bulkheaded property in Ocean Pines. That plan, with the exception of the occasional emergency repair and the continued collection of the waterfront differential, has been in hiatus for two years. One way to read the new bulkhead strategy is that it’s a call to resume the program that’s been in hibernation, albeit at slightly higher expenditure of roughly $1 million per year. To that end, the report recommends making $204,270-worth of bulkhead replacements from now until the end of April, with another $371,872 to be spent on nine properties in fiscal 2018-19, that is, from May 1 of this year to April 30 of next year. Still another tranche of q

16 Ocean Pines PROGRESS

February 2018 Ocean Pines PROGRESS

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February 2018

Bulkhead strategy From Page 16

22 properties at a cost of $418,880 is proposed from May 1 through April 30 of next year. That brings the total to be spent between now and April of 2019 to $993,000, a number that General Manager John Bailey says he’s included in his 2018-19 budget that is scheduled for approval later this month. The report then outlines proposed bulkhead spending in FY 20192020 in two segments, one costing $722,000 and the other $358,700, for a total of $1,080,700. After that, the report downshifts into a less specific modus operandi, in effect shifting the burden to OPA policy-makers to decide how much they want or believe they can afford to spend on bulkheading. For 2020-21, the report says the OPA could spend $2.6 million on 124 replacement properties, and the following fiscal year the estimate is $2.1 million on 22 potential properties. During a recap of the report

Bulkhead report From Page 16

was completed by Public Works in the past. Multiple properties totaling about 3,400 linear feet were identified in the spring of 2016 for need of replacement or repair and received permit approval from the state and federal authorities. Those permits are valid through 2019 also.

presented by its author, Facilities Manager Kevin Layfield, during the Jan. 27 meeting of the Board of Directors, he downplayed the potential dollars that could be spent on bulkhead repair or replacement during those two fiscal years. The cost “should be substantially lower,” he told the directors, without any explanation for how the board could or should decide how much to spend. There was no suggestion or recommendation offered as what criteria would be relevant in determining a budget number for those years. Layfield suggested at one point that the OPA could hire two marine contractors to work simultaneously in Ocean Pines to expedite replacement, but whether that possibility is practical really hasn’t been addressed. Before the current contractor, Hi-Tide Marine, was hired for some emergency replacement work last year, Fisher Marine had been the contractor of choice for many years. That relationship ended during the tenure of former Acting General

Manager Brett Hill, who summarily asked the contractor to vacate its Swim and Racquet Club staging area in part because of complaints about the appearance of the site from across the canal. In addition, Hill was not pleased with the more or less automatic renewal of the program on a single-sheet of paper year by year, with no competitive bidding. An issue that remains is where an on-site staging area for any ongoing bulkhead replacement program can be found in Ocean Pines. If two companies are working simultaneously in separate parts of Ocean Pines, then it’s possible that two separate staging areas will need to be located, even more challenging than just having to find one. The report is silent on the question of staging areas. How practical is it that Ocean Pines would be able to accommodate two marine contractors at once? The report offers no guidance. The report does suggest that a new 30-year bulkhead replacement plan could be implemented once these replacements/repairs or made

to bulkheading in Wood Duck Isle, however. New bulkheading might last more than 30 years, and bulkheading that still remains in good condition would not be replaced. Layfield told the directors that more inland canal bulkheads could be replaced with wood bulkheading, because they seem immune from worm infestations that afflict bulkheading in more exposed areas that front directly on the bay or river. More expensive vinyl bulkheading is suggested for these more exposed non-inland areas, Layfield said. The report does not seem to lend much support to Bailey’s recommendation to continue collecting the $465 waterfront differential in 2018-19. He and the Budget and Finance Advisory Committee initially had been at odds over the committee’s recommendation of a one-year holiday in the collection of the waterfront differential because the waterways and bulkhead reserves currently is flush with $2.5 million in asset value, two and a half times the spending called for in the first year of Layfield’s strategic plan.

Before work can proceed, the OPA must obtain county approval. Layfield said because of the location of the properties, including Westfield Circle, Wood Duck I, Teal Circle, Clubhouse Road, Dove Lane, and Mallard Drive East, engineering specifications must be completed on concrete sections and timber sections to be replaced or repaired. The estimated cost, excluding engineering, sediment and erosion

control, at $272 per linear foot is $918,000. The project has an estimated start date of October 1, 2018 with completion in spring of 2019. Additionally, Layfield said 81 properties remain on the OPA’s 30year plan for bulkhead replacement. On the south side bulkheads that have not been replaced are located along N. Pintal Drive. Wood Duck I, Wood Duck II, and Westfield Circle. Those on the north side are on

Carriage Lane, Clipper Court, Widows Watch, Lookout Point, Ocean Parkway, Beach Court, Windward Court, Portside Court, Sundial Circle, Clubhouse Dive, and Dove Lane. He said staff will evaluate the bulkheads for replacement by condition and schedule them for replacement them accordingly. Individual bulkheads may be repaired in lieu of replacement according to life cycle of adjoining bulkheads. The 30year plan will be completed by 2022 while incorporating yearly assessment with data tracking and onsite visits into a new 35-year replacement life cycle. The long term strategy for bulkhead repairs and replacement calls for repairing sections to prolong their life until other adjoining sections are ready for replacement. Replacing longer sections is more efficient and result in construction of a stronger structure, Layfield said. He said the OPA will utilize information and visual inspections to accurately assess the condition of the bulkheads and determine whether the appropriate course of action is repair or replacement. Additionally, the replacement program will continue to incorporate new technologies in the industry, including vinyl bulkhead, to assure a better longer lasting structure.

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February 2018 Ocean Pines PROGRESS

By TOM STAUSS Publisher xpressing disappointment and dismay with the perception by many that his tenure as acting general manager for much of this past year is a direct cause of an Ocean Pines Association operating deficit for 2017-18 that will substantially exceed $1 million, Brett Hill is fighting back. While not necessarily discounting the role that discounts and other operational experiments may have had on the financial results through late summer, when he resigned as acting general manager and as a member of the Board of Directors, Hill said that other factors, such as an ongoing losses from theft and unbudgeted accounting expenses incurred in an effort to stem those losses, should also share in the blame for the negative variances to budget. He went on to say that he didn’t get much support from his colleagues on the board in dealing with what he described as accounting irregularities, until he and former Director of Finance John Viola finally decided to call in the Worcester County Bureau of Investigation in late summer to probe discrepancies between deposit slips and actual cash receipts deposited with a local bank. There were 27 deposits with significant discrepancies, Hill said, totalling roughly $30,000. There is no indication that the WCBI is close to solving the thefts, which the former general manager called perplexing

Gloves off, former acting GM deflects blame for large operating deficits Says theft and unbudgeted accounting expenses caused much of the red ink because “only two people could have done it.” He also was critical of the previous board for not voting to accept his recommendation to hire Legum and Norman, a regional homeowner association management company with a branch office in Ocean City, to assume direct control over back office accounting functions for the OPA. He said the company would have brought in its own personnel and accounting software to run OPA back office operations. At the time, there was no public disclosure of the fact that Legum and Norman was under consideration as a replacement for the OPA’s inhouse department of finance, which Hill disparaged as the likely source of missing cash. He said shortly after the county’s Bureau of Investigation was brought in, two employees within the finance department were no longer employed by the OPA. But there were no arrests reported at the time or since, he said. Hill acknowledged that publicly, Legum and Norman was only cited as a company that could supply a

needed software upgrade for the OPA, not that it would take over back office operations for the OPA, replacing in-house staff. He said he had two votes in support of the out- Brett Hill source solution, director and then OPA President Tom Herrick and former Director Dave Stevens. Hill said that OPA Director and Treasurer Pat Supik had promised her support of the proposal to hire Legum and Norman prior to the meeting. “But on the day of the meeting in July, she screwed me (by voting against Legum and Norman),” Hill said in an telephone interview with the Progress in late January. He said she bought into the argument of other directors that a decision to outsource back offiice functions should await the arrival of a new general manager. Subsequently, the board and the

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new general manager, John Bailey, opted instead to hire a new in-house director of finance, Steve Phillips, who arrived on the job last month. The finance department continues to operate with a skeleten staff, and no decision has been made on new accounting software or replacement hardware, should the OPA go that route rather than switch to cloudbased solutions. “I tried my best to get at the source of the lost cash and reform our back office functions, but I couldn’t get a board majority to go along,” Hill said, acknowledging that relationships among the directors were toxic at the time over revelations that Hill, as acting general manager, had authorized the installation of video cameras in the administration building in an effort to capture wrong-doing by employees. One video in particular, of former OPA director of finance Mary Bosack conversing with Hill in his office, roiled relations among directors. Hill in particular came under sharp criticism from directors Cheryl Jacobs and Slobodan Trendic for what Hill now describes as the “infamous” Bosack video. What’s on that video has never been publicly disclosed, but Trendic has said that it doesn’t put Hill in a favorable light. Trendic recalls the he opposed the Legum and Norman proposal last July because the OPA had not sought competing bids for back-office functions. “The Legum and Normal proposal was pricey,” he said, “and we had not followed procedures in our bylaws for obtaining competing bids for large contract expenditures.” In principle, Trendic said he favors outsourcing back office functions as an alternative to spending “$400,000 for new hardware and software,” as next year’s budget allows. A copy of the Legum and Norman proposal obtained by the Progress indicates that the company’s proposed management fee was $159,500 annually, partially offset by a net reduction of two individuals in the finance department. The company would have supplied an on-site accounting manager and accounting administrator, with the OPA paying their salaries. Hill said the failure of the board to bring in Legum and Norman was a watershed moment for him, proof that a board majority simply could not grasp the severity of the problem with missing cash and could not summon the courage to act, preferq

OCEAN PINES

20 Ocean Pines PROGRESS Brett Hill From Page 19

ring instead to push the matter off to a new general manager. “Everyone now seems to want to blame everything on me,” Hill said an e-mail to the Progress. “Regarding the budget deficit, and all of the money ‘lost’ in operations, I am dumbfounded that no one is talking about the money that has been physically lost over the last year. “Three times from January through August I brought significant financial issues to the board,” Hill said. “The first time, the board decided to look past and move on; that was last January. The second time, last May, (around the time) of the infamous video, my peers decided to try and remove me, and started an internal fight because I had opened Pandora’s box. “The last time, in August, the CFO (Viola) and myself asked for WCBI to be brought in, because we could not tolerate the board looking past an issue any more. That resulted in two resignations in eight days, and where is the WCBI?” he said.

Apparently the investigation is ongoing. Former OPA Director Marty Clarke told the Progress in early February that WCBI investigators had just administered lie detector tests to finance department personnel. Hill said that back in January of last year, there was “documentation provided that alluded to well over six figures of money misappropriated by fraudulent documentation, and it was ignored. “The second issue in May brought up invoices from family members of employees for no-bid, no-show work to the tune of thousands of dollars per week, which nothing was done about. The company involved with the invoices got out of the business when questions were asked,” he said. This second incident involved outside landscape services purchased through the Public Works Department, Hill said, in amounts small enough that they went undetected by him and Viola for many months. “Last, in August, I was notified that 27 bank deposits were short cash, in amounts ranging from under $100 to thousands of dollars.

The cash was on video or in police custody from the time it was last accounted for until the bank tellers, so the fact that no action has been taken is beyond reprehensible,” according to Hill. On top of the money “physically taken,” Hill said the OPA last summer “spent tens of thousands of dollars across two auditors trying to identify the weaknesses in accounting, on top of paying hundreds of thousands in unbudgeted, outsourced consultants. Yet, everyone wants to talk about the Yacht Club being the big problem.” While conceding that the Yacht Club “was definitely a problem,” so was the fact that the “cash from customers didn’t make it to the bank,” Hill said. He also said that the accounting department charged its time to Yacht Club operations while trying figure out the Yacht Club cash and that these expenditures, and fees for unbudgeted accounting firms and consultants, are “somehow missing from reported financials.” He estimated these costs so far this fiscal year at roughly $200,000. Supik, in an email to the Prog-

ress, rejected Hill’s claims. She said that additional, unbudgeted accounting expenses have cost the OPA in the neighborhood of $50,000 this year and have not been charged to the Yacht Club or Beach Club. They show up under General Administration or the Finance Department, she said. Hill said the attitude of last year’s board and its hired accountants and consultants was to sweep the entire matter of missing cash under the rug. He said no arrests or efforts to collect lost cash through civil actions were authorized. “Property owners need to know that missing cash and all those consultants and accounting firms we hired contributed to the poor results at the Yacht Club and Beach Club,” Hill said. The former acting general manager and director said that he doesn’t believe it’s fair of this year’s board to try to impose a “deficit recovery” assessment increase on OPA members in the 2018-19 budget currently under review. q

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cean Pines Association President Doug Parks has appointed former OPA President and Director Tom Terry as the chair of the Technology Working Group, an ad-hoc committee of OPA members that Parks has led since its inception in 2016. “Given the demands on my time and the need for the Technology Work Group to continue its important work, I decided it would be appropriate to have someone else step in for me and lead the team going forward,” Parks said in an email statement to the Progress. “After soliciting for candidates, I’m happy to announce that Tom Terry has volunteered to take my place in leading the Technology Work Group.” Terry, a telephone company executive before retiring to Ocean Pines, served six years on the OPA board, exiting in August of 2016. He served as OPA president four of those years, not without some controversy. Terry was a strong backer and ally of former OPA General Manager Bob Thompson. As Thompson himself was a lightning rod in his final years as OPA general manager, so to some extent was Terry, who nonetheless left the OPA in strong financial condition after his term-limited retirement from the board. Terry’s appointment by Parks sends a clear message that the OPA president believes none of the baggage is relevant as the TWG begins a new chapter. “Tom has my full support, and I am working with him on the transition and to get him up to speed on the work that has been done to date.

Brett Hill From Page 20

Currently, the recommended budget for next year anticipates a $30 assessment increase, which Bailey has said essentially can be tied to deficit recovery. Somewhat ironically, given that he was at loggerheads with Trendic for much of last year, Hill said he agreed with Trendic that the current year’s operating deficit and the one from the previous year shouldn’t be offset “by raising assessments on the backs of property owners” in 2018-19. While Trendic has blamed last year’s board for failing to take action to stop some of Hill’s management decisions which Trendic said led to deficits, Hill’s take is that the board failed to act to prevent continued losses from cash mismanagement.

February 2018 Ocean Pines PROGRESS

Tom Terry appointed chair of technology working group Former OPA president to revive panel headed up by Doug Parks since its inception in 2016 I will remain a member the group and plan to attend as many meetings as my schedule will permit,” Parks said, adding that Terry “is al-

ready working to schedule a meeting with the TWG members. I look forward to continuing to leverage the expertise this group has provided as

we move forward in planning and delivering a longterm technology strategy for the Association.” Terry is no stranger to the Tom Terry technology challenges in Ocean Pines. In a ten-minute farewell address To Page 24

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February 2018

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February 2018

Davis, Bowen and Friedel firm tours Country Club second floor

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By TOM STAUSS Publisher n a brief update delivered to the Board of Directors during its Jan. 27 monthly meeting, General Manager John Bailey said that the firm hired to do engineering drawings for the renovation of the Country Club’s second floor was scheduled to tour the building again in early February to assist the firm in completing the design work. Bailey said he and the engineering firm, Davis, Bowen and Fridel of Salisbury, would be coordinating the design work in the hopes of having it ready shortly for board approval. After that, the OPA will release a request for proposals from contractors for the project. Previously, Bailey ruled out using Public Works Department for any phase of the project. Once the RFP is issued and bids received by the OPA, “we’ll see how much we can get done by summer,” Bailey said. He offered no assurances that the work will be done by June 30, the date a golf tournament scheduled as part of Ocean Pines’ 50th anniversary is planned. Indeed, he did not reiterrate any of the previous timelines for the

project. At a board special meeting on Jan. 12 when the board awarded a contract to DBF to draft final construction drawings, representatives from the from the firm said it would take about six weeks to complete the drawings, which means, assuming they’re approved by the directors immediately thereafter, an RFP could be released on or about March 1. Assuming a 30-day turn-around for bid submissions, the board could be ready to award a contract on or about April 1. How soon the approved contractor could begin work on the project remains to be seen, but just on the face of it a June 30 completion date seems like it would be quite a push to accomplish. The contract award calls for a fee to DBF not to exceed $40,000. The design drawings are for the first phase of a three-phase project. This first phase includes a large board room/bar area with seating in the center of the second floor, with a cathedral ceiling. On the side of the building facing the first teebox, there will be a second room with movable partitions,

which will be collapsible to create a single room if needed. The DBD representatives said the partitions could be solid, opaque or even made of a foldable glass material. A wall with two doors would be added to separate the entrance vestibule from the second floor space. A stairwell to the third floor office would be removed. The handicap lift will remain during this first phase. Two of the existing columns in the room will be removed, with three remaining to support the roof and first floor. The roof over the small room overlooking the pond between the ninth and 18th greens will be removed, with that space converted back into an outdoor deck, its original design. It will be raised slightly to be level with the interior spaces. An additional corner section of decking will be added to connect existing exterior decking with the area to be converted to open space. The engineering drawings do not include renovation of the existing kitchen. That project will be the focus of a second phase to be undertaken once phase two is completed, according to Bailey. As he has said previously, he does

not envision that phase two will involve a full-service commercial kitchen, but more of a “warming kitchen” with some refrigeration units that could accommodate buffets for golf tournament banquets and similar events, as opposed to what he called “plated dinners.” Food for buffets would be provided by the Yacht Club or the downstairs Tern Grille, Bailey said. Directors seemed generally to support this more limited approach to a second floor kitchen. Director Slobodan Trendic was the sole exception. During the Jan. 27 board meeting, OPA President Doug Parks said the board had received numerous emails opposing any kind of kitchen at the Country Club, suggesting a fitness center instead. Parks essentially said that while a fitness center somewhere in Ocean Pines would be considered by the board, the Country Club second floor would not be the best place for it. A third phase, which at this point is more in the conceptual and exploratory stage, would focus on renovating the entrance to the building. A component of that could be the addition of an elevator that would replace the existing lift for compliance with the Americans Disabilities Act (ADA). Directors seemed generally receptive to the idea of an elevator in a third phase, but there were no votes or promises made.

Technology group

Back in July of last year, Parks suspended the activities of the task force. He said the action was intended to send a clear message that the task force was unhappy because its members believed that their advice had not been welcomed by Acting General Manager Brett Hill. Parks told the Progress that on a number of occasions Hill had acted on technology matters “without the advice of the task force. “Brett wasn’t an advocate of the working group, and while his decisions may have been reasonable, the task force hasn’t been there to assist in some of them,” he said, indicating that some task force members were miffed because of that. “We will reconvene in mid or late September, after the arrival of a new general manager,” he added at the time. Perhaps the most egregious example of unilateral decision-making involved a recommendation by Hill, considered in the form of a motion

offered by him at the July 28 meeting of the Board of Directors, Parks said. The motion to proceed with the purchase of accounting software to replace the OPA’s antiquated systems failed to garner a majority of votes. The directors decided to delay that decision until a new general manager was on board to help with that decision. “It (the recommendation) to go with a system used by Legum and Norman (an HOA management firm) didn’t go through,” Parks added, “but not once did Brett mention that we as a task force had been working on this issue for some time.” Hill recently told the Progress that his proposal actually was for much more than software. He said he wanted to hire Legum and Norman to handle all of the OPA’s back office bookkeeping and accounting functions, an objective not made clear at the time. His motion failed on a 4-3 vote,

with Directors Dave Stevens and Tom Herrick joining Hill in support. Hill said that he had Director Pat Supik’s pledge of support going into the July meeting. Hill said she broke her word to him and switched sides. Parks said the committee was upset with the way the issue had been handled. “I had phone calls from members wondering whether it made good sense for us to continue as a task force,” Parks said at the time, adding that most members believed a suspension of activity until sometime after a new general manager arrived “would send the right message.” The suspended activity meant that the task force was in no real hurry to complete work on drafting a request for proposals (RFP) for a high speed, secure solution to OPA departmental connectivity, which could the installation of fiber optic cable through Ocean Pines. “We will present our draft RFP

GM makes no promises about construction timeline

From Page 21 to OPA members at the annual meeting in August of 2014, Terry alluded to those challenges, citing “the internet technology backbone and related systems in Ocean Pines [that] are in desperate need of an update. They are very archaic. They’re very old.” He added that “anyone who has ever tried to watch a board meeting online will understand how challenged the system is because it frequently shuts down.” There have improvements since then, although bandwith issues and occasional connectivity problems still occur. The most significant improvements in the broadcast of board meetings since Terry’s tenure on the board involve high-definition cameras and better audio. On-line streaming and access to recorded videos is available through the OPA Website or directly from You-Tube.

BOARD OF DIRECTORS

February 2018 Ocean Pines PROGRESS

Board agrees to retain Baltimore-based auditors for this summer’s audit Trendic motion to seek bids amended to apply to summer of 2019 report By TOM STAUSS Publisher irector Slobodan Trendic recently ramped up previous efforts challenging the Ocean Pines Association’s current relationship with a Baltimore area accounting firm and called for the OPA to immediately issue a request for proposals from competing firms to bid on the OPA’s 2017-18 audit report to be completed this summer. His call for a new RFP occurred in the form of a motion offered during the Jan. 27 regular meeting of the Board of Directors. He won a partial victory, with most of his colleagues agreeing with the concept of a RFP for auditors but not wanting to change auditors for this summer’s report. Instead, they suggested that an RFP be issued this August or September for the 2018-19 audit that would be conducted during the summer of 2019. Reluctantly, Trendic went along with the so-called “friendly amendment” to his motion calling for a competitively bid audit report. This board can’t bind next year’s board, however, on this or any other motion, so it remains to be seen whether the OPA will follow through on the amended version in August. In support of his motion, Trendic said that some directors “weren’t given the information (needed) about the process” that led to the hiring of Stout, Causey and Horning (SC&H) accounting in February of last year. He renewed his objections to the initial hiring at the current board’s organizational meeting in August, criticizing what he said was the “automatic” renewal of the SC&H auditing contract. At the time, he noted that SC&H contract is costing the OPA considerably more than the previous contract had but that directors a year ago weren’t privy to competing proposals and their cost details. OPA Director and Treasurer Pat Supik responded that she agreed with Trendic’s RFP proposal but had “difficulty with the timing,” suggesting that a RFP “should be done in

August or September” for the following year’s audit. In support of her position, she said that SC&H had conducted an “in-depth study” of OPA financial procedures and that it would be “invaluable” for that company to continue to be involved “in establising current procedures.” She noted that the OPA has a new director of finance, having been without one for roughly a year, and that having a new auditor along with a new director of finance “doubles the problems” of conducting an audit. She also said that by the time the OPA would issue an RFP, it wouldn’t be until the end of March before the board would make a decision on which firm to hire, and by then SC&H would already be making preparation to launch the audit process for the year ending April 30. In effect Supik said it was too late to issue an RFP for this summer’s audit. Director Ted Moroney, echoing Supik, suggested amending Trendic’s motion to issue an RFP this August for the following summer’s audit. Trendic initially pushed back against delay, noting that a year ago the OPA also had a new director of finance on staff. “Last year was no different (than the situation now),” Trendic argued. “We’ve already done this.” He said that the board a year ago inexplicably decided in favor of SC&H that he said was “50 percent more in cost/ expenses than the other two bids.” He said that if the audit job is given to SC&H again, at the very least the fees should be renegotiated. He added that it wouldn’t take as long as Supik suggested for releasing an RFP, getting bids back and selecting an auditing firm for this summer. “I have an RFP ready. It can be ready (for board action) in 48 hours,” he said. Supik said that just because the OPA “got through” audit season last summer with a new director of finance and a new auditing firm doesn’t mean it’s a desirable way to conduct business.

Literacy committee

The Republican Women of Worcester County’s literacy committee judged the work of students participating in the Jan. 25 Media Expo at the Worcester County Technical School in Newark. Pictured are committee members Liz Mumford (Literacy chair), Rosemary McAleer, Carol Rose, Marjorie Hagood , and Kathy Vornlocker.

“We made it through, but not as well as we could have,” she said. In fact, former OPA Controller Art Carmine was very much part of the process and was paid for his work as a consultant, while last summer’s temporary replacement director of finance, John Viola, reportedly was working for only nominal wages. Supik then said she “loved” Moroney’s proposed friendly amendment for an August RFP, saying she wished she had thought of it. At that point Moroney said he agreed with Trendic that the SC&H contract fee should be renegotiated, and Supik said she agreed with Moroney, adding that an auditing firm will often agree to lower its rates in a second year since it’s already familiar with a client’s books and procedures. OPA President Doug Parks said that what the OPA received from the auditors “was good,” and that continuing the relationship this summer “would yield benefits.” He said it would be “responsible” to delay the issuance of an RFP until this August. Trendic reminded his colleagues that one of the firms that would likely bid on this summer’s audit would be the OPA’s former auditors, Trice, Geary and Myers (TGM). “It wouldn’t be a cold start,” he said if it would turn out that TGM is the successful bidder. Moroney said that it’s been his experience in business that the first year a new auditor comes in to review the books more time and money is required to get the firm up to speed and that times spent and fees tends to decline in the second year. After Trendic agreed to a friendly amendment agreeing to an August

RFP, Directors Cheryl Jacobs and Colette Horm both said they agreed with it. The amended motion passed unanimously, a partial win for Trendic. Back in February of last year, he had informed his colleagues that he did not want the SC&H contract automatically renewed before the 2017-18 audit was conducted, but that’s basically what happened this past August. The August prior to that, a board majority indicated that it wanted to seek competing proposals for auditing services, which for many years prior had been provided by TGM. Another year, another board, and this time it was only Trendic who seemed interested in revisting the accounting contract. Trendic said at the time that he would be introducing a motion to solicit bids for accounting services at a future board meeting. He faulted the board for approving SC&H at the February meeting, in which Trendic was absent. Trendic said SC&H proposal was “50 percent more” than the lowest bids, one of which was submitted by TGM. The SC&H cost the OPA in excess of $30,000, he said, but that apparently did not include an additional “deep dive” into financial operations that occurred later. Trendic told the Progress at the time that he saw no good reason to hire an accounting firm from well outside the local area at a cost much greater than TGM’s. He said the Baltimore area firm had some unspecified prior relationship with Supik, and that Acting General Manager Brett Hill had some ties with the firm as well.

BOARD OF DIRECTORS

February 2018

Effort to announce election results on day of vote count hangs on by a thread Board postpones vote on revised version of M-06 resolution By TOM STAUSS Publisher ith no indication that the Elections Committee is willing to drop its long-standing effort to persuade the Board of Directors to authorize announcement of annual board election results on the day that the committee tallies the votes, rather than waiting one day to announce the results at the annual Ocean Pines Association membership meeting in August, the committee’s effort is nontheless hanging by a thread. That much was clear at the board’s Jan. 27 monthly meeting. Director Slobodan Trendic on behalf of the committee, to which he is board liaison, offered a motion to approve a revised M-06 board resolution. The revised resolution’s main component is language that would permit announcing results on the day of the vote tally. After an awkward moment of silence, OPA President Doug Parks said he was seconding Trendic’s motion for “purposes of discussion.” In a subsequent email to the Progress, Parks said he was leaning “slightly” in favor of disclosing results on the day of the vote count. But it was far less than a full-throated endorsement, as Parks said he could understand the desire by some to maintain the tradition of announcing results

at the annual meeting. But after brief board discussion, Trendic was probably fortunate when the board, at the suggestion of Director Ted Moroney, opted not to take a vote on the issue. Trendic quickly agreed to postpone a vote on his motion until the February board meeting when Moroney, at the time liaison to Bylaws and Resolutions Advisory Committee, said he wanted to consult with Jeff Knepper, a member of the committee, before deciding. Moroney, who did not indicate which way he was leaning on the committee’s proposal, said that Knepper wanted to take another look at the issue. In an email to the Progress, Moroney rebutted a claim in a recent commentary published on oceanpinesforum.com that he had mischaracterized the committee’s position on the issue. “During discussion of the issue, Moroney suggested any board vote be postponed because he said he had information from a Bylaws and Resolutions Committee member (Knepper) that the proposed changes desired by the Elections Committee might be a violation of Maryland law. As a result, no vote was taken on the proposed changes,” the commentary said. In an email response to the Progress asking for comment, Moroney

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said the video of the meeting will prove that he made no statement about possible violations of Maryland law. Moroney also included an email string on the issue, citing Knepper and Marty Clarke, the committee chairman. In an email to Moroney dated Jan. 22, Knepper said he had “just talked to Marty and he checked some of our earlier minutes. On M-06, we were in agreement with most of it but did have questions surrounding the recounting of votes and would like to see [the board’s written] response to their first reading [of M-06], as [that] is our preferred process.” In a Jan. 28 email to Clarke, Moroney tried to clear up what he had been trying to say at the board meeting the day before. “I also noted on your master schedule of reviewing resolutions that this was done [with M-06] in March of 2017 and again in October 2017. Since it wasn’t presented to the Board until November [for first reading], I was concerned the team had not seen the final version,” Moroney wrote in his email to Clarke. “Also in the comments section of the master schedule it said to ‘have attorney sign the Document’ and I wasn’t sure if that meant rule on it or sign off on what was requested. It will be back on the agenda for Feb-

ruary’s meeting. If you can, please review and indicate any requested changes. There were no [board] comments on the motion after the first reading [in November of last year]. We would welcome the committee’s input. Hope this clears up any confusion,” Moroney wrote. Clarke wrote back to Moroney indicating there was no problem with the clarification Moroney was requesting. “It is on the [committee’s] Agenda and won’t require much time. I am pretty darn sure we are all still in agreement that the Election Advisory [Committee) is on solid ground [recommending disclosure of results on the day of the vote count],” Clarke said. Trendic said that both the Elections and the Bylaws and Resolutions committees are in favor of announcing elections results on the day of the vote count. According to Dec. 4, 2017, meeting minutes, it’s clear that the Bylaws and Resolutions committee believes not announcing the results immediately could be a violation of Maryland law. “The Committee agreed that the vote counting provision which does not disclose the vote tally upon completion during the Election Committee meeting in which the votes are tallied may not comply with 11B111(4) of the Homeowners Association Act,” the minutes say. The argument appears to be that an open meeting of a committee isn’t truly transparent if what occurs within that meeting is not accessible or understandable by those attending the meeting. The oceanpinesforum.com commentary cited committee member q

26 Ocean Pines PROGRESS

BOARD OF DIRECTORS Election results From Page 26

Jim Trummel, who “believes that an Election Committee meeting for the purpose of counting votes is not really open to association members if those attending do not know what is taking place. Would a meeting be open and transparent if association members could only view the meeting through a window, or if those conducting the meeting conducted all business by whispering, so association members had no idea what was happening?” It’s not clear whether OPA attorney Jeremy Tucker has rendered a judgment on Trummel’s argument. Parks did not respond to a Progress email asking whether he had reached out to Tucker. Trendic told the Progress he wasn’t sure what Tucker’s opinion would be, adding that he (Trendic) was relying on the view of Trummel, a lawyer and respected authority on OPA governing documents. “Not announcing a vote count in a meeting when the vote count occurs in not transparent,” Trendic said. Some time ago, Tucker had rendered an opinion that announcing vote results on the day of the annual meeting was in keeping with language in the OPA bylaws, but, according to Parks, he has also said that announcing the results on the day of the count would be legal under the Maryland Homeowners Act. One Ocean Pines director, Chery Jacobs, also a lawyer, offered her opinion on the transparency argument in response to a Progress email. “As far as the MD HOA Act, I disagree that we are in violation. Your use of the ‘lack of transparency’ phrase was used for the purpose of controversy, as you know that nothing could be further from the truth,” she wrote. “The Resolution was amended [last year] with the specific purpose of allowing the vote counting to be conducted in public. Unless you or Mr. Reynolds [writer of the oceanpinesforum.com commentary] can provide me with a legal opinion proving we are violating the law, my opinion is unchanged.” Jacobs during the Jan. 27 meeting also repeated earlier statements that the Elections Committee shouldn’t even be bringing up the subject again, after last year’s board dealt with it decisively. Two other directors, Tom Herrick and Colette Horn, both reinforced

February 2018 Ocean Pines PROGRESS their support of waiting for the annual meeting to announce results in emails to the Progress. Herrick also did so during the Jan. 27 meeting. However, both said they would change their minds if it was determined that the Maryland HOA Act requires results to be announced on the day of the vote count. “The attorney said the intent [of OPA bylaws] is to announce [the results} at the annual meeting,” Herrick said during the meeting. “I don’t see any evidence [so far] to change my vote.” It was not clear whether Herrick had considered the Bylaws and Resolutions committee’s opionion, and Trummel’s in particular, prior to making that statement. Not weighing in on the issue was Director Pat Supik, who did not respond to a Progress email asking for her views. Trendic appealed to his colleagues to respond affirmatively to the viewpoint of two advisory committees and the desire of OPA members for full transparency. Countering Jacobs’s criticism of the Elections committee for bringing the matter again to the board, Trendic said the panel had every right to do so. “The outcome could change,” he said, adding that announcing vote

Moroney drops out as liaison to Bylaws and Resolutions panel

irector Ted Moroney, board liaison to the Bylaws and Resolutions Advisory Committee since last fall, has decided to call it quits as the committee’s board’s liaison. Moroney said he expects to be replaced as board liaison by a full-time resident of Ocean Pines able to attend monthly committee meetings. In an email to the Progress, Moroney said he had asked to be removed as liaison based on a recommmendation from committee chair Marty Clarke with the support of the committee. “Nothing would change in my status between now and March as a part time resident and the committee did not seem inclined to change the committee meetings to a Friday when I could attend. Please note the only reason I am asking to be removed is this committee feels they need a director present at their meetings,” Moroney said, premptively knocking down any speculation that he might be dropping out as liaison because of some policy difference with the committee. In a recent email to Moroney, Clarke said that while he understood Moroney’s job conflicts that make it difficult for him to attend the committee’s meetings, “I do believe there is a sound and important reasons to have a board liaison in attendance ... If you are unable to fulfill this obligation, then perhaps we should be looking for an alternative.”

results on the day of the count is “no different from local and state elections. This isn’t Oscar night,” he said, in which results in the balloting for Academy awards are delayed in order to build anticipation among a viewing audience.

He urged his colleagues to “forget” what they did last year and affirmatively “respond to the community request for more transparency.” He then said he agreed to Moroney’s suggestion to delay a vote until the board’s February meeting.

BOARD OF DIRECTORS

February 2018

Board approves Supik motion on interfund borrowing OPA treasurer cites shortfall in operating fund

By TOM STAUSS Publisher he Board of Directors initially rebuffed a motion by Treasurer and Director Pat Supik during a Jan. 27 board meeting to authorize the general manager to use reserve funds to replenish a de-

pleted operating fund in February and possibly March. Supik withdrew her motion to borrow funds allocated to the OPA’s replacement reserve and to transfer it to the operating fund, which she said was running out of cash as the

fiscal year draws to a close. She said such inter-fund borrowing is not a new occurrence in the annals of Ocean Pines. She met resistance from some directors, namely OPA President Doug Parks and Slobodan Trendic,

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who both said they wanted her to supply the exact dollar amount to be “borrowed” before voting for the inter-fund transfer. Once that number is provided, Parks said he would convene a special meeting of the board to vote on the motion. That special meeting occurred on Feb. 10, and the board approved a revised Supik motion for interfund borrowing up to $1 million. The motion was amended with additional clarifying language offered by Trendic. Her motion on the Feb. 10 meeting authorized the “temporary use” of $1 million in replacement reserve funds to pay operating expenses pending receipt of new assessment dollars in March and April. During discussion, she said there won’t be an actual interfund transfer, despite the impression she left during the Jan. 27 meeting. “This is a cash transaction,” she said, and it will not “hit” any financial documents as an interfund transfer. As amended by Trendic, the motion said the authorized $1 million could only be used for operating expenses previously approved by the board and that the funds would have to be returned no later than April 27. After initially objecting to the return date, saying it wasn’t necessary, Supik relented, telling her colleagues that the funds would be returned in March with new assessment dollars, more or less automatically. The directors voted down a bullet point in Trendic’s motion that would have involved the OPA’s auditing firm in reviewing the transaction. Supik said that review would cost the OPA $5,000 to $7,000 in fees and was not necessary. Supik’s original motion at the Jan. 27 meeting did not call for a transfer of money from one fund to another, but rather what she described as temporary interfund borrowing. During the Jan. 27 discussion, that appeared to strike Trendic as somewhat disenguous. He suggested that a transfer would need to be done consistent with specific language in Board resolution F-03 that deals with such transfers. F-03 says inter-fund transfers require a super-majority or five votes of the board. Trendic in initiating discussion of the motion said his research inq

28 Ocean Pines PROGRESS

BOARD OF DIRECTORS From Page 28

dicates that such inter-fund transfers or borrowing could have negative tax implications, and he asked Supik what those could be. He said the board should be “fully aware” of those implications before voting on Supik’s motion. Director Ted Moroney responded that so long as the borrowed funds are repaid and used as a cash flow hedge, “there shouldn’t be a problem” with Supik’s proposed remedy. Parks agreed, noting that such transfers are authorized in the OPA bylaws and therefore “pass legal muster. “I seriously doubt we are putting ourselves at risk,” he said. Supik then said there “is some precedent” for such interfund borrowing and that the transfer “doesn’t reach across fiscal years.” But she appeared to contradict herself when she later acknowledged that the interfund borrowing would be “repaid” by 2018-19 assessments paid in March and April. Those assessments once received

are allocated to the Ocean Pines Association’s operating fund. Once that happens, funds that had been “shifted” from the reserves to the operating can be shifted back to reserves, she said. But she intially suggested that assessment dollars for 2018-19 will effectively help the OPA deal with shortfalls in the operating funds in 2017-18. In that sense, what she proposed very much reached across fiscal years, despite her insistence otherwise. The revised motion makes it clearer that new assessment dollars flowing into the operating fund in March and April replenish the operating fund, making it possible for the operating fund to return borrowed funds to the replacement reserve. Former OPA Acting General Manager Brett Hill, in an email to the Progress after the Jan. 27 meeting, slammed the proposed transfer as defacto financial mismanagement. “How did anyone not realize or draw issue to the fact that Pat’s motion today clearly states that we are robbing 2019 operational funds

to pay 2018 operational expenses. They are following our governing docs to approve paying operations from reserves, but yet pulling funds from another fiscal year somehow goes on without even a blink of the eye? I don’t know why no one else hasn’t addressed this as a concerning item,” Hill said. The former acting GM and director said funds should be pulled out of the reserves and transferred to the operating fund when and if there are shortfalls, all within a single fiscal year, with board approval. He said said there is no need to involve or refer to new assessment dollars in the transaction. “We have plenty of cash in the bank or money market funds to handle our bills in February, most of it allocated to the reserves,” he said. “She overcomplicated it” in her initial attempt at a motion. During the Jan. 27 discussion, Parks said that to him the crucial point is that borrowed funds are repaid, but he didn’t address the use of 2019 operating funds for 2018 operating expenses, albeit temporarily. There in fact is no mechanism

in OPA governing documents that authorizes repayment of funds borrowed across two fiscal years. But there is authority for inter-year borrowing with a board super majority. The level of the OPA’s operating fund fluctuates during the calendar year, with a influx of new money coming in shortly after annual assessment notices go out in March, rising as most property owners pay their assessments within a month or two of receiving the invoices. Then, throughout the year, the operating fund begins to decrease as more money is spent than comes in. By late January or February, depending on the year, the operating fund can be depleted, showing a deficit, while the OPA’s overall cash reserves and short-term investments remaing healthy. OPA’s fund-based accounting system can be somewhat opaque, and Supik has difficulty in trying to explain it. She said the borrowing she was proposing would not show up as a transfer on the OPA’s annual audit report from one fund to another, so long as the funds borrowed are paid back in the current fiscal year.

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Supik motion

February 2018Ocean Pines PROGRESS

30 Ocean Pines PROGRESS

BOARD OF DIRECTORS

February 2018

Pine’eer Craft Club donations

The Pine’eer Craft Club in December presented donations to various Ocean Pines community organizations. Pictured from left are Craft Club President Sharon Puser, Jim Hamlin-Neighborhood Watch ($100), Nate Wilkins, Ocean Pines Public Works ($500), Julie Messick, Ocean Pines Branch Library ($300), Marie Gilmore-Veterans Memorial ($400), and Debbie Donahue-Ocean Pines Recreation & Parks ($1,500). Not pictured: Chief Massey-Ocean Pines Police Department ($1,500) and Dan Healy-President of Ocean Pines Volunteer Fire Department ($1,000). These two donations were presented in January. The donations represent proceeds from the club’s August Craft and Artisan Festival, the November Winter Wonderland Craft and Artisan Fair, and profits from the Artisan and Craft Shop in White Horse Park. 2017 donations totaled $5,300. Over the 40-plus years the club has been in existence, it has donated more than $136,00 to Ocean Pines.

Board dissolves working group that fell short in completing new capital improvement plan Directors vote to direct Bailey to pick up where panel left off By TOM STAUSS Publisher

n a motion by Director Ted Moroney that was adopted unanimously by his colleagues, the Board of Directors in a meeting Jan. 27 voted to dissolve a working group chaired by former director Dave Stevens and established more than a year ago with the objective of creating a new capital improvement plan for the Ocean Pines Association. In its place, the directors accepted a Moroney proposal to direct General Manager John Bailey to take over the tasks started by the committee, with the aim of having a completed CIP in the hands of the board as soon as possible for review and approval. Moroney stopped short of putting a deadline on Bailey to have a CIP ready for review. In response to a question from Director Tom Herrick, Moroney said he “didn’t put a date in other than April 1,” which is when he expects the firm that had been helping the working group in scrubbing the latest reserve study of OPA assets, DMA As-

sociates, to complete its work. But Moroney said he was in no position to promise on DMA’s behalf. Having an updated and accurate list of assets in place is presumed to be a prequisite for completing a capital improvement plan, although the heart of a CIP as generally believed to be a projected list of future capital improvement projects requiring substantial expenditure of OPA funds. But it can also include a plan for the regular and systematic replacement of components of various OPA assets. Bailey has said having such a plan in place to improve the general maintenance of thousands of asset components is vital. If all goes well with the process under Bailey’s supervision, Moroney said the board by the end of April “could starting having a discussion” on how to proceed with developing a CIP. Options would probably include assigning the task to Bailey or, perhaps, appointing a new working group to do the job. In offering his motion to dissolve

the Stevens-led working group, Moroney took care not to criticize the panel’s failure to complete a CIP. He commended it for the work done thus far. In addition to Stevens, its members included Moroney, OPA Directors Pat Supik and Tom Herrick, Budget and Finance Advisory Committee member John O’Connor, and Marty Clarke, a former director and current B&F committee member. Herrick, president of the board when the Stevens committee was created, wondered whether a new CIP process would reverse the preferences of recent boards for renovation of existing buildings, such as the Country Club or Administration buildings. Moroney responded that “we’re not going to argue about 95 per cent of it,” which seemed to be an opaque way of telling Herrick that he doubted that this or future boards would revisit plans to expand the police station into the existing footprint of the administration building, the next major capital project on the OPA’s to-do list after completion of

the Country Club’s second floor renovation. Moroney went on to say that the board, as part of the process leading to the development of a new CIP will need to decide at what level to fund the OPA’s reserve funds. That’s been a long-standing challenge, with no board so far arriving at a consensus on the percentage of asset valuations that should be set aside in reserves to cover replacement. The Stevens-led panel last met in September, consulting with Doug Green, managing partner of DMA Associates, to discuss ongoing efforts to update DMA’s reserve study as presented by the consulting firm the previous year. The working group had said the reserve study includes an asset list that is largely outdated. It wanted the study scrubbed of inaccurate information and updated with new assets that have been have added to the OPA’s inventory list this past year. It also wanted DMA to eliminate assets outdated by a board policy increasing the OPA capitalization amount to $5,000. That in turn would reduce the number of assets that are considered depreciable, as well as the assessment dollars needed to fund the depreciation related to those assets. In addition, the group succeeded in eliminating the so-called legacy or five-year-plan reserve and funding stream of roughly $700,000 per year.

BOARD OF DIRECTORS

February 2018 Ocean Pines PROGRESS

Board finally adopts changes to comp plan committee’s charter Directors also seem to favor proceeding with community survey By TOM STAUSS Publisher ith Director Ted Moroney intially putting up some resistance, but in the end voting with the rest of his colleagues, the Board of Directors last month finally voted to change both the name and function of the Comprehensive Plan Advisory Committee. The board, during its Jan. 27 monthly meeting, also decided to retain the newly renamed Strategic Planning Advisory Committee as a standing committee, rather than as an ad hoc entity that functions on an as needed basis. Director Slobodan Trendic, on behalf of the committee for which he is board liaison, offered a motion to amend Board Resolution C-07 codifying the changes, that had been previously reviewed by the board on a first and second reading. Moroney began the discussion by admitting that “I know I’m in the minority” on the revamped committee that he said had no plans, no model and no purpose. He said that strategic planning should be a function of the general manager, not a committee. Director Pat Supik said she regarded the committee as “more of an ad hoc” panel, and initially OPA President Doug Parks seemed to be in that camp. He asked rhetorically whether there were any “collaterals” from the committee to date, adding that “we need short-term fixes” to gaps in the OPA’s strategic planning

that the committee might be able to recommend. Director Cheryl Jacobs said the committee in its previous iteration experienced a lot of frustration “in trying to produce a survey for the membership.” She said the committee “is there for the board and GM, to help them” and that she was in favor of keeping the committee as a standing committee. She said that “maybe we can resurrect the survey” that the committee had worked on for more than a year, with the board never finalizing the questions to be asked and the idea of a survey seeming to fade at the end of the last board term. Trendic agreed with Jacobs and said that “yes, there is a need, the survey is needed.” He suggested that the survey be sent out with the assessment notices, which normally happens in March once the board adopts a budget for the coming fiscal year. At a meeting of the board last November, committee chair Frank Daly said the panel believed that it should be the new general manager, John Bailey, who breaks a logjam between the board and the committee on arriving at a final draft for the community survey. While it seemed at the time that a board majority agreed with that recommendation, some directors expressed interest in remaining in the loop before a finalized survey is sent out to property owners (and possibly renters).

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During the Jan. 27 board meeting, Bailey did not offer any insight on how far along he is in nailing down survey questions or whether he thinks the survey can be mailed out with assessment notices next month. Trendic also said work needs to be done to develop a new capital improvement plan for the OPA and that the committee might be able to assist in that effort. “I encourage you to rethink your positions,” he said. “It’s worth giving it a try as opposed to pulling the plug.” Director Tom Herrick said he, too, would like to obtain feedback from property owners before a strategic plan is devised for Ocean Pines. He said he agreed that the committee had done “a great job” in drafting the survey. Moroney was not quite ready to concede the point. He said he was “100 percent behind” what the committee had attempted to do, but he said it was a committee that “can’t get a survey out. Are we going to get it done?” He added that the process thus far has been “like a treadmill.” Parks then reentered the fray, this time saying he was behind keeping the committee alive by “engaging them” and giving them specific tasks to do. Moroney said that if the board was convinced that keeping the committee alive was the way to go, he could accept the revised C-07 language as accepted by the board on first and second reading. Trendic suggested that the board task the committee with analyzing survey results by May 1, which seemed to presuppose that Bailey will manage to insert the survey into assessment invoices. “Let’s finalize the survey and give them a deadline” to analyze the results, Trendic said. Herrick added that it was the board, not the committee, that couldn’t get the job done of approving and sending out the survey. With that, the board unanimously voted to accept the revised C-07 as drafted. As approved, the committee will advise the board and the general manager “on how best to align the

mission and the vision of the Ocean Pines Association by anticipating future needs and assisting in the development of a strategic multiyear plan that would support and enhance the lifestyles of its owners, residents and guests.” In executing its new mission, the committee will be expected “to support the general manager and board as directed to research and recommend best practices and develop supporting data to create the strategic plan.” In developing best practices and data, the committee will be expected “to actively work with the staff, other committees, the board, and outside information sources as required to fulfill their mission.” Under the revised resolution, the committee is charged “with gathering facts, investigating alternatives, evaluating issues related to the strategic planning. The committee will perform studies of community needs as requested by the board or general manager relating to the development, updating and/or evaluation of the strategic plan. It will also solicit information from pertinent sources within and outside the OPA regarding best practices.

County signs pact with Pines police

The Worcester County Sheriff’s Office has renewed its annual memorandum of understanding for a mutual aid agreement with the Ocean Pines Police Department that allows the two agencies enforcement authority in the other’s jurisdiction under certain circumstances. The mutual aid agreement gives the OPPD the right to exercise its law enforcement authority outside of the boundaries of Ocean Pines in special cases that include when a criminal or motor vehicle violation occurs within Ocean Pines and the offender leaves the community’s limits. Additionally, the OPPD will be able to operate outside of Ocean Pines while investigating a crime alleged to have occurred within its limits providing the offender is charged with a felony or has a warrant for arrest. Other circumstances under which the agreement applies include when OPPD officers are attached to a multi-agency unit, task force or at request of the sheriff’s office when participating in a joint operation.

COVER STORY

February 2018

Supik now predicting $1.5-$1.8 million deficit for 2017-18 fiscal year Board accepts proposal for ‘temporary’ inter-fund borrowing using next year’s assessments

By TOM STAUSS bined to argue for a larger assessPublisher ment increase to cover the losses. h, what a difference a few During a Jan. 27 meeting of the days can make in the fun Board of the Directors, Supik was world of Ocean Pines financ- much less pessimistic about what es. the future would bring. With three During a Feb. 5 budget work ses- months remaining in the fiscal year, sion, OPA Treasurer and Director her projection was for a $1.2 million Pat Supik dropped a bombshell: She for the year. now projected the deficit for the curShe offered no explanation for rent fiscal year at $1.5-$1.8 million, the half million or more increase in a number that morphed into a solid the projection in the space of a little $1.8 million when Director Ted Mo- more than a week. Director Slobodan roney began a discussion of “deficit Trendic framed the new information recovery” later in a Feb. 6 work ses- as a clarion call for budget cuts that sion. It was no longer the range that would go into effect almost immediSupik had initially offered. ately, including employee furloughs Moroney expressed concern and cuts in employee benefits. that earlier projected deficits were Other directors, in fact, seemed still too rosy. So he locked into the to have little appetite for major and $1.8 million on the eve of a Dec. 7 immediate cuts. Supik subsequentAd-J&M Market 1/11/2018rates 9:47for AM lyPage 1 to the board roughly discussion of assessment brought next year and how the OPA should $500,000 of cuts that would go into repay the $1.8 million and roughly effect in 2018-19, while Trendic pre$380,000 in an operating fund defi- sented a list that was three times as cit in 2016-17. He used a total of $1.2 much. Trendic suggested that the million for the two fiscal years com- OPA go on a diet and keep the lot

assessment at $921, while Director Cheryl Jacobs asked her colleagues whether they had an “appetite” for raising the assessment to $960, rather than the $30 increase to $951 that three directors support. While the doom and gloom narrative fed into the political objectives of Moroney, Supik and Jacobs to raise the assessment to $960, Supik’s financial report delivered during the Jan. 27 meeting offered a less dire situation. She mentioned that as of Dec. 31, the OPA had $947,000 in cash available for operations, and $8,155,000 in short-term investments, composed of money market funds and CDRs. She said the plan is to move some of the the money market funds into CDRs that pay higher interest. The cash is held in insured “sweep” accounts, in multiple banks. Later during the Jan. 27 meeting, she was rebuffed when she offered a motion that would have given her open-ended authority to move

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replacement funds temporarily to operating funds in the event of an operating fund shortfall in February and March. Directors Parks and Trendic both said they wanted her to come back with an exact dollar amount that would be moved. She withdrew her motion, anticipating that she would have that number available by budget review meetings in early February. It turned out she had the number available by a special board meeting on Feb. 10. While not absolutely precise, she said the inter-fund borrowing of up to $1 million would be needed. She said that inter-fund borrowing has been done before in Ocean Pines in the closing months of a fiscal year, with funds moved or “borrowed” from reserves subsequently returned when the operating fund is replenished with new assessment dollars that flow into OPA coffers beginning in March. In an email to the Progress, former Director and Acting General Manager Brett Hill took exception to the fiscal gymnastics proposed by Supik. “How did anyone not realize or draw issue to the fact that Pat’s motion today clearly states that we are robbing 2019 operational funds to pay 2018 operational expenses. They are following our governing docs to approve paying operations from reserves, but yet pulling funds from another fiscal year somehow goes on without even a blink of the eye? I don’t know why no one else hasn’t addressed this as a concerning item,” Hill said. In an e-mail response to the Progress, Supik insisted, as she had when she initially offered her motion, that what she was proposed did not “reach” across fiscal years. She offered no defense of the use of 2018-19 dollars for a financial activity that occurred in 2017-18. Other than Trendic, the board had no problem acceding to Supik’s motion to allow inter-fund borrowing and the use of prepaid 2018-19 assessment dollars to facilitate it. It passed, 6-1. Hill said the entire exercise is pointless, because the operating and replacement funds are little more than Excel spreadsheets and that it doesn’t matter whether one fund is lower and another one is higher at different times during a fiscal year. He said Supik’s inter-fund borrowing is an example of the OPA over-complicating financial manq

32 Ocean Pines PROGRESS

OPA FINANCES

February 2018 Ocean Pines PROGRESS

Trendic asks colleagues to support shift to higher yielding securities Supik says OPA, Budget and Finance Advisory are already looking into it By TOM STAUSS Publisher ithout offering a motion that would have forced his colleagues to take a definitive stand, Director Slobodan Trendic instead simply asked for time on the agenda of the Jan. 29 meeting of the Board of Directors to begin a discussion on how the Ocean Pines Association can generate more income from its hefty reserves. Citing former director and current Budget and Finance Advisory Committee member Marty Clarke as the inspiration for his call for higher yielding investments, Trendic said there was opportunity for the OPA to derive a better return than the less than one percent yield on money market funds and certificates of deposit. He suggested that the OPA instead divert some of its investments into treasury bills yielding 1.45 to 1.46 percent, which he said could generated an additional $70,000 in interest income for the OPA annually. Trendic suggested the appointment of two or three Ocean Pines residents with expertise in financial matters to look into investing in t-bills, which prompted some pushback from Pat Supik, the OPA treasurer and chief financial officer of the OPA and a director. Supik said that the new director

Interfund borrowing From Page 32

agement. He said if the OPA is running short of cash in its check book to pay the bills in the latter part of the fiscal year, then it simply needs to convert money market accounts or other short-term investments to cash to make sure the bills are paid. He said that with the balance sheet indicating roughly $9 million in cash and short-term investments as of Dec. 30, there should be no reason the OPA is fretting about running out of cash in February. “They’re just moving numbers around on spreadsheets,” Hill said. “What’s important is the amount of cash and short-term investments at any given time.”

of finance, Steve Phillips, will be engaged in the effort of safely improving investment yields, adding that CDRs in the OPA’s investment inventory “are getting close (in yield) to T-bills).” She said that Trendic may have a misconception on how the OPA fi-

nancial resources are deployed and the “rate range of yields” because of the way the OPA reports that information in its monthly financials. She said she is working on a “better way of reporting” certain financial data so the rates of return will be more readily apparent to those

who peruse the information. “A more detailed report will alleviate the concern,” she told Trendic. When Trendic repeated that he would like a committee of financial experts to review the investment policy and its implementation, Supik responded that the “B&F committee is already looking at it.” OPA President Doug Parks agreed that one of the purposes of the B&F committee is to do precisely that. But he said Trendic bringing up the topic for discussion was a useful exercise.

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34 Ocean Pines PROGRESS

OPA FINANCES

February 2018

OPA’s negative variance to budget exceeds $1 million at year’s end By TOM STAUSS Publisher he financial news for the Ocean Pines Association continued a less than inspiring trend line in December. The OPA produced a negative operating variance to budget for the month of $90,689, with revenues under budget by $42,457, expenses over budget by $32,848, and new capital expendtures over budget by $15,384. Variances to budget translate into the actual operating loss or surplus by the final month of the fiscal year, in April. According to the December financial report by newly minted Director of Finance Steve Phillips, December’s results pushed the OPA into a negative variance to budget for 2017-18 of $1.053 million. That’s based on revenues under budget by $763,492, total expenses over budget by $156,687, and new capital expenditures over budget by $132,870. Excluding new capital expenditures, which are funded directed out of current year assessments almost as if they were operating expenses, the OPA’s operating deficit for the month was $75,305, more than twice November’s results. Not including new capital expenditures, the OPA’s cumulative negative variance through December was $920,180. According to Phillips’s report, the Yacht Club was the OPA’s loss leader for the month. Its $57,796 in red ink generated a negative variance to budget of $28,055. For the first eight months of the fiscal year, the Yacht Club has an actual loss of $378,681 and has a negative variance to budget of $434,367. Last year through December, the amenity was only $7,095 in the hole, so the year-over-year negative swing is more than $371,000. The December results were a contributing factor in the decision of General Manager John Bailey to close the Yacht Club in early January, with Friday through Sunday food and beverage operations shifting over to the Country Club’s Tern Grille. January results at the Tern Grille were not available by press time for this edition of the Progress, but Bailey told the Progress recently that overall the operation is close to

December 2017 deparmental financial summary

break-even Golf operations, still in the black for the year but destined for a less by the end of the fiscal year, lost $49,960 for the month, missing its budget by a negative $24,183. For the year so far, Golf has a net operating surplus of $65,212, but that’s under budget by $65,856. The golf operation’s restaurant, the Tern Grille, lost $4,845 for the month, with a modest $1,149 netgative variance to budget. For the year through December, the Tern Grille has a $23,924 loss and a $31,464 negative variance to budget. Aquatics continues to perform well for the year so far, while losing $29,365 for the month and missing its budget by $5,674. For the year,

through December Aquatics has an operating surplus of $280,347, just $178 behind budget. A year ago through December, Aquatics’s surplus was $98,513. All three racquet sports were close to break-even for the month, with tennis and pickleball modestly ahead of budget. All three are also in the black for the year, with tennis ahead of budget by $4,546 but platform tennis and pickleball behind budget. Also notable in the December results, the Recreation and Parks Department, while in deficit for the month, beat its budget forecast by $8,358. The department has a positive variance to budget for the year of $37,303. Reserve summary -- The OPA

through Dec. 31 had $8,154,693 in reserve, a slight reduction from the Nov. 30 balance of $8,161,085. The replacement reserve carried a balance of $5,072,074, also a modest reduction from the previous month. The bulkhead reserve has grown from $1,815,219 at the end of April to $2,571,883 as of Dec. 31, reflecting $822,367 in waterfront differential revenues contributed at the beginning of the fiscal year. That was little changed from the previous month. But it represents roughly three years of spending that routinely occurred when the OPA had a multiyear bulkhead replacement program in place. No such program has been approved by the board, although Bailey presented a plan for a resumption of planned bulkhead repair and replacement at the Jan. 27 meeting of the Board of Directors. The roads reserve remained virtually unchanged in December with a balance of $510,736. Capital summary – A schedule in the financial report indicates that capital spending through Dec. 31 of $904,129 is substantially more than the budgeted $390,384. The variance is $513,745. Balance sheet – The Dec. 31 balance sheet shows total OPA assets of $34,391,018, up from $33,853,087 a year ago. Operating cash on hand of $995,093 is down from $1,937,436 in December of the previous year. But short-term investments of $8,102,799 compares to the previous December’s $7,571,782.

February 2018 Ocean Pines PROGRESS

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COVER STORY

Ocean Pines PROGRESS February 2018

Food and beverage From Page 1

result, losing about $11,000 while operating year-round. He resigned in creative differences over the ill-fated Java Bay Cafe that then General Manager Bob Thompson introduced. A fissure on the board emerged during the Feb. 10 meeting when Director Slobodan Trendic parted company with his colleagues over the merits of the managing partner approach. He said he was reluctant to vote for either Ortt or Reinhart if it comes down a choice, because to him leasing is the better option. “We can’t afford another year of experimentation,” he said, adding that he also thought that the Beach Club should be managed in-house, perhaps by rehiring former manager Linda Huettner, who resigned early last year over creative difference with then Acting General Manager Brett Hill. He further said he would have trouble choosing between the contenders because no “defined criteria” or “evaluation criteria” exists to compare the competing offers, with lease proposals in the mix. He also objected to the fact that Reinhart had not been invited to meet with the board. Trendic then said he would not participate in the executive session later that afternoon, which prompted Director Cheryl Jacobs in a hectoring tone to say that if he skipped the meeting he would be in violation of his fiduciary duty to property owners. “I will let the membership decide whether I’ve exercised my fiduciary duty,” Trendic replied, in a measured tone. “I won’t take it from you.” Other directors, Parks and Ted Moroney, took a less accusatory approach, both asking Trendic to reconsider. Moroney said he would have no problem if Reinhart was invited in to meet with the board. Parks said that he very much appreciated Trendic’s participation in meetings, even when he takes contrarian points of view. Parks said that Trendic’s insights help the board make the right decisions, even when he is in the minority. In the end, Trendic agreed to participate in the afternoon closed session, in a text to the Progress saying it would give him a platform to “state my business opinions” on the best way forward, including the

need to talk to Reinhart. At the Feb. 10 special meeting, Bailey basically repeated points that he had made at the Jan. 27 regular meetings about why he preferred to work with a managing partner. The timing doesn’t permit leasing the Ocean Pines Association’s two primary food and beverage facilities to a third party vendor for the 2018 season, he said. Bailey discussed the three options for providing services at the Yacht and Beach clubs: outsourcing, in-house management, and contracting with a managing partner. “We have seven different locations where we serve or could serve something to eat,” Bailey said, including the Yacht Club, Beach Club, Tern Grille, Swim and Racquet Club, Mumford’s Landing pool, Community Center and Sports Core pool. Food and beverage service for each location, based on the respective scope of service, should be handled differently, he said. In some locations, he recommended continuing to operate and manage those services in-house, but for the OPA’s largest two restaurant arenas, the Beach Club and Yacht Club, he recommended a different approach. Bailey told the Board of Directors it is too late to consider leasing the Yacht and Beach clubs to another entity for the provision of food and beverage services this coming summer. “In my opinion, the problem with this concept is our timing. The opportunity to pursue this approach expired last September/October time period,” he said. Under a the full-bore outsourcing option the clubs would be leased to a third party. “That entity gets everything, all the expense, all the headaches, all the responsibility,” Bailey said, contending that “it’s just too late to pursue that approach this year.” There is no time to develop a request for proposals, gain approved by the board, solicit proposals, review responses, meet with potential vendors, gather membership feedback, and implement the plan, Bailey said. He also seemed to rule out the option of continuing to manage the Yacht and Beach clubs in-house. That would require hiring a food and beverage director to oversee the operations, including hiring and training staff, creating the menus, managing the customer service, and financial operations.

HAPPENINGS Monday, Feb. 12 Medicare options seminar, Lynne McAllorum, independent agent with expertise in Medicare products, Ocean Pines Community Center, 3-4:30 p.m. Registration 410-641-7052.

monthly meeting, Ocean Pines Community Center, Assateague Room, noon. Agenda, board packet posted on the OPA Web site several days before meeting. Public comments welcome. Final approval of 2018-19 OPA budget expected.

Monday, Feb. 19 Democratic Women’s Club of Worcester County, monthly meeting, Ocean Pines Community Center, Assateague Room, 10 a.m., 9:30 a.m. coffee. Jesse Colvin, candidate for Congress in Maryland, and Jamie DeMarco, discussing renewable energy and job creation on the Eastern shore. 410-973-1021.

Thursday, Feb. 29 Republican Women of Worcester County, February luncheon meeting, Ropewalk Restaurant, 8203 Coastal Highway, Ocean City, 11 a.m., doors open 1:30 a.m. Speakers, Patrick O’Keefe, political director of the Maryland Republican Party, and Grant Helvey, chairman of the Worcester County Central Committee. $20 per person. Reservations, Ann Lutz at annlutz60@ gmail.com or at 410-208-9767.

Sunday, Feb. 25 Board of Directors, Ocean Pines Association, regular

“The problem with this approach is that the association would still have the headaches of oversight and management and time is short,” he said. With three proposals already in hand from what he described as “several proven, successful restaurant management firms from the Ocean City area,” Bailey recommended initiating contract negotiations with Ortt. That led to the private meeting with the board Feb. 10. By the scheduled boad meeting on Feb. 25, it should become clear whether discussions with Ortt have produced an agreement or whether talks have broken down. During the Jan. 27 meeting, Bailey also outlined his plans for other food and beverage venues in Ocean Pines. Oversight of the food and beverage operations at the Tern Grille, at least for this coming year, will be returned to the director of golf. Bailey said that the Tern Grille is a separate operation from the banquet facility proposed for a section of the second floor of the Country Club. “As we finish the renovations to the second floor our operational approach will necessarily change and become dependent on the usage booked for the new space,” he said, adding that “there will have to be good communication between the director of golf and the other departments, including administra-

tion, parks and recreation, and food and beverage banquet planning.” Placing the Tern Grille under management of the director of golf will allow the OPA the opportunity to “correct the deficiencies of last year” of not having an on-course beverage cart and food services available to meet customer demand. Bailey said that loss of service last season may have an impact on the OPA’s revenue stream this coming season particularly with package play, as some golfers remember a sub-par experience. “Having the director of golf hardwired into the Tern operation will make a huge difference in our ability to provide a quality visit to our guests thus hopefully impacting our revenue numbers at the golf course,” Bailey said. At the Swim and Racquet Club and Mumford’s Landing swimming pools, food and beverage operations will be handled by the aquatics director going forward, Bailey said. He said the options at those facilities will be snacks, not prepared foods. Similarly, the snack options available at the Community Center will be under the oversite of the director of recreation and parks. When the snack bar at the Swim and Racquet Club operated under Aquatics two summers ago, it actually was a profit center, and Aquatics Director Colby Phillips has said she expects that to happen again this summer.

February 2018 Ocean Pines PROGRESS

OPINION

Ocean Pines PROGRESS February 2018

COMMENTARY Assessment increase totally unnnecessary, easily avoidable

he Board of Directors has done some good work on the 2018-19 budget likely to be approved later in February. But the document shaping up also represents a missed opportunity to share the proceeds of meaningful cuts in operations to those who make those operations possible, assessment-paying property owners. The proposed $30 increase in the lot assessment is totally unnecessary, easily avoidable, and maybe a board majority will come to realize that before the process concludes. It could be worse, as three directors (Ted Moroney, Pat Supik and Cheryl Jacobs) have a voracious appetite for an even larger helping of member contributions. The good work done is in the form of $500,000 or so in cuts from the baseline in the budget recommended by General Manager John Bailey and the Budget and Finance Advisory Committee. These $500,000 or so in cuts compiled by Supik, the OPA’s treasurer and chief financial officer, from options debated by the board in three budget review meetings in early February, are significant. These cuts bring the approved budget down from the original $12 million to $11.5 million. Clearly, Supik’s list of cuts are far less ambitious than the $1.5 million list proposed by Director Slobodan Trendic, the board member whose actions as a director remain the most faithful to the sentiments of those who elected him. Still, the Supik plan represents progress and an indication that, finally, the directors are taking action to combat the operating deficit that has been allowed to accumulate over many months without a meaningful response. One example of the contrasting approaches of Supik and Trendic involves the sensitive issue of employee health benefits, which this board recognizes is in need of reform. Supik and the board majority are going overboard in trying to spread the pain of a less generous employer contribution over two full fiscal years, while Trendic would like to begin implementing needed reforms in the remaining months of 2017-18 with phase two in 2018-19, in this calendar year. The difference is roughly $200,000 in cost savings versus the $100,000 included in the latest iteration of next year’s budget. Trendic, of course, is recommending the more fiscally responsible course. If indeed OPA finances are as dire as the latest projections suggest (rather than a conveniently timed political contrivance to provide cover for an assessment increase), then a less leisurely approach is justified to altering the OPA’s Cadillac plan. Simply put, the OPA and its membership can’t afford a plan that too generously pays most if not all health reimbursement account co-pays within a deductible (before the insurance company pays) and 100 percent of an employee’s individual health insurance premiums.

OPA members who cling to a hope of a zero increase may still be able to prevail upon Doug Parks, Tom Herrick and Colette Horn to reduce the assessment to zero, but it’s going to take some work. The hour is late. Slobodan Trendic, of course, budget hero that he is, requires no persuasion. More than $1.1 million a year in HRA and insurance premiums need to be reined in. That this board is at least taking action at all is commendable. Then again, the bar is low. Phase one of the program cuts includes capping these generous HRA payments at $2000 for inviduals and $4000 for families. The board majority too timidly is awaiting the arrival of a new Human Resources employee to help usher in these reforms. Trendic in contrast doesn’t want to wait that long; he wants these changes, which only affects employees who submit claims, implemented immediately. It should not take an HR specialist to do this. If help is needed, the OPA’s law firm employs staff with expertise in this area. Phase two of program cuts would ask employees to share in premium expense at an 80-20 employer-employee split, typical in the working world. As for family members, here, too, the OPA has to curb expenses, but there is sentiment on the board to continue family benefits at rates somewhat more generous than what occurs elsewhere. That’s defensible. Many employers don’t even cover premiums for family members, so an 80-20 split here could work. Trendic agrees with the board that a phased roll-out of benefit cuts makes sense. The disagreement lies with the timing, with Trendic urging sooner and a board majority later than necessary. Trendic is also urging his colleagues to implement an immediate salary freeze with no automatic increases in next year’s budget. Earlier, he had suggested that bonuses could be divvied out to employees who perform well, but that may no longer be in play with Supik’s latest operational deficit estimate for the current fiscal year of $1.5 million to $1.8 million. Moroney rounds it off to $1.8 million, of course, because he can and because it feeds into a political narrative that justifies assessment increases. The recommended budget by Bailey and the B&F committee included a three percent salary increase across departmental budgets, with some discretion. Throughout the three days of budget work sessions, it seemed there was no concerted pushback on that, but that changed in the teeth of the latest deficit estimates. Trendic told his colleagues he wanted no salary increases in 2018-19. Colette Horn countered with one and

a half percent, and that seems to be the number that has been adopted, still subject to a final board vote later this month. Supik, Jacobs and Moroney are clearly in the camp of advocating for an the assessment increase in 2018-19. If they had been able to coax one more director to their side, property owners would be paying $960, not the $951 called for in the latest budget iteration. OPA members who cling to a hope of a zero increase may still be able to prevail upon Doug Parks, Tom Herrick and Horn, but it’s going to take some work. The hour is late. Trendic, of course, budget hero that he is, requires no persuasion. One way to get to zero -- and there are many -- would be to eliminate the recommended $26 in assessment funding for road depreciation. Casino money is sufficient for the road program in place today. If an accelerated program of road resurfacing emerges, with a real plan and a real timetable, that’s the time to increase funding for the road reserve by funding road depreciation. Until then, it’s an assessment increase without a plan to back it up. The rest of the proposed $30 increase in the lot assessment could be made up by reducing the Yacht Club operating deficit to zero, achievable by a simple decision to close the Yacht Club shortly after Labor Day, no later than Oct. 1, when historically it begins to lose money. Both Herrick and Horn (and, on one occasion, even Moroney, though one doubts his commitment, as he was one of the most fervent promoters of this $6 million white elephant) expressed support for the idea of keeping food and beverage operations open at the Country Club/Tern Grille after the Yacht Club closes. This makes sense, as a break-even or profitable operation at the Tern Grille or upstairs should be achievable. The three-days-a-week operation at the Tern Grille, though off to a very rocky start last month, apparently is beginning to stabilize, according to Bailey, who also told the Progress that it’s very close to breaking even. Closing the Yacht Club when it no longer produces a surplus and shifting or continuing operations at the Country Club would be a return to the mode of operation in the early decades of Ocean Pines. Banquets could be scheduled at the Country Club rather than the Yacht Club after Labor Day. This isn’t that difficult. A board majority seems to be coalescing around this idea, which enables the closing of the Yacht Club shortly after Labor Day and makes a zero operating deficit realistic, regardless of whether the board and Bailey keep management in-house or hire a managing partner. But if the board can’t summon the will to adopt a zero-based Yacht Club budget, then perhaps it will take a referendum petition and referendum to demand an end to Yacht Club operating subsidies. Think of it as Plan B. -- Tom Stauss

February 2018 Ocean Pines PROGRESS

Defict recovery myth dies a risible death

he Budget and Finance Advisory Committee and the Board of Directors have spent much of the 2018-19 budget development season hyperventillating and otherwise overeacting to current year operating deficits and scheming to find a way to make property owners pay for management mistakes and lax board oversight. This exercise fell under the rubrick of something called “deficit recovery” and could have involved the restablishment and refunding of an aberrant and abhorent artifice called a “deficit recovery reserve.” Aberrant and abhorent, because, as it turns out, it violates the letter and spirit of the OPA’s Declarations of Restrictions, which authorize the collecting of assessments for current and future needs, not backward-looking recovery of deficits in prior years. Moreover, Board Resolution F-03 does not include a deficit recovery reserve in its authorized list, which is confined to a replacement reserve, a roads reserve, a bulkhead reserve and a future projects reserve. When a prior board created it, and added it to the monthly and annual reserve summaries, it acted lawlessly. Last year’s board ended it; the current board has no business in reestablishing it. Apparently that isn’t going to

deficits from previous years, it’s so much easier not to share the fruits of these budget cuts with property An excursion through the curious cul-de-sacs An excursion through theby-ways curious and by-ways and cul-de-sacs owners, who, of course, are the poor of Worcester County’s County’s most densely community. of Worcester mostpopulated densely populated community. saps who pay the bills. By TOM STAUSS/ By TOM Publisher STAUSS/Publisher What the board is doing is not paying back or applying anything. It’s happen, so that, at least, is progress. and realized, then they will be “ap- simply cutting a draft budget that Director Ted Moroney, an appoint- plied” to the operating fund deficit. was in need of it, thereby improving ed board member who might well This, too, is a laughable. How exact- the odds somewhat that next year’s be the board’s high priest of deficit ly would budget cuts be “applied” operations will generate a surplus. recovery sharing honors with high to an operating deficit? How would If that happens, then the cumulative operating fund deficit will be priestess Pat Supik, had a belated that even be possible? epiphany on the last of three days of The OPA’s operating fund is a less than it would be otherwise. The budget review work sessions in ear- financial contrivance, essentially balance sheet, a far better indicator ly February. a spreadsheet, maybe not even all of the OPA’s financial health than Risibly, and perhaps with just the that accurate, and incapable by its these easily manipulated funds, will hint of embarrassment, Moroney very nature to have anything “ap- show an improving cash and shortadmitted that budget cuts that have plied” to it except, perhaps, sticker term investment position. Now that the myth of deficit rebeen endorsed by the board for 2018- notes or spilled coffee. 19 really don’t amount to “deficit It’s not a segregated, discrete pile covery is officially deceased, perhaps recovery” and won’t be transferred, of cash in a bank somewhere. To the a board majority will atone for its allocated, parked, borrowed, folded extent it even exists, its “resources” rhetorical sins by returning a modor spindled into a deficit recovery are bundled with all of the OPA’s est share of these projected savings reserve fund after all. cash and short-term assets, aggre- to property owners in the form of an OMG! gated for all to see on the OPA’s assessment decrease, or at the very least an abatement in the scheduled In other words, the b.s. has been month balance sheet. flying fast and furious for months, To assert that one is “applying” $30 increase. Consider it recompense for the courtesy of our appointed and elect- budget cuts to the operating deficit ed leaders. is an abuse of language. It’s a disin- months of feeding the deficit recovNow that the budget is rushing to genuous, misleading if not flagrant- ery myth. -- Tom Stauss the finish line, it’s OK to retire the ly false statement. myth and find a better way to deBut it’s a good cover story to exscribe all this financial Kibuki. plain why budget savings are not Moroney and Supik’s new and im- being returned to property owners. proved verbiage is that, once these If one can pretend that these budcuts are approved and implemented getary savings are “paying back”

LIFE IN THE LIFE INPINES THE PINES

The Ocean Pines Progress, a journal of news and commentary, is published monthly throughout the year. It is circulated in Ocean Pines, Berlin, Ocean City, and Captain’s Cove, Va. Letters and other editorial submissions: Please submit via email only. Letters should be original and exclusive to the Progress. Include phone number for verification. 127 Nottingham Lane Ocean Pines, MD 21811

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Aqua Virginia to suspend proposed rate increases, the result of new tax law Property owners’ group wants reduction in rates from grinder pump savings By TOM STAUSS Publisher hile the new tax law passed by Congress and signed into law by President Donald Trump has delivered a substantial tax reduction to corporations, including utilities, some corporations are passing on at least some of that savings to customers. One beneficiary of the tax law is Aqua Virginia, the Captain’s Cove water and sewer utility, which recently announced how it plans to pass savings on to its Captain’s Cove customers. According to a letter from John Aulbach, president of Aqua Virginia, to Cove resident Timothy Getek, in late January, the utlity company plans to keep rates as they are rather than increase them on an interim basis this month as had been

planned. On. Jan. 24, the company had filed with Virginia’s State Corporation Commission a request to revise its previously filed proposed interim rate increase to reduce water rate increase by almost half and eliminate entirely the wastewater increase. “Specifically, the reduction of interim rates means that, for our Captain’s Cove customers, current water and wastewater rates will not change as reflected in the new requested interim rate structure ... As far as I am aware, no other Virginia utility has undertaken such prompt and voluntary action to immediately pass through the savings from the Tax Cuts and Jobs Act for the benefit of our customers,” Aulbach wrote. A group of Cove residents fight-

ing what had been a proposed interim increase in rates has, as a result of the new tax law, is now taking a position that it’s possible to reduce rates in Captain’s Cove from what they are currently. In a Jan. 23 email to the SCC, one day before the company filed for its rate reduction, Getek on behalf of the residents argued that recently installed grinder pumps on roughly 300 homes in the Cove produces significanct operational savings to the utility company that should be passed on to customers in the form of lower rates. “In the beginning of 2017, a rate increase was requested and granted to Aqua Captain’s Cove (now Aqua Virginia) by the SCC for water and wastewater charges,” Getek said in his email. “In addition, those cus-

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From Page 41 “Aqua Virginia customers at Captain’s Cove would like to see an accounting by the SCC of any potential rate increase with the grinders in place for 2018,” measured against another accounting assuming the grinders were not in place for 2018. “This is necessary so that customers ... can verify that Aqua Virginia and the SCC have taken into account this massive and expensive upgrade by the customers when calculating the need for increased wastewater rates,” Getek said. First quarter financials -Cove President Tim Hearn on Jan. 23 posted Cove association financial results for the first quarter of 2017-18. The Cove is sitting on $1.6 million in cash, with 46 percent of it held in the Exhibit X account that pays for new road construction and mortgate payments on the Marina Club. Roughly $200,000 in “quality” receivables are owed, with the expectation of collection in the next three months. Accounts payable is a low $40,000, with no new debt added to the balance sheet since last year. Revenue for Billy Casper Golf operations is at $175,000 through December versus a budget of $145,000, or $30,000 ahead of budget. Revenue from assessments at $710,000 is $46,000 under the budgeted $757,000. According to Hearn, the shortfall is the the result of 82 lots that had been budgeted as performing were foreclosed on in 2017, after the 2018 budget had been approved. Total revenue year-to-date is $1.368 million against a budget of $1.406 million. Total expenses are $1.115 million against a budget of $1.131 million. Net income is $253,000 compared to the budgeted $275,000. Billy Casper Golf operations for December produced revenue of $51,000, ahead of budget by $7,000. Net income was $11,000 in December and $18,000 for the first three months of fiscal year. Labor costs were on budget for the month. In response to a question about the $46,000 shortfall in revenue collections, Hearn said the impact on (first quarter) financial performance was mitigated by positive variances in other areas, with the net income for the quarter still exceeding $250,000. There appears to be no reason that any FY 2018 budgeted capital expenditures or reserve funding will be impacted, if these overall trends continue,” he wrote.

February 2018 Ocean Pines PROGRESS

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