January 2018 progress by Ocean Pines Progress

January 2018

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The Board of Directors on Jan. 12 awarded a contract to Davis, Bowen and Friedel of Salisbury to draft final construction drawings for the renovation of the Country Club’s second floor. Once construction drawings are complete, the Ocean Pines Association will be able to post a request for proposals from builders for the second floor renovation and submit applications for county permits. There is a hope that the work can be completed by this summer, in time for some 50th anniversary-related events, perhaps for a golf tournament scheduled for June 30.

THE OCEAN PINES JOURNAL OF NEWS & COMMENTARY COVER STORY

Draft FY ‘19 budget calls for $60 lot assessment increase

~ Page 13

Most amenity fees remain the same; Bailey proposes to restablish deficit recovery reserve but cuts supplemental replacement reserve revenue

By TOM STAUSS Publisher eneral Manager John Bailey has proposed a $12 million Ocean Pines Association operating budget for 2018-19 that calls for a $60 increase in the base lot assessment and no change in amenity rates except for a return to 2016 fees and privileges for pickleball and a modest increase in boat slip rates at OPA-operated marinas. The draft budget also calls for the final elimnation of a controversial supplemental reserve funding stream that cost property owners $727,000 last year, contrasted with the resurrection of a previously abolished deficit recovery reserve that would cost property owners $33 of the proposed $60 assessment increase. That’s the equivalent of just less than $279,000 in assessments. The $33 “deficit recovery” component of the proposed assessment increase, designed to offset roughly $1.4 million in operational losses in the current and previous fiscal years, would remain in place for five years, prompting early critics to say

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it amounts to a special assessment and resembles the much criticized “five-year funding plan” for reserves established in 2010 and which, in 2018-19, can be said finally to no longer in exist in name or residual funding. The proposed 2018-19 budget also would eliminate the experimental $250 fee currently charged those who neither own property nor live in Ocean Pines, so-called “associate” members who abandoned the OPA amenities in droves this year. Under Bailey’s draft proposal, these associate members will be able to purchase memberships without what amounted to a $250 entry fee, albeit at somewhat higher rates than property owners and residents will pay. In a proposal that has aroused considerable discussion the during the budget review process currently under way, Bailey also has taken off the rose-colored glasses worn by some of his predecessors and has projected a hefty $338,000 loss in Yacht Club operations next year. He currently is projecting a $452,000 loss

Engineering contract for Country Club’s second floor awarded

Bailey confirms Yacht Club closure likely before mold

for this amenity in the current fiscal year, so the projected loss next year would actually be a year-overyear improvement. The $338,000 projected loss represents just John Bailey under $40 in the annual base lot assessment. While Bailey told the Progress recently that he might propose some sort of out-sourcing management solution for the OPA’s premier restaurant and bar venue, his draft budget assumes year-around inhouse operations again next year, which more or less guarantees operational losses, if past is prologue. Surpluses historically generated during the summer months are dissipated in red ink that generally starts in November and carries through until the end of the fiscal year in April. The difference this To Page 25

Confirming to some degree speculation that odds favored closing of the Ocean Pines Association’s premier dining amenity early in the new year, even before the discovery of a mold problem that is much worse than an early diagnosis and fix, Ocean Pines Association General Manager nontheless said the issue is real and in urgent need of remediation.

~ Page 19

GM agrees projected $338,000 loss at YC next year can be cut

General Manager John Bailey, in a wide-ranging discussion with the Budget and Finance Advisory Committee Jan. 12, said his proposed food and beverage budget for the Ocean Pines Yacht Club and other restaurant venues is in a “state of flux” and that the projected $338,000 loss in the amenity next year can be reduced.

~ Page 21

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OCEAN PINES BRIEFS Sports Core add-on hits budget turbulence

While it’s still too early to know whether a proposed training/party room addition for the indoor Sports Core pool will make the 2018-19 capital budget, the proposal hit some turbulence in the the Budget and Finance Advisory Committee’s first budget review meeting Jan. 10. It’s part of General Manager John Bailey’s almost $2 million proposed capital budget for next year. The problem is that the funding source for what is a new asset is the Ocean Pines Association’s replacement reserve, which is supposed to be used only for assets already in service. Committee members noticed. Bailey said he only identified the replacement reserve as the funding source for the proposed addition because it had been so designated a year ago when the current year’s budget was approved. He said he didn’t want to overrule a previous board decision, but that explanation didn’t seem to persuade committee members. The proposed $225,000 addition, including a uni-sex bathroom, would

be located on the concrete deck facing the South Gate pond and Veterans Memorial park. Aquatics and Recreation Director Colby Phillips told the committee she would love to have more room to accommodate private parties, staff training and a swim safety for fourth graders program she has negotiated with the Worcester County school system. Without the room, she said she would have to turn down some requests for private parties, a growing source of revenue for the Aquatics Department. But she also said she was willing “to take one for the team” because the OPA is facing a $1 million operating deficit this year. Budget and Finance Committee chair John Viola, who served as interim OPA finance director for more than six months last year, seemed supportive of the room and of Phillips’s budgeting skills and the fact that previous capital expenditures she has requested have paid for themselves in program fees.

Marina, pickleball fee increase in draft budget

Membership fees for golf, aquatTo Page 5

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ics, tennis and platform tennis would remain unchanged in 2018-19 if an amenity rate structure is approved as proposed in General Manager John Bailey’s draft budget for next year. But pickleball would be bumped up somewhat, boaters would pay somewhat more for boat slips at the Yacht Club and Swim and Racquet Club marinas if the Board of Directors approves the changes when the 2018-19 budget is adopted next month. Pickleball rates would return to the privileges and fees of two years ago, and apparently would include access to the indoor courts at the Community Center’s gymnasium without the need for drop-in fees. That objective has been the goal of the Ocean Pines pickleball club this past year. Current rates were lowered from the previous year’s, but added dropin fees for indoor play were not well received by the members, some of whom did not renew this past year

in protest. Restoring the status quo ante is designed to recoup that lost membership and build on the good will created by the opening of new outdoor pickleball courts last year. Pickleball rates for property owners and residents would increase from $100 to $150 for individuals and from $175 to $250 for families. Associate membership rates would also return to where they were two years ago, to $200 for individuals and $350 for families. Associate memberships are available to those who don’t reside or own property in Ocean Pines. Junior rates would be $55 for residents and property owners and $80 for associates. Marina rates at the Yacht Club would increase from $1,745 to $1800 for boats under 26 feet. Boats over 26 and under 40 feet would be charged $2,450, up from $2,380 currently. Fees for boats over 40 feet and liveaboards would increase from $3,355 this year to $3,455 next year. At the Swim and Racquet Club, fees for all boat slips would increase from $1,260 to $1300.

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Wage change may not apply to summer staff

Dismayed by a roughly ten percent increase in employee costs in the proposed 2018-19 budget for next year, one member of the Budget and Finance Advisory Committee is questioning one of the prime drivers of the proposed increase, the mandated hike in the state minimum wage to $10.10. Committee member Marty Clarke said it is his understanding that seasonal employees aren’t covered by the mandated increase, suggesting that the OPA could cut back on some of the proposed increases in employee costs. But Aquatics and Recreation Director Colby Phillips, in her session with the committee, pushed back against that proposition, diplomatically, suggesting that her departments will be competing against other recreation and swimming pools for staff, all or most of which are already paying staff more and which no doubt will be paying their staffs at least minimum wage this summer. How this shakes out remains to be seen, as the proposed budget would increase the payroll costs by $89,774, or 1.01 percent, over the current year’s budget. Some committee members, however, believe Ocean Pines Association payroll costs are too high this year, which sets up the possibility of some cost-cutting in coming weeks.

OPA ‘short’ of funds for OPVFD equipment

The Ocean Pines Association has

had a long-standing arrangement with the Ocean Pines Volunteer Fire Department to pay half of its capital equipment costs, such as new fire trucks and such. The OPVFD has ample reserves established to pay its share of capital costs, and the OPA maintains a separate bank account, a quasi-reserve fund one might call it, to pay its half of OPVFD capital costs when bills come due. It was a bit of a surprise at a Jan. 11 budget review meeting when OPA officials learned that the OPA needs to cough up roughly $147,000 in a little over a week to pay its share of a replacement fire truck. 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 is roughly $100,000 short in its OPVFD bank account “reserve” to pay its share of the cost. The dilemma had tongues wagging and heads shaking after OPVFD officials delivered the news. Apparently without fully understanding the implications, last year’s OPA board 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 equipq

OCEAN PINES OCEAN PINES BRIEFS

6 Ocean Pines PROGRESS January 2018 more honest dog owners have been OCEAN PINES BRIEFS From Page 5

ment. Currently the OPA has not set aside funds for these pending capital costs. Apparently the solution for the immediate shortfall will be 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.

Rec manager explains dog park entry system

General Manager John Bailey’s draft budget for 2018-19 includes a swipe card entry system for the Ocean Pines dog park at the Manklin Meadows recreation complex, designed to prevent dog owners, many of whom may not necessarily be Ocean Pines residents and property owners, from accessing the park without having paid the $25 fee that

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paying since the park opened a few years ago. Recreation Department manager Debbie Donaway said the $6,000 entry system is necessary because some dog owners have figured out that access to the park isn’t being policed, and that in turn has reduced the revenue generated from park passes from more than $5,000 in the first year of the park’s operation to about $1600 currently. Members of the Budget and Finance Advisory Committee, during a budget review meeting with Bailey and Donaway Jan 10, seemed receptive to the proposed swipe system, which would be considered new capital and funded directly out of next year’s lot assessment rather than reserves.

Committee member Marty Clarke during a Jan. 10 budget review meeting. The estimate is included in General Manager John Bailey’s draft budget for 2018-19 now under review by the committee and Board of Directors. Clarke said lifting the building alone to fix foundation defects alone could cost that much. He said he suspected that the low-ball estimate would be revised later when it was too late to abandon the project. He said he wondered whether it would make more sense to simply tear down the building rather than replace or repair it. If neither happens, members of the Pine’eer Craft Club, an organization that dates back to the earliest days of Ocean Pines, would no doubt be extremely upset.

Clarke questions cost for craft building

Sanctuary crabbing pier replacement hits snag

The Public Works Department’s $75,000 estimate for renovation of the Pine’eer Craft building in White Horse Park was criticized as too low by Budget and Finance Advisory

Some members of the Budget and Finance Advisory Committee aren’t too keen on a proposed replacement of the crabbing pier in the Sanctuary section of South Ocean Pines de-

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8 Ocean Pines PROGRESS January 2018 OCEAN PINES BRIEFS From Page 6

shall remain nameless” to remove signage on Ocean Parkway promoting the crabbing pier. Committee member John O’Connor, until the return of John Viola the chair of the committee, asked why the OPA should be spending money on replacing the pier “when it’s not even for us,” by which he meant Ocean Pines property owners generally. He seemed to be suggesting that if Sanctuary residents want the crabbing pier as a neighborhood amenity, the obligation to pay for its replacement should rest with them.

Committee members spar over bulkheads

Members of the Budget and Finance Advisory Committee sparred among themselves during a Jan. 11 budget review meeting over whether the Ocean Pines Association should be sitting on roughly $2.5 million in a bulkhead replacement reserve. In one corner was member Gene Ringsdorf, who said it’s too much, even if a new bulkhead replacement program had been proposed by management and approved by the Board of Directors. One hasn’t been, but it soon will be, according to Public Works Director Eddie Wells and General Manager John Bailey. In the other corner was committee chair John Viola, who said a few years of little activiity in bulkhead replacement other than some emergency repairs and replacement does not justify a “waterfront differential” holiday for waterfront owners in Ocean Pines. He said funding needs will become clearly once details of a new multi-year replacement program are announced soon. Wells said a new replacement program will cost the OPA and the bulkhead reserve roughly $1 million per year when it’s up and running. It possible could begin this year, depending on action by the Board of Directors.

Massey defends staff size, OPPD space needs

Ocean Pines Chief of Police Dave Massey defended his budget and the 16 police officers in his department against a suggestion by one member of the Budget and Finance Advisory Committee that perhaps the department could cope with a reduction in staff next year. The suggestion came in the form of a question during the

Swim team donation

Members of the Ocean Pines Hammerheads swim team, and their coach, Brooks Ensor, recently delivered plush animals to the Atlantic General Hospital Emergency Department to be given to pediatric patients. Shown left to right team members Will Schlesinger, Nat Fink, Audrey Iman, Katie Pizlo, Emma Coyman, Emily Fink, Victoria Iman and Molly Hoffman.

Jan. 11 budget review meeting hosted by the committee. Massey was also asked about the need for additional space, for which $50,000 has been allocated in capital funding this coming year for construction drawings related to an expansion in space in the Administration Building from the current 1700 square feet to a proposed 5,000. In both cases, Massey said the need was well established. He said that the original space was based on a department of three officers, as opposed to the 16 now in place. General Manager John Bailey said the plan is to complete the Country Club second floor renovation before tackling another major capital project. So actual renovation of the Administration probably won’t occur until calendar year 2019. “We can’t operate with fewer officers,” Massey said, citing turn-over and training time that is needed to keep Ocean Pines protected on a 24-7 schedule.

Idea for capital reserve meets resistance

General Manager John Bailey’s idea to take a full year to roll out and fund a new capital reserve after creating a new committee to review, vet and rank future capital projects in order of importance met some resistance among members of the Budget and Finance Advisory Committee Jan. 11. Well aware that some committee members, not all, regard the idea with suspicion, believing it to be a proposed “slush fund” that could be easily abused by future boards of directors, Bailey tried to ease everyone’s concerns by saying projects would not be funded unless fully vetted by a new capital projects committee. He argued that right now

the OPA has no mechanism to finance new capital projects or expenditures, and that as a result all new capital essentially is an operating expense funded by assessment increases in the years they’re funded. He wants to be able to pay for “new capital” expenditures out an established reserve, in the same way that replacement capital expenditures are funded. Member John O’Connor was perhaps the most outspoken against the idea, in a low-key sort of way, suggesting that it would encourage wasteful new programs that won’t benefit most property owners. OPA President Doug Parks seemed to agree with O’Connor, suggesting he was not inclined to support the establishment of a new capital reserve in this year’s budget. “I’m not sure I want to create a new unknown reserve fund,” he said. “It puts us in a higher risk position (to fund) the whim of the year.” He called the idea a potential “slush fund.” Bailey said he didn’t want to establish the fund this year, either, preferring to take a year to work out procedures to ensure that O’Connor and Parks’s fears don’t come to pass.

New director of finance on the job as of Jan. 8

The Ocean Pines Association’s new director of finance, Steven Phillips, a 19-year finance and accounting veteran, had his first day on the job Monday, Jan. 8. He is responsible for OPA budgeting, forecasting and accounting practices, maintenance of its fiscal records and the preparation and interpretation of financial reports. As a result of a board vote during a special meeting Jan. 12, he is now one of two assistant OPA treasurers,

with check signing authority. Phillips most recently has served as senior associate vice president for Finance and Operations for Harford Community College in Churchville, Md. For the previous eight years, he served as controller for Harford Community College, which operates a $50 million budget. He also brings with him knowledge of preparing financial statements in accordance with the Government Accounting Standards Board, developing models and performing analytics on pricing and marketing programs, and making investment decisions in an effort to maximize profits. Phillips had held his licensure as a certified public accountant and received his bachelor’s degree in accounting from Loyola University and master’s degree in finance from Johns Hopkins University.

OPA to target excessive cell phone expenses

The Ocean Pines blogosphere was churning a few months ago over reports that the Yacht Club’s monthly phone bill was extraordinarily high, almost $20,000. Turns out, phone bills throughout the entire organization seem high, at least to members of the Ocean Pines Association’s Budget and Finance Advisory Committee, who batted the subject about during a budget review session Jan. 11. One possible explanation seems to be cell phone usage among those with OPA smartphones. The solution in part, according to the discussion, may be to eliminate company phones in lieu of some sort of reimbursement or shared cost for when employees use their personal phones for business purposes. To Page 10

January 2018 Ocean Pines PROGRESS

OCEAN PINES

10 Ocean Pines PROGRESS January 2018 Yacht OCEAN PINES BRIEFS General Manager John Bailey, who has both a company cell phone and a personal phone, commented that “no one likes to carry two phones around.” OPA President Doug Parks commented that controlling phone use may be a way to cut more than $85,000 in budgeted phone expense.

Tern Grille to pick up slack from YC closing

General Manager John Bailey disclosed during a budget review session Jan. 12 that the Tern Grille, previously closed for the season, will be reopening on a three-days-a-week schedule -- Fridays and Saturdays, from 4 to 9 p.m., and Sundays 9 a.m. to 9 p.m. Mentioning that the Tern Grille operation will not be managed under the golf department until May 1, Bailey said that the food operation on the lower level of the Country Club will be run by Yacht Club staff that had been laid off when the

Commitee questions pessimistic golf budget

With golf operations including the Tern Grille projected to lose about $100,000 this year, the best bottom line performance in years if not decades, members of the Bud-

Garden Club officers

The Ocean Pines Garden Club installed officers for 2018 at a Lighthouse Sound installation luncheon Jan. 11. Pictured, are left to right, Corresponding Secretary Buttons Bassett, Co-Vice President Sue Sewell, Recording Secretary Joan Dempsey, Co-Vice President Jan Tellman, Treasurer Daryl Carpenter, and President Linda Baker. The OPGC generally meets on the second Thursday of each month at the Ocean Pines Community Center at 10 a.m. Visitors and new members are welcome.

get and Finance Advisory Committee are wondering why, in his draft budget for 2018-19, General Manager John Bailey and Director of Golf John Malinowski are budgeting for a $200,000 loss. The projected loss for the current year consists of roughly $31,000 at the Tern Grille and $69,000 in golf

operations, said Bob Kessler, a committee member and also the chair of the Golf Advisory Committee. He and other committee said in effect that Bailey and Malinowki were being overly pessimistic on both projected income and expenses. Kessler, who said he has never seen

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Club’s Cove restaurant was shut down earlier this month. Bailey said there was “left-over inventory” at the Yacht Club that needs to be consumed. It will be brought over to the Country Club and effectively recycled. He said the menu that will be offered at the Grille will be expanded from the usual fare, with a variety that hasn’t been seen before at that venue and probably won’t be replicated in the future. An announcement posted on the OPA Web site later on Jan. 12 said a prime rib dinner will be offered from 4 to 9 p.m. Friday nights. A Sunday brunch is scheduled from 9 a.m. to noon. New menu items will include fresh salads, appetizers and sandwiches.

January 2018 Ocean Pines PROGRESS 11

OCEAN PINES By ROTA L. KNOTT Contributing Writer t nearly 20 years old, the Ocean Pines library is due for some major structural repairs, including a new roof, chimney work, and interior repairs, at an estimated cost of $800,000. The extensive and expensive project is included in Worcester County’s $100 million Five-Year Capital Improvement Plan for next year. The Worcester County Commissioners on Jan. 2 unanimously approved the planning document, which includes proposed capital improvements for fiscal years 2019 through 2023. Commissioner Chip Bertino, one of two commissioners who represent Ocean Pines, asked about the timing for the building repairs at the Ocean Pines branch of the Worcester County library system on Cathell Road. He wanted to know when residents can expect the project to get under way. John Tustin, county director of public works, said the project is still in the design phase. However, he anticipates putting the work out for bids in the late spring, with work to commence in over the summer or in the fall of 2018. Bertino asked “So within the year?” Tustin replied “yes.” Built in 1999, the library’s roof system leaks and damage is systemic, according to the project justification included in the CIP. Roof sheathing, valley flashing and shingles need to be replaced to prevent water intrusion. “Currently, the facility leaks rain water through the roof and chimneys causing considerable interior damage.” The building has two brick chimneys and both leak due to original construction deficiencies. The chimneys need to be partially demolished and reconstructed with proper techniques and

OCEAN PINES BRIEFS From Page 10 a golf budget that he regarded as realistic, suggested a loss of about $150,000 might be a good compromise. Kessler said that elimination of an outside management company reduced expenses this year and that he expected that savings would carry over into the new year. Bailey and Malinowki said a partial explanation for high expenses is a proposed addition of a seasonal assistant pro and higher medical costs.

Ocean Pines library in need of $800,000 in structural repairs Leaky roof, faulty chimneys, interior upgrades planned construction methods. An aging heating, ventilation, and air conditioning system cannot maintain space cooling requirements at the library and is also scheduled for replacement as part of the project. The condensers and evaporator coils are obsolete and need to be upgraded to new equipment. “The occupants of the facility experience interruptions in cooling due to failing or failed equipment. So services to the staff and patrons are adversely affected,” the CIP states. Interior drywall repairs will have to be completed after building improvements. The project scopes and final repair recommendations were developed for the county by the engineering firm of Gipe Associates, Inc. for the HVAC and The Whiting-Turner Contracting Company for the building envelope. Upgrades for the HVAC systems will require that all systems meet an applicable codes for indoor air quality and ozone depleting agents. The final project scope with options has not been determined so conservative estimates were provided at $800,000. In justifying the request for funding, the CIP states maintaining the structural integrity of this building is paramount as this facility serves the residents of Ocean Pines and other nonresident patrons such as tourists. The consequences of not funding the repairs described will be short-term and long-term degradation of the structural elements resulting in loss of services to the patrons of this facility. Loss of adequate cooling to the occupied spaces occurs on a regular basis when ambient temperatures rise to a level where the equipment is unable to perform to meet the requirements. Construction of the improvements at the library is estimated to take up to a year after formal bidding and project award, based on construction sequencing, weather conditions and constraints. The CIP also includes funding for a new Showell Elementary School,

with $10.4 million proposed in FY19, $19.3 milliin in FY2020, and $10.4 million in FY 2021. An addition to

Stephen Decatur Middle School is included at $253,691 in FY21, $3.2 million in FY22, and $4.9 million in FY23. The capital improvement plan is a planning document that is used to identify future capital projects. The commissioners held a public hearing on the document on Jan. 2, but there were no comments. Bertino made a motion, which was given a second by Merrill Lockfaw and approved unanimously, to adopt the CIP.

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County approves ‘memo of understanding’ for access to fiber optic backbone Ocean Pines will pay for connecting OPPD to line on Route 589 By ROTA L. KNOTT Contributing Writer orcester County is continuing to partner with the Maryland Department of Information Technology to install fiber optic cable throughout the county, but the line will stop short of Ocean Pines. The Ocean Pines Association will have to cover the cost of tapping into the cable on Route 589 and extending it into the community. The Worcester County Commissioners during a Jan. 2 meeting unanimously approved a memorandum of understanding (MoU) with the state’s information technology department (DoIT) that allows the county access to the existing fiber optic network buried throughout the

county. Fred Webster, director of emergency services, presented the request for signature on the MOU, saying time was running out for its approval. He said it needed to be submitted to the state by the next day or the conditions of the MOU may change. The county has been working with DoIT and Skyline Technology Solutions for about two years to develop and deploy a countywide fiber optic network, known as Worcester County Public Network, in support of multiple public safety projects, general county government, the library system, and the Board of Education. “DoIT provides a critical link q

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From Page 12 with the fiber, at certain locations, that the county has recently paid to have installed by Skyline Technology Solutions,” Webster said. Portions of the network that serve the Board of Education are already in place and being used. The use of Maryland fiber is a critical part of the path to providing connectivity for both the Next Generation 911 and emergency radio system projects. Commissioner Chip Bertino asked if the MOU would allow for connection of the Ocean Pines Police Department to the fiber optic network. Webster said the connection of the Ocean Pines Police Department from Route 589 to the OPPD is a separate project. He said it is up to the Ocean Pines Association to negotiate an agreement with Mediacom to provide that fiber connectivity between the backbone system and the community. “So that is separate from what this is?” Bertino asked. Webster responded that yes, “that would be a signed agreement with Mediacom and Ocean Pines Association.” The county will pay an annual fee of $87,759 to the state for the privilege of connecting to the state’s fiber optic system. The county will provide the state department with access to rights-of-way that it holds along roads for the construction, maintenance and operation of state fiber optic cable in Worcester County. Under the MOU, DoIt will provide the county with 1GB ISP of bandwidth and 100 Mbps of service, at no cost to the county during the term of the agreement, use of department-owned fiber optic cabling as identified for a fee of $1,400 per mile per year for aerial and $2,100 per mile per year underground. It also specifies that county will have reasonable access to fiber constructed by the department in the future, at incremental installation costs as may be reasonably negotiated by the parties. The matter of whether to contract with Mediacom to provide the highspeed connectivity to the backbone system for the Ocean Pines Police Department is currently on hold, embroiled in an internal board debate and awaiting recommendations from the OPA’s Technology work Group.

January 2018 Ocean Pines PROGRESS

Board awards final design work for Country Club second floor to Davis, Bowen and Friedel Six week turn-around anticipated before RFPs can be issued By TOM STAUSS Publisher he Board of Directors on Jan. 12 awarded a contract to Davis, Bowen and Friedel of Salisbury to draft final construction drawings for the renovation of the Country Club’s second floor. Once construction drawings are complete, the Ocean Pines Association will be able to post a request for proposals from builders for the second floor renovation and submit applications for county permits. There is a hope that construction can be completed by this summer, in time for some 50th anniversary-related events, especially a golf tournament scheduled for June 30. The motion offered by Director Cheryl Jacobs called for a contract not to exceed $40,000. Representatives from the company, architect Christopher Cullen and structural engineer Andrew Welch, said it will take about six weeks to complete the drawings, which means the RFP could be released on or about March 1. They estimated a three- or perhaps a four-week turn-around for construction bids to be submitted. In theory, that could mean the board could award a construction contract on or about April 1. Whether that means construction could begin immediately would depend on the contractor’s schedule. Jacobs made no secret of the fact that she’s in a hurry, describing herself as “passionate” in her desire to see this project move forward. The construction drawings are for the first phase of a three-phase construction 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. Welch, the structural engineer, said that two of the existing columns in the room could be safely 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

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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 General Manager John 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. q

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An earlier draft of the second floor redesign. In its latest iteration, a wall including two doors has been added to separate the large meeting room from the entrance area near the service elevator (handicap lift).

From Page 13 Directors seemed generally to support this more limited approach to a second floor kitchen. 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. On the suggestion of Director Ted Moroney, the specs for the first phase will include engineering for the potential of an elevator. He said he wanted to make sure there would be enough “juice” and space for an elevator to be added later. He said he wanted the first phase of the project to be accomplished in a way that would not require walls to be ripped up if this or a future board decides to add an elevator. The larger of the second floor meeting groups was described as a board room, but it could more accurately described as a multi-purpose room, usable for meetings of the board or civic groups. A bar would be positioned against the wall that separates the multi-purpose room from

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OCEAN PINES From Page 14

renovated bathrooms, with an area for tables to seat up to about 125 people. There would be storage included as well, but whether there’s enough room to store all the furnishings that might be included in the building was unknown to the DBF representatives. A movable table or raised platform of some sort could accommodate board meetings. Wi-fi and a built-in sound system would be included. Bailey had told the board last Nov. 30 that he would be ordering engineering design drawings for improvements on the second floor. It actually took about a month and a half to move from that optimistic forecast to an actual board vote to approve the contract to DBF. In her initial comments in support of her motion, Jacobs complimented the firm for its willingness to step up and complete plans that it had begun earlier. In still murky events that remain publicly undisclosed, the company didn’t complete the plans last year and the work was given to another company associated with a construction company that the former acting general manager, Brett Hill, wanted to hire for the entire second floor project. The old board and the new one formed in August never approved the Hill-backed scenario for the second floor. Even so, the general concept of a renovation of the building as opposed to a totally new building remains in place. The previous board and Hill accomplished the first floor renovation, including the expansion of the Tern Grille, where budget review meetings are being held this month. No one seemed to know the status of engineering plans associated with last year’s failed effort to renovate the second floor. During the Jan. 12 meeting, Director Tom Herrick asked whether those earlier engineering designs could be incorporated by DBF, thereby reducing the cost to the OPA. In a somewhat awkward moment, the DBF representatives seemed to suggest designs started or completed by another firm could at least be looked at by DBF, if they’re available. Because the floor plan has changed somewhat from what Hill originally had proposed, it may be that any earlier engineering specs are not usable.

Directors differ on whether Bailey missed deadline for Yacht Club recommendations GM now intends to have written report to board before Jan. 27 monthly meeting By TOM STAUSS Publisher cean Pines Association President Doug Parks and Director Slobodan Trendic briefly differed on whether General Manager John Bailey missed a deadline called for in an unanimously approved motion several months ago to submit a written recommendation on how best to manage the

Yacht Club in the future. The approved motion called for Bailey to submit his recommendation to the board by Dec. 31. In response to a question to Parks on oceanpinesforum.com by forum moderator Joe Reynolds, who wanted to know if the board of directors had received Bailey’s recommendations by Dec. 31, Parks replied in the affirmative.

“The GM provided his recommendation on Yacht Club operations to the board as he had promised. Discussions are ongoing and additional information will be available in the next several days as the details are finalized,” Parks wrote. In a response to a similar query from Reynolds, Trendic in a Jan. 5 post offered a somewhat different q

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Report deadline From Page 15 interpretation of what had occurred than what Parks had proffered on the forum site. “Last Friday the GM emailed the Board letting us know that his report and his formal recommendations on future F&B operations will not be ready by December 31st. “So, the options and his recommended/preferred future business model is still a ‘work in progress’,” Trendic wrote. He later told the Progress that there has been no discussions that he’s been privy to about recommended options, and that Parks was incorrect when he stated that recommendations had been provided to the board. Although it seemed possible that Parks was trying to cover for Bailey by in effect saying he had met the deadline, the general manager in a Jan. 5 telephone interview with the Progress acknowledged he had not completed his report by the Dec. 31 deadline. He said he informed the board that he need a little more time to finish the report, as Trendic reported. Bailey said additional proposals from restaurant management companies or individuals were going to be submitted after Dec. 31, with three more interested companies surfacing the first week of January. He said he expected three or four additional proposals the second week of January and he needed time to incorporate those proposals into his report and recommendation to the board. Parks in Jan. 7 e-mail to the Progress resolved the apparent conflict over Bailey’s work product. “It was my mistake regarding the response I provided as I misinterpreted the question Joe asked (on oceanpinesforum.com),” Parks wrote. “Given that the GM reported he had already reached out to several organizations with regard to options for the food and beverage operation, I took that as being his recommendation. “However, after re-reading Joe’s question, I realized he was asking about the “final” recommendation for the food and beverage operation at the Yacht Club. “That recommendation is still being developed by the GM and will be presented as soon as it is available,” Parks concluded.

Outside management for Ocean Pines’ Yacht Club had been Bailey’s preference General manager says he may decide to keep operations in-house after all By TOM STAUSS Publisher hile technically missing a Dec. 31 deadline for completing a report and recommendation to the Board of Directors on how best to manage the Ocean Pines Yacht Club, General Manager John Bailey nontheless had let it be known that the report, when it is submitted to the board later in January, would probably recommend the hiring of an outside management firm to run the amenity for the Ocean Pines Association. “I would like to run it myself; it’s in my skill set,” Bailey told the Progress in a Jan. 5 telephone interview. But because of all the other demands of running a $12 million business, he said he simply didn’t “have the time” to run the OPA’s premier dining and bar amenity as it should be managed. But he also said the current inhouse model clearly hasn’t been working, something made abundantly clear in a recent critique of

operations submitted by the OPA’s Clubs Advisory Committee, which said that improvements in the amenity’s management structure are clearly warranted. While he was leaning in the direction of outside management in the Jan. 5 interview, a somewhat cryptic comment by Bailey during a Jan. 12 budget review meeting with the Budget and Finance Advisory Committee suggested that the entire matter is “in flux” and that he might decide to recommend staying with in-house management after all. While Bailey offered no additional insight into his thinking during that meeting, the Progress has learned that a very well known and respected local food and beverage manager in partnership with a local chef has indicated interest in running Yacht Club operations for the OPA. As a result, it’s very possible that Bailey will opt to recommend hiring that experienced team instead of pursuing outsourcing. If so, the in-house business model

would remain in place. The committee’s recommended approach had been to hire an outside consultant to run the Yacht Club for a period of time before turning over operations to an in-house food and beverage manager. The committee suggested a consulting firm that would develop a business plan, hire and train the entire staff as needed, and oversee the OPA’s own food and beverage manager until he or she is able to take over day-to-day control of the operation. Bailey, on the other hand, while taking an approach not totally at odds with the committee, seemed instead to be favoring an approach that has been tried before in Ocean Pines, especially in the early years when such companies at Clubs Corporation of America and the Marriott Corporation had a contract to manage the amenity for the OPA. Operational losses were steep, resulting in an eventual decision by the OPA to run the operation inTo Page 18

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house. The in-house model has reigned for the rest of Ocean Pines’ 50-year history, except for a two-year period in the 1990s when the amenity was leased to an Ocean City-based restaurant partnership. The 1990s experiment, which delivered a minimal operating loss to the OPA, nontheless was seen as a failure when the OPA and the lessees decided not to renew the lease. Differences over what utility expenses were to be born by the tenants and OPA were factors in a less than amicable relationship. The tenants had been mostly interested in a lease to manage the Ocean Pines Beach Club in Ocean City. The outside management model has been tried more recently in Ocean Pines at the Ocean Pines golf course. For six years, Billy Casper Golf and then Landscapes Unlimited managed the course for the OPA, including the Tern Grille operation on the lower level. Roughly nine months ago, the OPA board of directors decided to terminate the LU contract before its expiration date, opting to return to an in-house management model that had been in place for all the years prior to the six-year outside management interlude. Then Acting General Manager Brett Hill negotiated an arrangement with the Director of Golf, John Malinowski, who had served under both BCG and Landscapes Unlimited, to stay on as director of golf. Hill

did make a change in golf course superintendents, however, replacing Rusty McClendon with Andre Jordan, a former course employee whose long tenure at the course had been terminated six years or so earlier by BCG. No longer paying Landscapes Unlimited a management fee after a generous termination bonus, the OPA has been doing much better financially under in-house management than it did under LU. Yearover-year through the end of November, the positive swing in the golf bottom line is roughly $120,000. While it seems unlikely that golf operations will show a surplus in the current fiscal year, it’s theoretically possible with the surplus through November at about $109,000. Bailey said there would be differences between a recommendation for outside management at the Yacht Club over what was in place at the golf course. “As I understand it, staff at the golf course and Terns Grille were employees of BCG and LU,” he said. In his recommended model, staffers would continue to be OPA employees, but under the direct supervision of a food and beverage manager who would be supplied by the outside management company. It may be a distinction without a substantive difference. Under the BCG and LU model, employees were still paid by the OPA even while technically employees of the contractors. Payroll expense appeared in the monthly financial statements for golf prepared by the contractors and then incorporated into the of-

Anniversary license plate An Ocean Pines license plate will soon be available for purchase to help celebrate the community’s 50th anniversary and to raise money for the Ocean Pines Police Department. The Police Department will host its own National Night Out, a community-building event that promotes police-community partnerships, on Tuesday, Aug. 7. from 5 to 7 p.m. at White Horse Park in Ocean Pines. Music, food and a moon bounce will be available. Marked police vehicles will be on display and officers will meet and greet the public. Proceeds from a license plate raffle/auction that is scheduled for Saturday, March 24, will help to cover the cost of the National Night Out event. The raffle drawing/auction fundraiser will happen at 10 a.m. in the Ocean Pines Community Center. Ocean Pines specialty plates that are numbered one through ten will be auctioned off to the highest bidders and license plates that are numbered 11-50 will be raffled off at the fundraiser. Beginning on Monday, Jan. 15, members of the Association will be able to purchase anniversary license plate raffle tickets at the Administration Building, Monday – Friday from 8 a.m. to 5 p.m. Winning raffle recipients must be present at the March 24 drawing to claim their winning plate. The plate will be mailed to the home owner once the Motor Vehicle Administration form is completed and approved by Ocean Pines Association. To be eligible, a vehicle must be registered in the State of Maryland. Applicants must must be approved by Ocean Pines Association and in a good standing with the OPA. Tenants must display a rental lease agreement and their landlord’s account must be in good standing with the Association.

ficial monthly financial statements published by the OPA. Somewhat ironically, the model

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contemplated by Bailey similar to the one offered to the OPA roughly seven years ago by Billy Casper Golf for the Yacht Club. BCG very much wanted to manage the Yacht Club in addition to the golf course, an option declined by the OPA at the time. Whether BCG would have done better than the OPA did over the course of those seven years will never be known. BCG runs both the golf course and the food and beverage operations in Captain’s Cove, Va., a community roughly half the size of Ocean Pines in Accomack County, just south of Worcester County. Bailey said that he missed the Dec. 31 deadline for a completed Yacht Club report because he wanted to obtain additional management proposals. He had one in hand by the end of last year, with another due in the second week of January. During the Jan. 5 interview, Bailey said three additional management options had surfaced during the first week of January.

January 2018 Ocean Pines PROGRESS

Bailey confirms probability of Yacht Club shut-down before mold issue surfaced GM says mold so far is confined to the second floor and attic area housing the building’s HVAC systems By TOM STAUSS Publisher onfirming to some degree speculation that odds favored closing of the Ocean Pines Association’s premier dining amenity early in the new year, even before the discovery of a mold problem that is worse than an earlier diagnosis and fix, Ocean Pines Association General Manager nontheless said the issue is real and in urgent need of remediation. Bailey said that as he and the staff reviewed the financial results of the Yacht Club in November and saw how numbers were shaping up in December, closing the amenity shortly after the annual New Year’s celebration became a real possibility. Back in November, he had announced a plan of reduced days of operations that he hoped would, in his words, “stop the bleeding,” a reference to the $320,000 operating deficit at the amenity through November.

Although December results won’t be available until the third week of January, preliminary indications suggested that the results won’t differ that much in December from November’s $34,000 loss, Bailey told the Progress in an interview late last year. The prospect of an operating deficit for the year that could easily have exceeded $400,000 and approached $500,000 loomed. Bailey declined then to commit to keeping the amenity open on Fridays and Saturdays through March, the schedule he had announced at the November meeting of the Board of Directors. During the interview, he did not disclose the existence of a mold problem or that it could factor into a decision on whether to keep the amenity open after New Year’s. But early in the first week of January, after receiving a report on the condition of the Yacht Club submitted by a mold inspector he had hired on his authority as general manag-

er, Bailey said it was clear the mold problem was far more extensive than either he or staff had anticipated when signs of a problem first surfaced weeks earlier. “That made it a little easier,” he said of the decision to close the building, announced in a press release that appeared on the OPA Web site on Thursday, Jan. 5. “It (the mold) did force our hand.” He rebutted speculation that the emergence of a mold problem provided a convenient excuse for closing a building that some elements in Ocean Pines have said should be closed for economic reasons during the winter months anyway. “That makes no sense,” he said. “We wouldn’t be spending $50,000 for remediation if the problem was not real.” He said the decision was painful because the closure meant the immediately lay-off of staff, including that of the OPA’s food and beverage manager, Brian Townsend, who was hired by former Acting General

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Manager Brett Hill after serving as banquet manager prior to the promotion. Townsend was on the job for roughly a year. Only one staffer remained initially, Bailey said, a banquet coordinator who will help notify clients affected by the closure that the Yacht Club will not be able to accommodate any commitments for events in a 60 to 90-day period. But apparently other staffers have been rehired to staff the newly reopened Tern Grill on Fridays, Saturdays and Sundays. Bailey announced the reopening in a meeting with the Budget and Finance Advisory Committee Jan. 12, and details were on the OPA Web site later that day of a Friday prime rib night and a Sunday morning buffet. The decision to close the Yacht Club had been foreshadowed in an e-mail blast and weekly update that also appeared on the OPA Web site earlier that week. The weekly update omitted any reference to the Yacht Club’s Cove at Mumford’s restaurant, which led to speculation posted on the oceanpinesforum.com message board that the restaurant would close in January and remain closed throughout the winter. The press release said that the Yscht Club would remain closed “for 60-90 days as the Association undergoes a proposal selection and remediation. The current estimated cost of the remediation effort will likely exceed $50,000, thus requiring the General Manager to seek other proposals” in a competitive bid process. But the 60- to 90-day estimated closure period seems somewhat speculative, as Bailey confirmed that the mold inspection he authorized had targeted the second floor and the attic area that houses the building’s HVAC systems. The $50,000 remediation quote he received from the company that had done the inspection did not include any remediation on the first floor, which so far has seen no indications of contamination, Bailey said. “But we want to do a more completion inspection, to make sure we have been as thorough as we possibly can be, ensuring that we have fixed the problem for good,” he said. Bailey said that staffers first noticed the problem of mold earlier in December, on and near an electrical outlet in the upstairs reception area. A subsequent check by the Public q

OCEAN PINES

20 Ocean Pines PROGRESS Yacht Club closure From Page 19

Works Department revealed the presence of a mold in the attic area. “For $4000, we added an air scrubber and a dehumidifer in the attic area,” Bailey said. “That was the easy part.” He said he also authorized a mold inspection company to inspect the building’s second floor and attic to determine if the OPA’s attic fixes would suffice to remedy the problem. One of the company’s first tasks was to do an air sample test on the second floor areas accessible to the public, to make sure that those attending the OPA’s New Year’s Eve gala would not be adversely affected by mold spores in the air, Bailey said. “The air quality results came back OK,” he said. “Had there been elevated levels of mold, we would have cancelled the event.” But when the company’s report came back the following week, based in part on probes behind the walls on the second floor and attic, Bailey said the results were alarming enough that a decision had to be

made to close the building. “If it had been left alone, eventually it would have gotten even worse, to where mold would have been growing on the walls on the second floor,” Bailey said. The press release described the closure as “precautionary,” but Bailey said it was more than that. “If we just ignored it, it could come back to be an extremely serious situation, and it’s serious enough already,” he said. The inspection revealed the presence of what the press release described as a “substantial amount” of Cladosporium, a common airborne mold that “can be found in areas with humidity, moisture and/or water damage.” Mold is a common problem in Ocean Pines, especially in crawl spaces, where high heat and humidity in the summer can incubate mold infestations. The new Yacht Club is built on a concrete slab, rather than on pilings, as was the case with the original Yacht, and has no crawl space. Accordingly, it would be relatively easy not to consider the possibility of mold in a new building.

Parks: OPA has no recourse against builder for mold

cean Pines Association President Doug Parks recently said that “as of now” the OPA doesn’t believe it has “any recourse with the builder” for the recent outbreak of mold in the attic and second floor of the three-year-old Ocean Pines Yacht Club. Parks also confirmed that the OPA’s insurance policy doesn’t cover mold remediation. An agent for the Avery Hall agency in Salisbury, in reviewing OPA insurance coverages last November, during a public meeting of Board of Directors, had mentioned that mold remediation is not a covered event. Insurance companies have generally removed mold remediation from the standard insurance policies, and the OPA has not been immune to what seems to be an industry-wide unwillingness to insure against mold infestations. The OPA president also did not want to engage in a blame game for how mold could grow in a newer building that does not have a crawl space, where in a low-lying marshy community such as Ocean Pines mold can take root if humidity is not controlled. The simple fact is that no one on the OPA staff in the past three years considered the possibility that mold could grow in the attic space where the building’s HVAC equipment is located. “I see no fault with anyone and just want to focus on how we can support the GM in getting things resolved in an accurate and timely manner,” Parks said.

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January 2018 Ocean Pines PROGRESS

Committee wants to reduce $338,000 in projected 2018-19 losses at Yacht Club Bailey concedes his proposed food and beverage budget is in ‘state of flux’ because of uncertainty over Yacht Club’s management structure By TOM STAUSS Publisher eneral Manager John Bailey, in a wide-ranging discussion with the Budget and Finance Advisory Committee Jan. 12, said his proposed food and beverage budget for the Ocean Pines Yacht Club and other restaurant venues is in a “state of flux” and that the projected $338,000 loss in the amenity next year can be reduced. He made those remarks in the context of a consensus among committee members that the $338,000 projected loss in the amenity next year needs to be reduced. One committee member, former Ocean Pines Association Director Marty Clarke, insisted that the loss could be reduced to zero by closing it soon after Labor Day, something that general managers and previous boards have been reluctant to do. When asked whether he favored closing the Yacht Club during the winter months, Bailey said he didn’t. “If we want to do that,” he continued, without completing his thought. While it wasn’t clear that a committee majority favors operating the Yacht Club on a reduced monthly schedule, perhaps May through October, a clear consensus emerged that the Yacht Club budget should reflect better control over payroll expenses as a percentage of revenue. The projected budget shows that percentage that hovers above 60 percent, while, according committee member Gene Ringsdorf, the percentage should be 30 percent. He said he was willing to “compromise” at 45 percent for budgetary purposes. Bailey seemed to accept that as doable, adding that the lower percentage would be reflected in a revised budget that he hopes both he and the committee can jointly recommend to the Board of Directors. The $338,000 projected loss at the Yacht Club is a principle driver behind the draft budget’s call for a $60 increase in the base lot assessment next year. If that loss can be reduced substantially or even eliminated as Clarke insists is achievable, then the $60 proposed assessment increase won’t survive the budget review process. Bailey told committee members

that his proposed budget was based on the assumption that the Yacht Club management would remain inhouse, while he has been exploring

the possibility of hiring a management consulting firm to supply top management that would hire and train staff.

What approach he formally recommends to the board by the end of this month will affect the budget, as an outside management company would charge a management fee that would need to included in the budget. That additional expense led at least one committee member, John O’Connor, and perhaps others, to question the outside management To Page 24

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OCEAN PINES

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Yacht Club budget From Page 21

scenario. O’Connor said outside management had been tried at the Ocean Pines golf course for six years, with two management companies, before the board cut its losses and went back to in-house management, albeit with the same director of golf, Malinowski, who had served in the same role with Billy Casper Golf and Landscapes Unlimited, beginning in 2012. In a telephone interview with the Progress the first week of January, Bailey seemed to be leaning in favor of some sort of outsourcing, but in a cryptic comment to the committee Jan. 12 he seemed to suggest that his thinking had shifted back to inhouse management. The Progress has learned that Bailey has had favorable discussions with an experienced local restaurant manager and chef and that he may hire this two-person management team to operate the Yacht Club with the concurrence of the board. That still leaves a debate over whether the Yacht Club should be open for six, nine or 12 months.

OPA in the red by $92,000 in November

he Ocean Pines Association generated a $92,369 negative operating fund variance for November and has a cumulative negative variance to budget of $962,360 seven months into the 2017-18 fiscal year. Variances to budget translate into the actual operating loss or surplus by the final month of the fiscal year, in April. According to the November financial report completed by financial consultant Art Carmine, the former OPA controller who continues to assist the OPA in the preparation of financial documents, the OPA’s $92,369 negative operating fund variance for November resulted from revenues under budget by $35,292, expenses under budget by $710, and new capital expenditures over budget by $57,787. 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 a relatively modest $34,582. According to Carmine’s report, the $962,360 negative variance to budget for the year through November resulted from revenues under budget by $721,035, total expenses over budget by $123,839, and new capital expenditures over budget by $117,486. The overage in new capital is attributed to the unbudgeted expenditures of $100,883 in completed platform tennis courts and a new refrigerated truck for the Yacht Club costing $17,031. The Yacht Club continues to be the most troublesome of OPA departments, losing $34,058 in November. But its negative variance to budget was by recent measurements a relatively modest $8,926. For the first seven months of the fiscal year, the Yacht Club has lost $320,886, with a negative variance to budget of $406,313. Golf operations, still solidly in the black for the year, lost a modest $13,721 for the month, missing its budget by $13,522. Through November, golf generated a $109,173 surplus, behind budget by $41,673. But the yearover-year swing in golf through November is a positive $120,096. The golf operation’s restaurant, the Tern Grille, lost $8,133 in November, behind budget by $5,610. Through November, the loss is $19,079, under budget by $30,315. Aquatics continues to perform well through the first seven months of the fiscal year, despite an $18,443 loss in November. That actually exceeded budget by $1,829. For the year, Aquatics is in the black by $309,712, ahead of budget by $5,496. At the same time last year, Aquatics was in the black by $132,437. The year-overyear improvement is $177,275. Revenues in Aquatics continue to be robust. Total revenues in November were $40,673, compared to the budgeted $33,000, a positive variance of $7,673. A primary driver of that was swim lesson revenue of $19,847, which had been budgeted to earn $13,000. All three racquet sports were either slightly in the red or slightly in the black for the month.

COVER STORY

January 2018 Ocean Pines PROGRESS

Proposed budget

Trendic critical of draft budget

cean Pines Association Director Slobodan Trendic isn’t happy with the $12 million proposed budget for 2018-19 and the methods used to address $1.4 million in actual or projected operating deficits over two fiscal year. “With projected $1.4 million in losses the Board should have insisted on the development of a ‘deficit reduction plan.’ That kind of a plan usually consists of budget cuts, cost cutting measures and revenue increases,” Trendic said during a Jan. 10 budget review meeting conducted by the Budget and Finance Advisory Committee. “The Board failed to request such plan, so I proposed my motion last year [November board meeting] to mandate a 5 percent target for overall cuts in recurring expenditure. I believe this was and still is the right position for the Board to take.” Trendic said there are many areas and items in the proposed budget that need to be questioned. “That is the GM’s job and now the B&F Committee’s job,” he said, adding that “if the GM’s budget proposes to raise HOA fees, then reduction in recurring spending by at least an equal amount must occur. That is what I would call good management and fiscally responsible Board attempting to address a serious deficit problem.” Trendic slammed the draft budget’s proposed five-year annual increase of $33 per property as a “special assessment” for prior years losses “while at the same time budgeting a $40 loss per homeowner ($338,000 in total) for the YC for the coming year. “In my view this is fiscal irresponsibility. His document states the proposed budget is balanced but requires a $27 HOA fee increase. Blaming the losses on inaccurate revenue budgeting is nonsense. The losses were incurred because past management failed to control costs in the face of the unrealistic budgeted revenue.” Trendic said that OPA “anagement must focus on what they can control, the cost side of the equation.”

posed payroll increases among the areas that received scrutiny on the first day of budget review. Bailey is proposing the $33 increase over a five-year period, with the possibility of an abatement if some other funding source is found other than the lot assessment. The proposed resurrection of the deficit recovery reserve has a definitive impact on the lot assessment, at the same time it would reverse a previous board’s action. Bailey’s draft budget preserves the actions of two prior boards that, over two years, had killed off a supplemental replacement reserve funding stream that started in 2010 as the five-year funding plan with a modest $219,000 appropriation. In $219,000 incremental annual increase, it had grown to almost $1.2 million in supplemental reserve funding five years later, plateaued at

roughly amount for another year, and then began a gradual decline. Two years ago, the five-year plan funding stream was relabeled the legacy reserve, a component of the Major Maintenance and Replacement reserve, but that name change didn’t kill off the revenue. In the current 2017-18 fiscal year, the five-year plan/legacy fund or supplemental revenue stream continued to cost property owners $727,374 in assessment dollars. The intention of the previous board was to eliminate this revenue stream for good in 2018-19, and Bailey’s draft budget has kept faith with that commitment. The proposed budget preserves the primary revenue stream for the replacement reserve, funded asset depreciation, in the amount of roughly $1.67 million collected from lot assessments. q

From Page 1 past year is that there were no summertime profits, producing an almost untenable financial situation at year’s end. All staff was laid off in early January, for at least 60 to 90 days, depending on how quickly a mold remediation program can be implemented. [See separate article in this edition of the Progress for details.] The $60 proposed assessment increase breaks down into two segments, a $27 hike related to operations and the $33 increase that would generate revenue for the previously abolished Deficit Recovery reserve. The deficit recovery reserve was zeroed out last year and its assets transferred to the OPA’s operating fund. There were no public board discussions related to its resurrection prior to the development of the draft budget. The $27 increase in the assessments related to operations wouldn’t be necessary if the Yacht Club were no longer budgeted for a $338,000 loss and instead was budgeted to break even. At a budget review meeting of the Budget and Finance Advisory Committee on Jan. 10, committee member Marty Clarke, a former OPA director, and OPA Director Slobodan Trendic both pushed back against the idea of an assessment increase caused by the restablishment of a Deficit Recovery reserve and continued huge losses at the Yacht Club. “What is most revealing about the GM’s draft budget is the proposed five-year annual increase of $33 per property as a ‘special assessment’ for prior years losses while at the same time budgeting a $40 loss per homeowner ($338,000 in total) for the YC for the coming year. In my view this is fiscal irresponsibility,” Trendic said. He criticised a budget that is “balanced” with a $27 assessment increase to cover operations. “Blaming the losses on inaccurate revenue budgeting is nonsense. The losses were incurred because past management failed to control costs in the face of the unrealistic budgeted revenue,” Trendic said. Committee members with the exception of Clarke didn’t push back against the proposed $33 increase related to deficit recovery but seemed less reticent on operational matters, with pro-

Pine’eer Craft Club officers

Pictured are the 2018 officers of the Pine’eer Craft Club of Ocean Pines. From left: Carol Quinto, Jane Wolnik, Barbara Stilwell, Sally Warenius, Barbara O’Connor, Linda Brindley, and Sharon Puser. The Pine’eer Craft Club meets the third Thursday of each month at the Ocean Pines Community Center. Guests/new members are welcome.

26 Ocean Pines PROGRESS

COVER STORY

January 2018

Proposed OPA Budget, 2018-19

Proposed budget From Page 25 This revenue stream is roughly $200,000 less than the $1.997 million in capital spending that the draft budget anticpates in 2018-19. [See separate story on proposed capital spending in this edition of the Progress.] The proposed $12 million budget is a very modest increase over what the former board approved in February of last year. Last year’s approved budget of $11.813 was only $187,000 less than what Bailey is proposing for 2018-19. The year-over-year increase is 1.56 percent. Working from a somewhat reduced baseline for the current year based on current estimates, Bailey says his budget calls for $298,251 more in spending next year, or 2.5 percent. In his exectutive summary, Bailey said the proposed budget “is likely to be viewed by many for what it does not include than for it does include. It is crafted with austerity in mind, as we work to ‘right our ship’ this next fiscal year.” He said the starting point in drafting next year’s budget “was a left-over deficit from 2016-17 of $369,000, plus the estimated deficit for 2017-18 of $1 million. These two figures come to a total deficit of approximately $1.4 million. For this proposed budget, we need to address that amount of loss as well as correct the inaccurate revenue numbers of the current year.” Bailey did not address the possibility of simply allowing the deficits to show up on the OPA’s balance sheet, a possibility mentioned as an option when the committee and the board met jointly to discuss budget goals for next year last November. Budget guidance approved by the committee and the board does not call for the restablishment of a deficit recovery reserve nor an increase in the lot assessment to generate revenue for it. Bailey in his executive summary proposes 86 full-time employees, while full-time equivilent employees would decrease by 4.67, from 77.62 to 72.95. That produces a reduction in FTE (full-time equivilents) from 163.62 to 158.95. Bailey’s proposed budget calls for a ten percent in costs related to employee medical benefits and a three percent increase in pay rates, with individual increases to be based on merit. The proposed budget also is impacted by the new minimum wage of $10.10 an hour, which Bailey said would especially affect the OPA’s seasonal employees. “Even so, total payroll costs increase only $89,774, or 1.01 percent,” Bailey said.

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January 2018 Ocean Pines PROGRESS

Five-year plan funding finally ends in draft budget ‘Deficit recovery’ reserve, killed off by last year’s board, undergoes resurrection By TOM STAUSS Publisher he infamous, unlamented five-year plan funding stream renamed the Legacy reserve two years ago and merged into the Major Maintenance and Replacement reserve a year ago, but with much of its former funding stream intact, has finally been unfunded in the draft 2018-19 budget unveiled by General Manager John Bailey in early January. It amounts to a $727,374 yearover-year budget cut, of the sort that could have resulted in an assessment decrease had other elements in the draft budget remained roughly the same. But another reserve fund, and its funding component, has risen from the dead in the draft budget. It’s called the “deficit recovery” reserve and is funded from a proposed $33 increase in the annual lot assessment, to be continued over a fiveyear period, unless some other funding source is identified. The proposed $33 increase is the largest component of a proposed $60 increase embedded in the draft budget. This $33 assessment increase, if approved by the Board of Directors, would generate an additional $278,916 for the OPA. Along with $1,673 in anticipated interest income, this resurrected backward-looking reserve has a projected balance of $180,589 on April 30 of 2019, including earned interest. The previous board zeroed out the deficit recovery reserve last year after it had grown to more than $400,000. It was transferred into the OPA’s operating fund to reduce what otherwise was a $350,000 or so operating deficit for the 2016-17 fiscal year. While the OPA clearly lost money operationally last year, technically its operating fund did not. Some directors thought it had been zeroed out for good. Apparently not. Without a lot of rationale as to why Bailey proposed it in his budget, it’s simply there, the general

manager’s response to some directors expressing the need to somehow address operating deficits that will most likely exceed $1 million during the current fiscal year and the $350,000 loss in 2016-17. When the board met with the Budget and Finance Committee in November in a joint meeting to discuss budget guidance, there was no consensus or agreement on how or even whether to address, in next year’s budget, the looming deficit in the current year or last year’s operations. Combined, the two years of deficits are expected to reach about $1.4 million. At least one committee member at the November meeting suggested it could simply be absorbed and reflected on the OPA balance

sheet, while Ted Moroney, appointed to fill one year of former Director and Acting General Manager Brett

Hill’s three-year term, expressed support for some sort of multi-year offset for the operating losses. But at no time did he or any other director advocate for an assessment increase or a resurrection of the deficit recovery reserve during the discussion. Nothing remotely resembling either outcome appeared as part of budget guidance to the general man-

Proposed 2018-19 Reserve Summary

COVER STORY

28 Ocean Pines PROGRESS

Deficit recovery reserve From Page 27

COVER STORY

January 2018

ager by the committee or the board. It’s certainly plausible that Bailey expects a lot of discussion over the proposal during budget reviews. Given the less than full-throated endorsement of the concept in his executive summary, it’s hard to imagine that he would be emotionally invested in its survival. It did, however, appear in his draft budget. As for the replacement reserve

under Bailey’s draft budget, it’s left with one funding source, annual lot assessments, with the amount of funding based on the full funding of annual depreciation of most but not all Ocean Pines Association capital assets. This has been the traditional source of funding and building up the replacement reserve since the earliest decades of the OPA as a non-profit social and community and welfare association of property owners. In Bailey’s draft budget, he pro-

poses to fund the replacement reserve at $1.68 million, a modest increase over the current year’s $1.6 million depreciation-based contribution from assessments. This represents the calculated contribution from funded depreciation, once known, and possibly still, at least in some OPA budget documents rarely seen by the membership, as the historical reserve, a component of the Major Maintenance and Replacement Reserve often called, in simpler terms, the replacement reserve.

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But a supplemental source of revenue, $727,374, that had been included in the current year’s reserve budget and boosted the total contribution to the replacement reserve this year to roughly $2.7 million, is nowhere to be seen in the draft budget for next year. This represents the final implementation of arcane budget policy first enunciated two years ago, in a process championed much of the way by former OPA President and Director Dave Stevens. He retired from the board this past August. The elimination of what last year was a $727,374 supplemental contribution from assessements could have eased pressures on the lot assessment in 2018-19, but countervailing pressures led to a draft budget offered by Bailey that, perhaps counter-intuitively, would raise the assessment by $60 instead. The primary drivers of the proposed increase are the resurrection of a deficit recovery reserve, that last year’s board had effectively killed off, and the continuation of a huge operating loss at the Ocean Pines Yacht Club. Were the deficit recovery reserve not included in next year’s budget, and had the operating deficit at the Yacht Club been reduced to zero, the product of leasing out the amenity or closing it and laying off all staff at the end of October, then conceivably the $60 assessment increase in Bailey’s proposed budget could be eliminated. A modest decrease in the assessment, reflecting the final elimination of the legacy reserve once known as the five-year funding plan, would be possible if both adjustments to Bailey’s draft were made. The original five-year plan began in the 2009-2010 fiscal year, with a contribution from lot assessments of $219,440. The second year of the plan added another $219,440, and the plan continued to add the same amount until, by 2013-2014, the plan’s fifth year of funding, the supplemental funding to the replacement reserve reached $1,097,980. As its creators envisioned, but which became a political perception problem for the plan, the so-called five-year plan contribution topped out in fiscal year 2015 at $1,098,960, and then began to decline. The contribution from assessments was $923,760 in 2016, $864,724 in 2017, and $727,374 in the current fiscal year.

COVER STORY

January 2018Ocean Pines PROGRESS

OPA projected to lose $1 million for 2017-18

DEPARTMENT SUMMARY Forecast for Year Ending 4/30/18

Yacht Club red ink could exceed $450,000

By TOM STAUSS Publisher he latest projection by the Ocean Pines Association for the current fiscal year’s operating loss is $1 million, consisting of $791,812 in departmental red ink and another $217,000 in new capital expenditures. Whether that turns out to be optimistic remains to be seen. Projections with four or five months remaining in the fiscal year tend to be educated guesses but guesses just the same. By year’s end April 30, actual numbers don’t always match up with January projections, with even more deviations possible and even typical in the final audited results for the year. The actual projected loss for 2017-18 is $1,008,812, according to a schedule contained within General Manager John Bailey’s draft budget for 201819, recently posted on the Ocean Pines Association’s Web site under Forms and Documents. Of interest, the Yacht Club is projected to lose $452,070 this year, while golf, including operations, maintenance and the Tern Grille, is projected to lose a modest $100,916. The Beach Club, a perennial winner for the OPA, this year is projected to lose $72,185. Because of a mold infestation and also concerns about operating deficits, Bailey took action in early January to close the Yacht Club for at least 60 to 90 days. q

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COVER STORY

January 2018

Light up the Pines winner

The13 home of Pamela Foltz, located at 10 Quarter January 2017 Ocean Pines PROGRESS

Wood Duck Isle properties identified for emergency bulkhead replacement Worm infestation requires immediate action, Hill says a holiday in the waterfront differential, an idea advocated by Director Slobodan Trendic in the absence of a new multiyear bulkhead replacement program. The original 35-year program is now approaching year 40. With evidence of a worm infestation, and with the potential of substan-

tial outlays required in the future, Hill seemed to be saying that any waterfront differential holiday would potentially be a big mistake. Indeed, he has not backed off of that view in light of the recently completed survey of bulkheading throughout Ocean Pines. But other directors will be

Staff Place in Ocean Pines, was the first place weighing in on the matter once the writwinner in the annual “Light Up the Pines” house ten report on the condition of the bulkdecorating contest. Foltz decorated her home heads is provided to them with festive holiday lights, ribbons and wreaths. After Hill made his comments about Doors, the “scary proposition” facing the OPAwindows and trees were all brightly lit. Theconsecond place goes to the home of Jamie with respect to bulkheads, Trendic Greenwood, who a voter dubbed as “the decoratinued to insist that Hill needed to prestion master.” Greenwood’s winter wonderland is ent clear, convincing evidence of need before the OPA continued to collect mon- at 233 Windjammer Road in Ocean Pines. located ey from waterfront owners. The home of Kenny and Brenda Pilarski, located at 114 Pineforest Drive, received the third “If we don’t have a bulkhead plan, most votes. The holiday contest is sponsored by how do we justifying taking the money?” he asked his colleagues. He saidChoptank that if Electric. Voting took place from Dec. 11 such to Dec. 22 on Facebook. Prizes for the winWood Duck Isle bulkheads are in ners included a gift certificate good at The Cove poor condition because of worms, “let’s Mumford’s along with a gift certificate for a document it” before collecting at money Choptank Electric Cooperative bill credit. that may not be needed.

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30 Ocean Pines PROGRESS

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From Page 29 How this will affect the operating losses for the year remain to be seen. Through November, the cumulative loss for the Yacht Club was just less than $321,000; December could add another $30,000 or so loss. Mold remediation costs are not going to be favorable to the final results, but the closure and layoff of staff should contribute to stemming the losses. Aquatics is expected to earn $137,231 for the OPA, marinas $187,300, and Beach Club parking $296,817. The three racquet sports are close to break-even. Tennis is projected at an $8,671 loss, pickleball AT a $1,646 loss and platform tennis with a $6,093 surplus. Another way to measure departmental performance is comparison to budget. The projected negative variance to budget for the Yacht Club is $453,675, for the Beach Club $310,346, for Aquatics $38,358, and golf, including the Tern Grille, $10,598. Pickleball is projected with a negative variance to budget of $3,992. Tennis’ negative variance is projected at $2,259, while platform tennis’ positive variance to budget is $4. Other amenity departments with projected positive variances to budget are marinas, $1,849, and Beach Club parking, $27,897. Combined, all departments are projected with a negative variance to budget of $941,120. With projected new capital spending over budget by $67,692, the total comes to a negative variance to budget of $1,008,812.

COVER STORY

January 2018 Ocean Pines PROGRESS

Bailey proposes new capital reserve fund but doesn’t fund it in draft 2018-19 budget Suggests OPA take a year to find funding source By TOM STAUSS Publisher eneral Manager John Bailey has used the executive summary in his draft 2018-18 budget to propose the establishment of a “new capital” reserve fund to replace the way that the OPA pays for new capital initiatives and expenditures. The long-standing practice of the Ocean Pines Association has been to pay for new capital expenditures out of that year’s annual lot assessments, treating them almost as if they are operating expenses, although technically they’re not. Most capital expenditures are paid for out of the OPA’s Major Maintenance and Replacement Reserve, which means they are paid for out of assessment dollars collected for the most part in prior years. Because new assessment dollars flow into the replacement reserve fund every year, through the full funding of depreciation of most but not all OPA capital assets, technically the replacement reserve comingles new and old assessment dollars. But OPA officials, Bailey included, like to say that replacement reserve spending doesn’t directly affect that year’s lot assessments, while new capital items, if they’re funded, undisputably do. Because of the close association of new capital expenditures with assessment increases, general managers have sometimes been reluctant to propose and boards of directors reluctant to fund new capital expen-

ditures. It’s generally easier to pay for capital expenditures out of replacement reserves than out of that year’s assessments, which is why, over the years, GMs and boards have sometimes paid for new capital expenditures out of replacement reserves, blurring if not deliberately fudging the distinction between the new and replacement capital spending as a way of securing funding for the desired project. The latest example of that is the new $225,000 party/training room proposed for the Sports Core indoor pool, a carry-over item from the current fiscal year that the OPA, under former Acting General Manager Brett Hill, didn’t quite get done in the 2017-18 fiscal year. Bailey apparently isn’t going to be able to get it done this fiscal year, either, because of other projects said to take priority. Whether deliberately or mistakenly, the funding source for this new party/training room in the draft 2018-19 budget is the replacement reserve, despite the fact that it clearly isn’t a replacement item. It’s an add-on to the existing Sports Core pool complex, designed to accommodate private pool parties, staff training and some equipment storage. Bailey told the Budget and Finance Advisory Committee that he simply carried over the funding source from last year’s board-approved capital budget. He said he didn’t want to overrule the previous board’s judgment

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on what constitute a replacement project. But the loose definition of certain projects as replacement items when they’re clearly more accurately defined as new capital underscores the rationale of Bailey’s proposal for a new capital reserve fund. If established with a funding source, as Bailey suggests should be done over the coming year, the problem of how to define certain projects as replacement or new capital becomes somewhat less acute. And a proposed new capital project needn’t face funding headwinds because of concerns, in an otherwise tight budgetary environment, that approving it will cause an unpopular increase in the lot assessment. Notwithstanding the apparent mislabeling of the Sports Core party/training room as a replacement item, Bailey in his draft budget’s executive summary says there are only two new capital projects he proposes for funding next year, $8,500 for some drainage improvements and $6,000 for a controlled access gate to the Ocean Pines dog park in the Manklin Meadows recreation complex. The list of new capital items he didn’t include is lengthy [see separate article in this edition of the Progress for details]. Among them is lighting for the new pickleball courts in the Manklin Creek complex, exercise equipment for the walking trail around the South Gate lake, proposed by Recreation Director Colby Phillips, and new playground and bike exercise equipment recommended by the Recreation Advisory Committee. “The proposed budget is likely to be viewed by many for what it does not include than for it does,” Bailey wrote early in his executive summary. To give such new capital items a better chance of making it through the budgetary process, Bailey is recommending the creation of the new capital reserve. “It is critical to understand that newcapital projects (those things that do not currently exist) have historically been funded within the operating budget,” he wrote. “Doing so means that New Capital proposals were hard to pursue, as anything

significant would directly impact the general annual assessment.” The general manager argues that the operating budget “is no place from which to fund New Capital projects; we should have a separate (reserve) fund dedicated for that purpose. In so doing, we can ensure less fluctuating impact in the operating budget, and thus on the annual assessment.” Bailey said there were “plenty of good ideas that had to be left out of the proposed budget, most notably in New Capital.” He said those good ideas could be accommodated next year by employing “a better way to accomplish these types of worthwhile projects that add value to our community and our personal assets.” Acknowleding that he is proposing to create a New Capital reserve fund with zero funding for 2018-19, Bailey says there are three aspects that need to be considered in developing this concept in the coming year. He is recommending the creation of a new committee -- he didn’t say whether it would be a permanent advisory committee or more of an ad hoc panel or task force set up for a specific purpose and an anticipated if unspecified end date -- “whose charter would include the review of new capital requests and to prioritize them for financial consideration by the Budget and Finance Advisory Committee.” He also suggested that the “processes and procedures governing the use of this fund be developed prior to the next budget cycle” late this year. Finally, and this a key component, he said “a funding source for New Capital projects should be determined and included in the development” of the 2019-2020 budget. He didn’t include potential funding sources, but they might include transfers from other reserves, annual lot assessemnts, borrowing and the sale of OPA property assets, such as individual building lots owned by the OPA. Perhaps the OPA’s most expendable land asset, one that would engender less opposition than, say, the sale of any existing OPA assets, is the two-acre site on Cathell Road and Route 589 immediately west of the Ocean Pines library and post office branches. Many years ago, the tract was the home of an equestrian center, To Page 34

COVER STORY

January 2018

Draft budget calls for $2 million in replacement capital spending Country Club renovation, Yacht Club decking head list of proposed projects By TOM STAUSS Publisher he draft 2018-19 budget unveiled by General Manager John Bailey in early January calls for $1,997,675 in replacement capital projects, including $500,000 in place-holder funding for renovation of the Country Club second floor, $400,000 in place-holder funding for new management software, and $135,000 for a replacement crabbing pier in the Southside section known as the Sanctuary. Also included in the list of significant replacement projects, most of which would be funded by the Ocean Pines Association’s Major Maintenance and Replacement reserve, is $225,000 for a new training/party room for the Sports Core indoor pool, which somewhat oddly has not been categorized as a new capital item.

Also on the proposed to-do list is replacement of the outside deck of the Ocean Pines Yacht Club, at an estimated cost of $68,000. Already replaced once by the original contractor, the existing Trex surface would be removed and replaced with a woodgrain-textured, porecelain tile paver said to be less less slippery than what’s there now. While not funded out of the replacement reserve, significant road resurfacing is planned for the coming year. The $500,000 included in the draft budget for roads would be spent out of the roads reserve, funded by the OPA’s share of local impact funds from operations at the nearby Ocean Downs casino. The OPA’s every-other-year resurfacing program allows casino funds of roughly $250,000 per year

to accumulate. Subject to revision, as it’s a twoyear old list, streets targeted for resurfacing on 2018-19 include Bimini Lane, Brookton Lane, Tail of the Fox Drive, Newport Road, Allendale Court, Weeping Willow Court, Raft Court, Burrhill Road, Admiral Avenue, Willow Way, Fosse Grange, Beach Court, Clubhouse Drive, Invanhoe Court, Laport Court, Drawbridge Road, Garrett Driveway, Juneway Lane, and Waters Edge Court. Also in the list is the Sports Core pool parking lot. Also slated for major exterior and renovation is the long neglected Craft building in the Community Center-Administration Building-White Horse Park campus, at a budgeted cost of $75,000. Its exterior renovation would

bring it closer in architectural style to the other buildings on campus, such as the new park bathrooms and the Community Center. Interior walls would be removed and the building given a much more updated look. The Southside ballfield booth would be replaced at an estimated cost of $14,000, and the walking trail around the South Gate pond, a perennial capital budget item that previous boards have cut, would be paved at an estimated cost of $78,500. A new dog park card access system would be funded as a new capital project at a cost of $6,000. In addition to the proposed Sports Core room addition, proposed Aquatics capital projects at the Sports Core indoor pool include $55,000 for a new bathhouse roof and $10,000 for a replacement air curtain on the roof above the pool, as well as $8,700 for new bathroom flooring and $6,575 for lobby improvements. Replacement furniture for all pools is budgeted at $10,000. q

32 Ocean Pines PROGRESS

Aquatics open house

Area residents had the chance to test the waters as well as a variety of aquatic fitness equipment and classes at a free open house at the Sports Core Pool on Sunday, Jan. 7, from 2-4 p.m. Despite the snow-covered roads, dozens of area residents came out for the free event, which included instructor-led mini classes and the opportunity to try the facility’s aquatic exercise equipment. Over the past few years, Ocean Pines Aquatics has steadily increased the number of water exercise programs it offers as well as the variety and types of aquatic fitness equipment. The Sports Core Pool now houses water trampolines, bikes, balance boards, treadmills and an elliptical machine in addition to several different types of water weights. Pictured is Ocean Pines aquatics instructor Jennifer Kauffman demonstrating how to use water trampolines.

COVER STORY Capital budget From Page 32

For the police department, replacement capital items include a radar display board for $8,000, two vehicles at $35,000 each, and $50,000 in hold-over funds for expansion of the OPPD headquarters in the administration building. These funds

January 2018 Ocean Pines PROGRESS would cover the cost of developing precision engineering plans for the expansion, which is the next major renovation on the OPA’s to-do list after completion of the second floor Country Club renovation. As usual, golf maintenance is generously funded in the proposed capital budget. Replacement items include a

Proposed Capital Budget, 2018-19

new range picker cart at $13,000, two fans costing $15,000, ten new radios for $5,000, five utility carts for $50,000, a new trim mower at $35,000, a tri-plex mower at $35,000, a new fuel system for $20,000, and a new sand rake for $16,000. Replacement items in the Public Works Department include two Z-mowers, one at $12,500 and the other at $12,400, and two new tractors for $70,000. A plate compactor costing $7,000 would be funded out of the bulkhead/waterways reserve and equipment called a “drainage attachment” would be funded as a new capital item for $8,500. New capital items are paid for directly out of assessment dollars, impacting the annual assessment, while replacement items are funded out of the replacement reserve, with no direct impact on the assessment the year of expenditure. If the designation of the Sports Core pool addition stands as a replacement item, the draft capital items includes only two new capital items costing a total of $14,500. By department, Public Works is

projected for the most capital spending, at $610,400. But $500,000 of that is the $500,000 for road resurfacing, with another $110,400 for equipment. Country Club renovation at the $500,000 place-holder estimate could be considered a Public Works project, but it’s listed as a standalone expenditure. Bailey has said he expects it to be completed by an outside contractor rather than the Public Works. Aquatics is projected at $315,275 in capital spending, followed by Recreation and Parks at $308,500. Golf, not including the Country Club second floor renovation, has $189,000 in projected spending, followed by the OPPD, including $50,000 in place-holder funding for the expansion project, with $128,00. Bringing up the rear in the capital spending list is the Yacht Club, with only $68,000 in projected spending for the outside deck replacement. Mold remediation probably will be considered a maintenance expense this year, with no impact on next year’s operating or capital budget.

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COVER STORY

January 2018

Bailey rejects drone proposal

The Phantom 4 Pro commercial drone proposed for inclusion in the 2018-19 draft budget. Ocean Pines Association General Manager John Bailey denied the request.

Recreation and Police departments hit in general manager’s ‘not funded’ capital list By TOM STAUSS Publisher cean Pines residents who suffer sleepless nights fretting over the possible deployment of drones flying over the treetops looking for violations of rules and regulations enforced by the Compliance, Permits and Inspections Department and the Architectural Review Committee needn’t worry. General Manager John Bailey apparently isn’t going to let an invasion of drones happen, although he did include the drones in his draft budget proposal for 2018-19 under items that had been proposed by staff but rejected by him in assembling his budget plan. In theory, his decision to kill the drones before liftoff or actually even before purchase could be overruled by the Board of Directors when they meet this month and in February to review the budget. But it’s probably safe to say none of the directors will be eager to overule their general manager and risk a backlash by property owners unhappy about what many would perceived as an assault on their privacy. In indicating that the proposed drone was an “expense denied,” Bailey also noted that the proposed drone purchase at a price of $1900 was not a capital item, a reference to the fact that under a new purchasing policy any capital items under $5,000 are considered operating expense items rather than capital purchases. According to a request form included as part of the draft budget, the purpose of the proposed drone is to “simplify the process of taking picture [sic] and video of houses and properties in violation of the OPA by-laws.” The request, made by an individual named Nathaniel Wilkins, otherwise unidentified, said that “no current equipment owned by the OPA ... allows us to take real-time pictures from an aerial point of view.” There is no explanation offered as to why the current methodology of streetview photos taken from a

land-based location either just off a property line, or even from a point somewhere on private property, might be regarded as inadequate for the purpose of CPI enforcement. In addition, the request defines the proposed project scope as “purchasing of a commercial drone, and training two in-house employees on proper drone laws, and how to fly and maintain the drone in a professional environment.” The proposed drone is identified as a Phantom 4 Pro model. The Progress reached out to Lisa Schwartz, the chair of the ARC, and Ted Moroney, the board’s committee liaison, for comment on whether they supported the drone budget request and knew about it before it made it to Bailey’s desk for consideration. As of the date of publication, Schwartz had not responded to the Progress inquiry. Moroney said that it had been “suggested that a drone might be an effective tool for use in several OPA departments to include ARC. Obviously, the use of a drone would need to be further defined and any legal use limitations explored prior to purchase and implementation. For instance, it would likely not be used for law enforcement purposes. The idea was circulated among many parties over the course of time and I believe was submitted by Nathaniel Wilikins who is connected to OPA through our IT operations.” Pressed further on his personal thoughts about drone usage, Moroney said that “based on what I know now, I see no justification for the purchase of a drone for the specific purpose of seeking CPI violations.” In addition to the drone, Bailey’s draft proposal lists a number of proposed capital expenditures not funded, with the Parks and Recreation and Police departments particularly hard hit by the exclusions. Although Bailey does include funding for paving of the walking trail around the South Gate pond in his draft budget, a perennial request

of previous general managers that has not survived the budget process in prior years, pond trail lights at $90,000 and $10,000 in exercise equipment were not funded. Also not included in his proposed capital budget were a bike track for kids costing $41,310, a Sky Zip track for kids at $30,728, and a Tri-Runner spinning ride also for kids with three seats at $10,986. This playground equipment was proposed by Recreation Department Director Colby Phillips for White Horse Park or possibly the Southside recreation complex off Manklin Creek Road. Lights for new pickleball courts at the Southside complex at $65,000 were also not funded. Lights had been suggested by the Ocean Pines pickleball club as a way to increase use of courts during nighttime hours. OPPD Chief Dave Massey apparently withdrew two items from the proposed capital expenditure list, two mobile data terminals costing $8800 total and a phone/radio recorder costing $16,250. All are replacement items. The mobile data terminals are described by Massey on the original request form as “military spec in-car laptops utilized by the department’s computer aided dispatch (CAD), as well as Records Management System (RMS).” They are said to “allow officers to run tags and suspects for information checks from their vehicles” and allow “headquarters to dispatch police calls for service directly to the officer’s vehicle.” According to Massey’s original request form, the MDT’s allow officers to complete reports from their vehicles and “remain in service.” According to Massey, Worcester County is upgrading its CAD and RMS systems that are capable of processing information much faster than older equipment. “The speed of the new systems requires compatible MDTs” in Ocean Pines, Massey said, and the new models will “enable officers to operate more effi-

ciently in their vehicles.” Compatibility with county equipment is also cited as a justification for a new phone/radio recorder that captures “all telephone calls into and out of the police station. It also records all police radio transmissions and citizen interactions and “is essential for officer safety and liability issues, should police actions be subject to public scrutiny.” Massey said the current system is eight years old and breaks down a lot because of age. Several capital requests included in the “not funded” list were shifted into department operations, where they still could be funded. Beach Club exterior washing and restaining at $20,000, roadside trimming at $45,000 and Ocean Parkway restriping at $35,000 are included elsewhere in Bailey’s draft budget. A proposed Clear Comfort disinfecting and air quality improvement sytem for the Sports Core indoor pool was moved out of capital into an Aquatics operating expense, proposed by Phillips as a $5,000 annual rental to see if there is a noticeable improvement in air quality.

New capital reserve From Page 31 the remnants of which are former horse-riding trails (now walking and bike trails) that extend into wooded areas to the east of the post office and along Route 90. Without explicitly stating it, Bailey seems to be proposing a committee to take up the baton from a reserve study/capital improvement plan ad hoc committee chaired by former OPA Director Dave Stevens this past year. While making some headway in scrubbing a 2016 reserve study of outdated projects, it made little or no progress in arriving at an updated list of new projects that would comprise an updated capital improvement plan for the OPA.

WORCESTER COUNTY

January 2018 Ocean Pines PROGRESS

Workinâ&#x20AC;&#x2122; the snow

More than a foot of snow fell in Ocean Pines Jan. 4 and 5, the most significant snowfall in the area for many years. Ocean Pines Public Works crews were out in force, shown here clearing clearing the snow from around the mail boxes in Teal Bay. The crews reported to work at 7 a.m. when the temperature was at 8 degrees, well below zero with the wind chill. Ocean Pines Association General Manager John Bailey said that major streets received three or four passes with snow plows to keep up with blizzard conditions. It took several days for residents to dig out from the storm, but major roads were passable by the weekend. Dan Collins photo

By ROTA L. KNOTT Contributing Writer ith the school system nearing construction of a replacement Showell Elementary School at a cost of $42.4 million, the Board of Education has selected Oak Contracting, LLC of Towson, Md., as its construction manager for the project. During a December meeting, the school board awarded a contract with the firm to provide all construction management services re-

Installation of officers

quired for the successful completion of the Showell School project. Oak Contracting, LLC is a regional construction management and general contracting firm specializing in new construction, modernization, and renovation projects for the K-12 and medical research sectors. The school system in September released a request for proposals for construction management for the project. On Dec. 12, the Showell Elementary CM Selection Committee

interviewed five construction management firms in order to select and recommend one firm to provide pre-construction, construction and post-construction construction management services for the replacement school project. In October 2017, school officials appeared before the Board of Public Works to discuss the countyâ&#x20AC;&#x2122;s fiscal year 2019 capital improvement plan funding requests. The FY 2019 CIP maintains the $42.4 million construction cost estimate and requests

On Thursday evening, Nov. 15, at the Dunes Manor in Ocean City, Congressman Andy Harris installed the 2018 officers for the Republican Women of Worcester County. Standing from left to right are Jean Delcher, Mary Adair, Loretta Spinuzza, Sandy Zitzer, Congressman Harris, President elect Beth Rodier, Vanessa Alban and Kahy Vornlocker.

School board selects firm to manage Showell project

partial state funding for the project of $4.336 million. In cooperation with the commissioners and county staff, the school system reduced the original working project cost estimate for Showell from the $54.6 million included in its FY 20I7 CIP in October 2015 to the current working project estimate of $42.4 million. Following the meeting with the Board of Public Works, the school system received preliminary support of the Showell Elementary project from the Governor, the comptroller and the treasurer. Also, in October, school representatives met with the state Interagency on School Construction to review the CIP and had another positive meeting. The Board of Education completed conceptual planning and educational specifications for the Showell project in August 2016. Design development documents for the SES replacement school were submitted to the state for and the school system is on schedule to complete and submit the construction documents soon. The successful, on-schedule completion of each of these phases of design has allowed the school system to remain on schedule to seek county authorization later this year to proceed with bidding of the project. Bid opening was tentatively scheduled by the school system for June and, pending approval of the bids, construction is expected to begin in October. The Showell Elementary School

Ocean Pines PROGRESS January 2018

Monday, Jan. 15 Democratic Women’s Club of Worcester County, monthly meeting, Ocean Pines Community Center, Assateague Room, 10 a.m., coffee 9:30 a.m. Guest speaker: Liyana Kadushin, who helps those with memory issues and their caregivers to connect. 410-973-1021. Thursday, Jan. 18 Pine’eer Craft Club, monthly meeting, Ocean Pines Community Center, refreshments 9:45 a.m., business 10 a.m. Guests welcome. Sharon, 410-208-3032. Saturday, Jan. 20 Proposed 2018-19 budget hearing, open to members of the Ocean Pines Association, Ocean Pines Country Club, Tern Grille, 10 a.m. General manager and Budget and Finance Advisory Committee hosting. Dive-in Movie, Sports Core pool, 6:30 p.m. “The Emoji Movie,” $3 swim members, $5 Ocean Pines residents, $7 non-residents, $20 families four or more. Rescheduled from two weeks earlier. Thursday, Jan. 25 Republican Women of Worcester County, January luncheon meeting, Captains Table Restaurant, 15th Street and Baltimore Ave., Ocean City, 11 a.m. Updates what’s happening at the County, State and Federal levels. Chip Bertino will cover Worcester County, Pat Schrawder will handle state activities, Carol Frazier will discuss federal legislation and Liz Mumford will talk about the Worcester County Commission for Women. $20 per

HAPPENINGS

person. Reservations, Ann Lutz at annlutz60@gmail.com or 410-2089767. Saturday, Jan. 27 Board of Directors, Ocean Pines Association, regular monthly meeting, Ocean Pines Community Center, 10 a.m. Agenda, board packet posted on the OPA Web site several days before meeting. Public comments welcome. Tuesday - Thursday, Feb. 6, 7 and 8 Coast Guard Auxiliary, Maryland basic boating safety course, Ocean Pines Library, 6-9 p.m. Certificate required for all those born after July 1st 1972 is awarded after successful completion. Piloting in local waters, tying nautical knots, foul weather tactics and legal issues, maintenance and common medical issues that can occur while boating. $15. Registration, Barry Cohen, 410-935-4807, or CGAUX1205@ Gmail.com. Saturday, Feb. 10 Annual Kiwanis winter pancake breakfast, Ocean Pines Community Center, 8-11 a.m. Pancakes, sausages and eggs, coffee and tea. Tickets $6 for adults, $3 for children under 12, free under 5. Tickets, any Kiwanis member, 410-208-6719, or at the door. Carryout. Proceeds benefit the youth of the community. 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. Ongoing Free indoor walking, every Monday and Wednesday, Ocean Pines Community Center gymnasium, 10:45 a.m. to 11:45 a.m. Free platform tennis clinics, Saturdays at noon, Manklin Meadows tennis complex. Bring sneakers, the rest is provided. Line dance classes, Monday and Wednesday, 9:30 -10:30 a.m., Ocean Pines Community Center. Beginners welcome. Betty Daugherty, 410-726-1818, or bettydau@ aol.com Pinesteppers. Square Dance Club, Wednesdays, 7-9 p.m., Ocean Pines Community Center with caller Dennis O’Neal. Visitors welcome. The group also hosts a dance the fourth Saturday of the month from 7-9:30 p.m., Ocean Pines Community Center. Arlene Hager, 302-436-4033. Pine Tappers free adult tap dance classes, Tuesdays, 2-3:30 p.m., Ocean Pines Community Center. Exercise and have fun with choreographed tap dancing routines. From 2-2:30 p.m., brush up on basic techniques and a review of the routines, then join the regular class from 2:30-3:30 p.m. Every week or drop-in as convenient. Lori, 410251-2162. Ocean Pines Ping Pong Club, Ocean Pines Community Center, Monday, Wednesday and Friday,

Wounded Warrior donation

SeaFloor Flooring of Ocean Pines recently donated $1000 to the Wounded Warrior project. Shown are Tabby Berkeridge and, Steve Olney of Seafloor Flooring, John Rego (of the Wounded Warrior project), and store owner Don Robertson.

LIFESTYLES noon to 2 p.m. All levels welcome. Eric Bowers, 410-208-1794. The Kiwanis Club of Greater Ocean Pines – Ocean City every Wednesday at 8 a.m., Ocean Pines Community Center, 410-641-7330 or kiwanisofopoc.org. Star Charities -Monthly meetings the first Friday of every month, Ocean Pines Library, 10 a.m. Anyone wishing to volunteer welcome to attend. Anna Foultz, president, 410-641-7667. Sanctioned duplicate bridge games, Ocean Pines Community Center, Mondays noon, Tuesdays 10 a.m. $5 and $6 for special games. Linda Rau, 410-208-4044, for a partner if needed. Non-sanctioned game Friday, 10 a.m. Marian Dore, 410641-6172, for a partner if needed. The U.S. Coast Guard Auxiliary, Flotilla 12-05, meets the first Monday of each month at 7:30 p.m. in the U.S.C.G. Station, Ocean City. Visitors and new members are welcome. Dennis Kalinowski, 410-2084147. Life after loss support group, second and fourth Tuesday of each month at the Community Church at Ocean Pines, 11227 Race Track Road, Berlin, 11 a.m. Help in coping with any type of loss. 410-641-5433. Worcester County Democratic Club meeting, fourth Thursday of each month, 7 p.m., Marlin Room of Ocean Pines Community Center. Club membership is not required. All those interested in Democratic platforms and agendas are welcome. Republican Women of Worcester County, fourth Thursday of each month, 11 a.m. meeting (doors open at 10:30), lunch at noon, local restaurants. Meetings in January through June, and again in September and October. Dinner meeting in November. No meetings July, August and December.

Showell School From Page 35 Feasibility Study, completed in April 2014, detailed the need for the construction of a replacement school. The study was approved by the Board of Education in May 2014 and by the Worcester County Commissioners in August 2014. The study, including the replacement school recommendation, was approved by the State in September 2014. The existing 53,610 square foot facility was constructed in 1976 and augmented with a 12 classroom addition in 1990.

January 2018 Ocean Pines PROGRESS

OPINION

Ocean Pines PROGRESS January 2018

COMMENTARY

Assessment increase is easily avoided

he $60 increase in the base annual assessment proposed in General Manager John Bailey’s draft budget for 2018-19 is easily avoided, if the elected and appointed members of the Board of Directors see fit to represent the interests of property owners, very few of whom elected directors with the expectation and hope that they would add to the cost of living in Ocean Pines. The proposed $60 increase is composed of two segments, one of which is a five-year $37 per year defacto special assessment designed to compensate OPA coffers for operating deficits of roughly $1.4 million in the current and previous fiscal years. If this de facto special assessement survives the budget review process -- and it deserves a not too merciful death by those wielding the budgetary scythe - then this board will have effectively punished property owners for two years of less than stellar OPA management. Poor management decisions this past year in particular included “fixing” and thereby ruining a heretofore profitable Beach Club operation that wasn’t broke, a 20 percent across the board give-back on restaurant tabs that continued during the lucrative summer months, and a stubborn head-in-the-sand refusal to reform the OPA’s overly generous health insurance program. No doubt there are others. The larger point here is there is no reason why operating deficits need to “recovered” in this and in future fiscal years. The proposed $37 “special assessment” over a five-year period is inherently deceptive if not fraudulent, as if a future board can ever be obligated to rescind an assessment increase bestowed on their supplicants by their predecessors. One only need recall the five-year supplemental “plan” imposed years ago as a way of collecting additional revenues for the OPA’s replacement reserve and then squandered on a wasteful, over-built $5 million (and now close to $6 million) mold-infested Yacht Club. This five-year slush fund revenue matatasized into seven or eight, with its revenue stream even continuing into the current fiscal year in the amount of roughly $650,000. Thankfully, in the draft budget for next year, it’s no longer there, the result of a very deliberate board decision a year ago. But in its place, that damnable deficit recovery reserve is back, flush with funds collected from the proposed $37 defacto special assessment. It was supposedly killed off by board action this past year. Why it’s been brought back is not easily explained. Bailey makes no real effort to do so in his executive summary, for good reason. There is no explanation, at least not one that survives a test of logic and common sense. He just throws out the idea of reestablishing the deficit recovery reserve with no supporting rationale, as if directors and property owners will just appreciably nod their heads in acqui-

escence and assume it’s a great idea and oh so necessary. Actually, some directors probably will. Based on previous public remarks, OPA Treasurer Pat Supik and appointed director Ted Moroney are among the most likely suspects who will support “deficit recovery” and the committant assessment increases needed to finance it. On the opposite end will be Slobodan Trendic, who will argue that operating deficits should be offset with spending cuts rather than assessment increases. Trendic’s position is the one that will resonate. Moroney, if he decides to run for the board for an elected term this summer, needs to change his. Running as a candidate who voted to raise assessments for an unneeded deficit recovery fund is not a surefire path to victory and earning a seat on the board. This isn’t meant as a criticism of the new general manager, however. The proposed budget has the fingerprints of unseen consultants, paid and unpaid, all over it, all of whom have worshiped at the altar of these supplemental sources of revenue and bizarre reserve contrivances over the years. Bailey in fact seems clever (maybe even Machiavellian) enough to throw out this deficit recovery reserve and defacto special assessment as a trial balloon, fully expecting it to be shot down and, perhaps, killed off once and for all. If so, kudoes to him. Directors have to act less like potted plants and more like policy-makers to keep this reserve dead and buried. There is no accounting reason that anyone can cite as for why previous year operating deficits must be recovered in future years in a special reserve. It’s doubtful if in any of his previous incarnations in community and association management that Bailey has ever seen or heard of such an arcane budgetary artifice. If he has, consider this an apology in advance. If an organization’s balance sheet is otherwise healthy, and if the causes for the deficits in previously years are being dealt with responsibly and energetically, then there’s no reason why non-recurring operating deficits can’t simply be absorbed. They will show up in the OPA balance sheet as less cash or short-term investments available for operations. That’s already been happening, if one studies the balance sheets published by the OPA monthly, and hardly anyone notices or cares because the situation is not in the least bit alarming. The OPA is not going broke nor is it dangling on the precipice. Its underlying finances are stronger than any municipality on the Eastern Shore and probably the state, with only a miniscule amount of debt, a reliable stream of assessment revenue and (perhaps) a somewhat less reliable but still robust stream of amenity revenue, and reserves projected for the end of the current fiscal year in April at $8 million. Most towns of similar size anywhere in the country or on the planet would kill for OPA’s balance sheet. The other $23 in the proposed assessment

increase can also be easily addressed by rejecting the draft budget’s proposed $380,000 loss at the Yacht Club. It is intolerable. The time has come to zero out that operating deficit and the subsidy required to finance it. Historically, the Yacht Club has made money for the OPA during the first six months of the fiscal year, a pattern that only crashed and burned this past year because of weak management (an example of the 1970’s-era Peter Principle; google it if its detail have faded from memory) and a stubborn refusal by a board majority to retain a 20 percent discount when it was manifestly not working. Having declined to step in to stop the madness of discounting food and beverage this past summer, when there was still time to attenuate the effects, the current board will only be compounding the previous board’s sins if doesn’t take steps to eliminate the operating subsidy once and for all. And it will earn the scorn of many if it attempts to remedy last summer’s mistakes by taking it out on the backs of property owners in the guise of higher assessments. One way to stop the losses is to lease out the Yacht Club, taking advantage of the current mold-abetted hiatus in operations to let the world know loudly and clearly that the OPA will entertain lease proposals from qualified restaurateurs. With the former staff mostly laid off, Bailey has created an environment and timeframe in which lease proposals can be actively solicited and reviewed. Bailey isn’t going to propose this option himself. It will be up to the board to assert its policy-making role and direct the general manager that the time for leasing is nigh. Alternatively, a zeroed out Yacht Club deficit can be accomplished with traditional in-house management or with an outside management option structured in a way that closes the amenity down (and lays off all staff including top management) when there isn’t enough business to justify keeping it open. The outside management option seems to be one that Bailey prefers, based on on-the-record comments he made to the Progress recently and soon to be formalized in a written recommendation to the board. If he persuades a board majority that outside management is the best way to ensure consistent product and service at the Yacht Club, with cost percentages within industry standards, so be it, though it should be kept in mind that outside management isn’t free. The monthly management fee just adds negatively to the bottom line if things aren’t working out, as experience with two outside management firms at the Ocean Pines golf course has demonstrated. Expecting a different result at an amenity with a limited record of success seems somewhat rose-colored. If the board selects outside management as the 2018-19 Yacht Club solution du jour, then care needs to be taken to draft a contract that allows the OPA to bail on it whenever the day

OPINION

January 2018 Ocean Pines PROGRESS

Assessment increase From Page 38 comes in the last half of the fiscal year (and it will) when the amenity isn’t profitable. An absolute must is that no management fee is due and owing if the amenity isn’t open to the membership. To cut down on losses, and to avoid dissipating summer profits, the Yacht Club simply needs to close when demand is lacking, even if (and

perhaps especially if) an outside management firm is doing the day-to-day heavy lifting. Given the many alternative dining and drinking options in the area, that day will come not long after Labor Day. If outside management has somehow against the odds turned the Yacht Club into a must destination for the multitudes, that day can be pushed off closer to New Year’s. Don’t bet the ranch on that, however.

If the projected $380,000 loss at the Yacht Club is reduced to zero, the savings more than covers the remaining $23 assessment increase in the draft budget. Do the math. A $23 assessment times 8,420 properties equals $194,396. What that means, simply, is that it’s possible for the board to reduce the assessment next year. Not only possible, but more or less the only fiduciarily responsible response to the numbers. -- Tom Stauss

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OPINION

Ocean Pines PROGRESS January 2018

Saved by the mold: A blessed intervention

nly in Ocean Pines would the arrival of a common mold in the upper reaches of the Yacht Club have the salubrious result of closing down a business amenity that needed to be shut down for reasons having nothing to do with human health. Any and all who burst out laughing when they first heard the news should not feel ashamed. These sorts of mirthful occasions punctuated by unexpected and delicious irony should be relished. Along with the amenities, a congenial climate most of the year, a pleasant natural setting and mostly good-humored residents (excepting of course the “Ocean Whiner” contingent), these are the occasions that make Life in the Pines a never-ending treat. While some cynics concluded the mold story was made up to give General Manager John Bailey “cover” to do what he wanted to do anyway, that interpretation is skewed from reality and at war with basic logic. For one thing, the presence of mold in the Yacht Club is more or less an established fact. Certainly the estimate of $50,000 to remedy the problem is no illusion. Unless one believes Bailey imported a little mold from his friends across the bay, and had it planted by staff in the attic by a mad uncle or staff unable to perceive self-interest, there is no basis in fact for such a fantastical conspiracy theory. To be sure, it’s true that Bailey had been rethinking his previous decision to keep the Yacht Club open throughout the challenging winter months, on a reduced Friday-Saturday schedule. That schedule, unfortunately, had not “stopped the bleeding” at the amenity, which was one reason it had been implemented by Bailey in the first place. Moreover, no decent manager “wants” to make a decision to lay off employees who had served loyally and whose lives will surely be affected by a decision to close down. Indeed, it wouldn’t be too surprising if compassion for employees played a part in the new general manager’s decision to keep the amenity open much longer than fiscal prudence would justify. According to the just released draft budget for 2018-19, the Yacht Club is projected to lose roughly $450,000 in the current fiscal year,

was not top management. Food and Beverage Manager Brian Townsend An excursion through the curious cul-de-sacs An excursion through theby-ways curious and by-ways and cul-de-sacs is gone, with odds of a return slim of Worcester County’s County’s most densely community. of Worcester mostpopulated densely populated community.and none. The life cycle of a food and beverBy TOM STAUSS/ By TOM Publisher STAUSS/Publisher age manager in Ocean Pines is not a long one. Pudge Ruppert is looka horrific number even for those thought more or less “forced” the ing down from a lofty perch atop a who console themselves (and us) OPA into making the decision it did. heavenly cloud with gratitude for by saying that the Yacht Club is an According to some reports, cer- his relatively protracted tenure of amenity, amenities lose money, and tain directors were pushing back what, ten years or more? Even he therefore property owners should against Bailey’s business instinct to was felled by the dismal reality of expect to subsidize losing amenities close down the Yacht Club even in a brand name and business plan in through their annual lot assess- the teeth of monthly losses. Once in- need of a massive overhaul, of which ment. sidious mold spores took root in the a name change is but a timid first Of course the Yacht Club is more attic area and made their way down step. accurately described as a busi- to the second floor via walls, there To help the board with its deciness amenity, but even as a simple wasn’t much the diehard opponents sion on leasing versus fee-based out“amenity” there is nothing about an of closure could do to prevent the inside management, it might consider amenity that would make tolerating evitable. conducting a town meeting to hear horrific losses, or any loss at all, acTo do otherwise would be the put the views of OPA members with a ceptable. the health of patrons and staff in vested interest. Ocean Pines has plenty of ameni- jeopardy. Can’t have that. And just Certainly the opinions of the ties -- marinas, Beach Club parking, to be clear, management tested air Clubs Advisory Committee memand Aquatics -- that more than pay quality before the New Year’s Eve bers are relevant, but that should their way, generating net operating gala and determined it to be safe for not be the extent of the board’s insurpluses for the OPA. The racquet breathing. teractions with those who pay the sport amenities are better than or To the extent that mold made bills. close to break even. Until this past it easier to make the right move, So town meeting anyone? summer, the Beach Club had always it should be regarded as a blessed Let the debate begin, with a brief been profitable before an ambitious intervention of the Universe as op- opening prayer in gratitude to the (but ultimately bad) business plan posed to the unanticipated expense lowly mold spore. intervened. that, in truth, it is. Even at $50,000 With a return to the status quo or more, the cost of remediation will ante -- a competent manager and be less than keeping the Yacht Club hours of operation that meet mar- open for the remainder of the fiscal ket demand -- there’s no reason to year, barring some evidence that the think it won’t return to profitabil- infestation is even more widespread The Ocean Pines Progress, a journal of ity next summer. If he hasn’t done than the evidence suggests it is for news and commentary, is published so already, a sit-down with former far. In Ocean Pines, anything is posmonthly throughout the year. It is cirmanager Linda Huettner would be sible. culated in Ocean Pines, Berlin, Ocean a meeting Bailey would be well adThe press release announcing the City, and Captain’s Cove, Va. vised to take. closure talked about a 60- to 90-day Letters and other editorial submisThe stated goal of all of the ame- hiatus, but that’s just a best guess. sions: Please submit via email only. nities is to at least break even, and Indeed, a gala reopening Memorial Letters should be original and excluthat is not a goal in the aggregate Day weekend might give the OPA sive to the Progress. Include phone but individually. The Yacht Club, more time to eradicate every last number for verification. and to a lesser extent, the golf mold spore while avoiding losses in course, have been laggards on the the winter and early spring months. 127 Nottingham Lane fiscal front, with boards of directors That’s a win-win scenario if there Ocean Pines, MD 21811 being far more tolerant of operating ever was one. losses than they should be as careful The OPA -- Bailey and the Board PUBLISHER/EDITOR stewards of members’ money. of Directors and OPA members genTom Stauss The projected $450,000 loss in the erally -- should use the interlude to tstauss1@mchsi.com Yacht Club this year obviously was a have a leisurely reflection on the 443-359-7527 major concern to Bailey, and he may best way to manage the Yacht once have been on the cusp of deciding it reopens. Advertising Sales to close it even before mold spores With the amenity closed, both Frank Bottone made their timely appearance on outsourced management or outright 410-430-3660 stage just in time to ring in the new leasing can be considered on equal year. footing without the need to guaranART DIRECTOR But he acknowledges that an in- tee the jobs of current staff. Rota Knott spection of the second floor and attic The closure of the Yacht Club as areas of the amenity that delivered a “precauction” resulted in the lay CONTRIBUTING WRITER the bad news of a much more exten- off of all but one employee, Bailey Rota Knott sive mold infestation than initially said recently, and that employee

LIFE IN THE LIFE INPINES THE PINES

January 2018 Ocean Pines PROGRESS

Tim Hearn re-elected president of Cove for another year Directors approve officer slate in uncontested ‘consent order’ vote By TOM STAUSS Publisher nyone who thought that a challenging year and even several challenging years on the health front would deter Tim Hearn from serving another year as president of the Captain’s Cove property owners association may be wondering why he’s doing it. The board of directors of the Cove association, formally known as the Captain’s Cove Golf and Yacht Club, in December reelected Hearn and a familiar slate of officers in an e-mail vote. The vote occurred in what’s known as a “consent order” action. The Cove board of directors will ratify the action taken outside a regular meeting of the board at the next regularly scheduled meeting, sometime in the first quarter of 2018, most likely in February. A posting on the Cove Web site in late December indicates that the actual date of the meeting is to be determined. Elected with Hearn was John Costello as vice-president, Pat Perino as secretary, and Michael Glick as treasurer. All but Costello held the same po-

sitions this past year. Hearn essentially said he is willing to continue to serve as president of the Cove Association, a position he’s held for about five years, in order to preserve the gains he believes the Cove has made during his tenure. Although a dissident group of resident homeowners including former directors often appears at board meetings to find fault with Hearn and the board on which he serves, Hearn said he believes many if not most property owners are pleased with the Cove’s overall financial health and the way the community has been run since 2012. The improvements, he said, include a much healthier balance sheet, a pattern of operational surpluses, an aggressive capital improvement program, and assessments that have remained constant at $1200 per year for three years straight. Although Ocean Pines’ base annual assessment is $921 per year, amenities are accessible through additional memberships or the payment of user fees. In Captain’s Cove, the annual

membership dues includes pre-paid access to all of the Cove’s amenities, including the golf course, swimming pools, and tennis courts. Only cart fees are not included in the annual assessment. Cove owners who walk when they play the Cove golf course pay no additional fees for the privilege. Hearn says he doesn’t take it personally when he’s on the receiving end of attacks from critics. He said it comes with the territory and he’s used to it but nontheless says it’s an “unproductive” use of the board’s time to deal with a steady diet of complaints from what he said is a small number of former directors. “Sure, there are four or five people who come to meetings or post messages that are negative,” he said. “But there are literally hundreds in the Cove who feel differently. Most of our owners think we’re on the right track.” He said the team that is in place now is the one that, working with the developer/declarant, will make Captain’s Cove’s undeveloped sections fully buildable. After roads are built in remain-

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ing areas of Section One in the near future, focus then will shift to a two or three-year phased approach to adding roads in Sections 12 and 13. Financing is provided through so-called Exhibit X properties once identified as delinquent but that now are paying annual asessments, together with a private investor based in Worcester County who is providing a revolving line of credit to the Cove. Hearn said there is roughly $700,000 available now to continue with the road construction program, something he has said never was on the radar of boards prior to him becoming president in 2012. “They just didn’t understand the connection between build-out of roads and the payment of association dues, and just the overall health of the community,” Hearn said. The initial draft of the agenda for the first quarter meeting of the board indicates that former director and Hearn critic John Ward in late December filed a complaint that the board will consider. Apparently it has to do with the recent posting on the members’ only section of the Cove Web site of copies of 1099s given to former directors and members of the Environmental Control Committee over a roughly four-year period reflecting compensation for service to the Cove. For one day according to Hearn, or three days according to Ward, the posted 1099s included Social Security numbers of the identified individuals. Posting the Social Security numbers, but even the 1099s without them, constituted a grevious violation of personal privacy, Ward has said. The new complaint filed in late December involves that complaint, which, if past is prologue, the board will reject. Ward then can file an appeal of that rejection with the Virginia’s homeowner association ombudsman, who could impose some sort of penalty on the Cove association if that office rules in favor of Ward. Meanwhile, Ward told the Progress in early January that he and his fellow complainants have discussed the posting of the 1099s with various county and state law enforcement officials, in the hopes of finding some remedy. “The problem is that this has never occurred before, and no one knows how to handle it,” Ward said. He said a former director, Wilbur q

CAPTAIN’S COVE

42 Ocean Pines PROGRESS

CAPTAIN’S COVE

January 2018

Hearn reelected From Page 41 Bowden, recently told him that the old policy of compensating directors and members of the ECC who attended meetings had been in place in Captain’s Cove for at least 20 years and was never controversial, as it was designed to cover travel expenses. Although meetings during

the Hearn era have been held in the banquet room of the Cove’s Marina Club amenity, previous boards often traveled outside the Cove for board meetings, sometimes across the Chesapeake Bay bridge in the Annapolis-Baltimore area convenient to non-resident board meetings. During the era of former developer Bob Warfield in the early 2000s, board meetings usually took place

in the Atlantic Hotel in Berlin. Hearn and his allies on the board did away with the practice of compensating directors when they took control of the Cove after the 2012 settlement agreement was put in place, the result of litigation over, among other issues, whether the developer-declarant could vote in annual Cove elections. It was that settlement agreement,

still the source of friction between the opposing parties five years later, that made it possible for Hearn and his business allies, including directors Glick and Jim Silfee, to effectively assume control of the board and the Cove. Hearn sold his interests in the CCG Note and is no longer technically a Cove developer in any sense of the word.

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Berkshire Hathaway HomeServices Pen Fed Realty 4323 Captain’s Corridor • PO Box 28 Greenbackville, VA. 23356 302-381-6910 (cell) • 757-854-1604 (office) 757-854-1606 (fax) • Email: candhwelsh@aol.com ©2017 BHH Aﬃliates, LLC. An independently owned and operated franchisee of BHH Aﬃliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Equal Housing Opportunity.

January 2018 Ocean Pines PROGRESS

ATTENTION: Sussex County, DE --Berlin, MD --- and Captain’s Cove VA!! Here we GROW AGAIN and YOU can help!! CHOOSE FIBER “Future proof” your property and ADD value! CHOOSE SAVINGS Only pay for the services YOU want! CHOOSE YOUR TV Only pay for what YOU want to watch! CHOOSE YOUR HOME PHONE SERVICE Improve your cell service, keep a home phone – or not!

FOLLOW THE LINK: https://pdf.ac/7NDxC2 Sales@ThinkBigNets.com

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www.ThinkBigNets.com

44 Ocean Pines PROGRESS

January 2018

THIS IS QUALITY Award after award, Bennington still leads the way in quality pontoons.

Everything But The Water

32415 Long Neck Road, Millsboro , DE 19966 302.945.1200 One of the Top 100 Boat Dealers in North America! WWW.SHORTSMARINE.COM