Directors debate budget on route to approval with two dissenters

Horn, Daly object to holding the line on amenity dues this summer, while Lakernick and Farr say OPA members are feeling ‘squeezed’ by inflation in household budgets

By TOM STAUSS Publisher

While five directors supported a 2023-24 budget that held the line on amenity membership fees and daily user fees, while reducing the base lot assessment by $13, two directors made it clear they preferred increases in Aquatics dues and fees to eliminate a projected loss in that amenity.

The dissenters were last year’s elected Ocean Pines Association leadership team, former president Colette Horn and former vice-president Frank Daly.

They were part of a solid Board of Directors majority, reduced to a minority this year by virtue of a 15-vote separation between the third and fourth-place finisher in last summer’s Board election.

The third place finisher, current OPA Treasurer and Director Monica Rakowski, beat fourth place finisher and former appointed Director Amy Peck by those scant 15 votes, and that has made all the difference in the political dynamics on the Board since the new Board was organized in August.

It’s unclear if Peck’s presence on the Board in place of Rakowski would have made a difference in the budget’s approval.

Had she been elected, she would have been in alignment with Horn and Daly on many issues, and possibly Steve Jacobs, the top vote getter in the election who so far this Board term has often sided with Horn and Daly on policy issues.

However, in the case of the 2023-24 budget, Jacobs, despite some reservations over the creation of a couples membership in Aquatics, voted with the Board majority of OPA President Doug Parks, Rakowski, and directors Rick Farr and Stuart Lakernick.

The debate that occurred in the Board’s Feb. 18 monthly meeting underscored the continuing differing perspectives on key issues between the prevailing Board majority and minority blocs.

Those divisions manifested shortly after General Manager John Viola explained the adjustments he made in the budget that made it possible to lower the base lot assessment from the current $896 to $883.

Horn was a right out of the box with a criticism of the budget’s projected $100,000 loss in Aquatics, telling her colleagues that OPA governing documents “require” that individual amenities break even.

She also asked Lakernick how much a new couples membership in Aquatics he advocated would bring in new revenue.

“I’m concerned about any deficit (in amenities),” she said.

Actually, Board Resolution M-02 that sets out the policy to which Horn referred does not mandate break-even amenity budgets.

The language is “should” not “shall”, and M-02 also says that any shortfalls in the break-even goal “shall” be covered by the annual lot assessment.

Lakernick responded that holding the line on amenity dues increases is the proper response to “our members [who] are getting squeezed” by inflationary pressures in the economy.

“We have an [operating[ surplus],” he said, adding, “We can do this.”

Although Viola told the Board that he had reduced Aquatics revenue by $12,000 as a result of the new couples membership in Aquatics, Lakernick said he believes the new category will bring in new members and revenues.

He said the Aquatics Advisory Committee has also proposed a new membership category in Aquatics for grandparents.

Lakernicjk didn’t push to include this in the 2023-24 budget but but he said it introduced for consideration by the Board next year.

After Horn pointed out other potential budgetary pressures, such as a gradual move to an all-paid fire department in coming years and the need to improve benefits for police officers to retain them, Lakernick returned to the issue of the couples membership in Aquatics.

“I don’t think $12,000 [in potential lost revenue] is a problem,” he said.

Jacobs said he would have preferred if the couples membership had been deferred, suggesting that it should have been delegated to the Aquatics Advisory Committee for a package of possible membership changes next year.

He also noted that the Ocean Pines Volunteer Fire Department doesn’t have enough to pay its 50 percent share to buy new fire-fighting equipment.

He also said that surveys indicate that public safety is the number concern among property owners, and that there may be “big ticket” expenses in this area in coming years.

Those concerns were not sufficient to cause him to vote against the budget, however.

Daly declared he wouldn’t vote for the budget because of the projected $100,000 loss in Aquatics next year.

He said he supports the $883 base assessment “because our people are hurting” but that the Board should have supported dues and fees increases in Aquatics to make that amenity self-supporting.

“The governing documents say [amenities] should be break-even,” he said, echoing Horn.

Daly said the projected $100,000 loss in Aquatics next year adds $5 to every lot assessment.

Actually, $100,000 amounts to almost $12 for each of 8,452 properties in Ocean Pines.

Daly said he had asked Viola how many property owners in Ocean Pines use the pools, with Viola responding that information was not available.

“We have that information for golf,” Daly said.

He went on to say that there are 700 Aquatics memberships currently and there is data available that suggests that pool usage in Ocean Pines is 88 percent by members.

“I see no way to break even without higher fees,” he said.

Daly did not address the possibility that the OPA would save on labor expenses if the 40-plus lifeguards needed for a full schedule at the pools don’t materialize this summer despite the best efforts of the OPA to hire them.

Horn said that in addition to membership dues increases, daily fees could also be raised to bring Aquatics into balance.

OPA President Doug Parks pushed back on the idea that a loss in Aquatics would upset that many OPA members.

“People care about the assessment,” he said. “I will take a guess that members don’t put a lot of emphasis on amenities. Though I hear you,” adding that amenities “should be run in a business-like manner.”

He reminded his colleagues that a budget is an educated guess, and that by not increasing amenity dues and fees this coming year more OPA members may decide to buy memberships.

“I’m comfortable with the budget,” he said.

OPA Vice-president Rick Farr was on the same page with Parks.

He said a lot of OPA members haven’t been able to keep up with inflation and some people are saying they can’t afford to go to the pools.

“It’s the right thing to do,” he said of keeping dues and fees the same.

Horn and Daly then repeated their arguments, with Daly contending that the OPA has been dealing with the amenity subsidy issue for more than 50 years.

“We’ve eliminated them except for Aquatics,” he said. “It’s very correctable. Just increase” the dues and fees “as opposed to putting [the projected loss] on the backs of those” who don’t use the pools.

Parks said increasing these fees “might dissuade them from buying.”

In the end, only Horn and Daly were unhappy enough with the hold-the-line approach to vote against the budget.

Ocean Pines Association

FISCAL YEAR 2023-24 BUDGET PROPOSED ALLOCATION OF ACCUMULATED SURPLUS FUNDS

Proposed Allocation Of Accumulated Surplys Funds

Fiscal Year 2023-24 Budget

By TOM STAUSS Publisher

Ocean Pines Association directors received a number of emails from members asking for more reduction in the base annual lot assessments as this year’s budget process unfolded, with the directors delivering a more modest reduction than some would have liked. After a flurry of last-minute emails among the directors debating the extent of the 2023-24 reduction, they voted 5-2 in favor of an assessment of $883 at the Board’s Feb. 15 monthly meeting.

That represents a $13 decrease from the current $996 and $8 more than $875 assessment embedded in the preliminary proposed budget unveiled in late December by General Manager John Viola.

It also represents a $9 reduction from the assessment in the revised proposed budget presented to the membership in a Town Hall meeting earlier in February, when the assessment had been adjusted to $992.

The relative small-ball adjustments in the assessments during this year’s budget process was in marked contrast to last year at this time, when the final assessment for this fiscal year was dramatically and historically dropped $100 to the current $896.

Viola recently told the Progress that in late December of this calendar year when the preliminary budget for 2024-25 is unveiled, it could contain significant additional assessment relief.

It would reflect this year’s projected operating surplus of about $1 million as of April 30, and a projected cumulative operating surplus as of the same date of $1.692 million.

Viola said he was more cautious in offering assessment relief in 2023-24 -- the new fiscal year begins May 1 -- because of potential cost headwinds and unknowns going into the new fiscal year.

He also said he prefers to offer that kind of assessment relief after the previous fiscal year’s surpluses are realized.

That means certified by the OPA’s auditors and reported in the prior year’s annual report delivered just before the annual meeting of the association in early August.

Viola said the projected fiscal

Opa Finances

year-end operating surplus of $1 million and cumulative operating fund surplus of $1.7 million should be sufficient to handle any unanticipated expenses that might arise during the remainder of the current fiscal year and in 2023-24.

If all goes well, then that $1 million in realized surplus recorded in 2022-23 will be available for assessment reduction in 2024-25, Viola said.

It actually could turn out to be more than $1 million. As of Jan. 31, it is already at $1.1 million, rounded off, and February, March and April may yield surpluses as every month has so far this fiscal year.

But that’s not guaranteed, as weather in April can be fickle, affecting play at the Ocean Pines golf course and use of other amenities.

Plus, Viola is known to guesstimate conservatively because he dislikes surprises that turn surpluses into deficits.

According to a schedule of proposed allocation of accumulated surplus funds presented by Viola during the Feb. 15 Board meeting, the estimated operating fund surplus as of April 30 of this year will actually be $2.473 million, a reduction from the $3.1 million cumulative operating fund surplus recorded as of April 30 of 2022.

During the current fiscal year, budgeted transfers from the operating fund totaled $1.635 million, much of them related to various capital projects accomplished during the year.

The estimated surplus for this fioscal year adds $1 million back to the calculation.

Transfers included $150,000 to the new capital reserve for cluster mailbox refurbishment, a $350,000 transfer to the roads reserve, $75,000 to the replacement reserve for racquet complex court renovations, $60,000 to the new capital reserve for t-docks at the Yacht Club marina, and an additional $350,000 to the roads reserve.

Also occurring this year was $650,000 allocated from the operating fund for assessment reduction.

This may seem somewhat confusing, because this year’s $100 reduction in assessments actually cost the operating fund $845,200 [8452 lots x $100].

It’s all about timing. Viola treats assessment reduction as if it’s a time-release capsule.

He’s elected to spread out assessment reduction over multiple years.

Another $650,000 in assessment reduction allocated from the operating fund is anticipated for 2023-24, the fiscal year that begins this May 1, according to the published schedule of proposed surplus fund allocations.

Over two fiscal years, assessment reduction would total $1.3 million.

The difference between what’s been allocated in assessment reduction and what’s been paid out so far will, assuming Board approval, be reflected in another downward draft to be proposed this December for

2024-25.

A rough calculation by the Progress is that there’s $350,000 remaining to be allocated from that $1.3 million, or about $41 per lot.

In addition to a second $650,000 in assessment reduction, 2023-24 transfers include an additional $100,000 to the drainage reserve and $30,000 for a new kayak launch.

According to the schedule, the total allocation from the operating fund is $780,000, resulting in an estimated operating fund surplus as of

April 30, 2024, to $1,692,703.

The schedule says it’s a balance of $1.69 million as of April 30 of this year, but that’s a likely typographical error.

It’s also a projection.

Should the approved budget for 2023-24 produce operating fund surpluses, the cumulative fund surplus would reflect that.

If it’s another banner year relative to budget, it in turn would make Viola’s aim of additional assessment relief even more attainable.

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