(Jan. 29, 2015) Day one of the budget meetings of the OPA Board of Directors went relatively smoothly, as the board got its first crack at the $10.9 million proposal during a meeting at the yacht club on Monday, Jan. 26.
Talks heated up on Tuesday, as the issue of reserves ratcheted up tensions between several directors.
On Monday, Budget and Finance Committee Chair Patricia Supik began the meeting with a series of recommendations.
The committee had met with General Manager Bob Thompson and Comptroller Art Carmine, as well as several department heads, during the previous week.
Supik said the recommendations were “a committee process totally.”
“The budget is not significantly different from prior years, so there’s not any kind of ‘oh my gosh’ items in there that the committee reacted to strongly,” Supik said.
The committee recommended each department provide a business plan for board review before receiving budget approval, as well as “a document which presents and contrasts the current and prior year’s assessment by component.”
“We seem to spend a lot of time some years on the $10 [assessment fee] for the yacht club and not as much time on the hundreds of dollars for the fact that we provide our own services and we have a capital investment that we must support,” Supik said.
“It’s critical, in the committee’s mind, to keep the focus on the long-term capital infrastructure and also the fact that we are a service committee and police [and] fire department are all services that we as a community pay for.
“Assessment by components I think is critical to any presentation of the budget to the community to give a real picture of ‘this is what Ocean Pines is,’” Supik continued. “It’s a service industry protecting you with amenities that involve capital expenses in addition to operating expenses.”
The committee stressed the importance of developing a “communitywide information technology system.”
“Everybody struggles with that, I think,” Supik said. “But the committee feels the dollars that are in the budget … is critical and should be supported. We recommend the board support that.”
The committee did not go into detail regarding the increase in the Fire/EMS budget, which drove a projected $24 increase in resident fees.
The committee also worked around the issue of the uncertainty of the golf course.
“Our understanding is we are possibly in the process of change in golf,” Supik said. “The committee felt that the timing of that could be critical, given that golf has a season, which is coming up. Any change, perhaps imminent, could significantly impact the ability for the coming year to meet any targets.”
Supik said the committee requested more depth of detail involving capital plans, recommended combining the future projects reserve with the five-year recovery reserve, and asked the board to diversify its investment policy.
“The investment of reserves has been on the ultra-conservative side over the last couple of years,” Supik said. “While that certainly preserves the capital, the loss in buying power … can become significant.”
Finally, the committee asked the board to examine the possibility of increasing the level of funds from the county.
“The bulk of our assessment is for our support services, and our support services are typical government support services — police, public works, etc.,” Supik said. “My understanding is we get no tax break.
“That would be an area we are paying twice as community members,” Supik continued. “We pay Worcester County and we pay Ocean Pines, and that may be something we can look into going forward, if there is any relief there for Ocean Pines residents.”
On Tuesday, Vice President Marty Clarke advocated adding $314,000 for road depreciation and $350,000 for golf drainage projects to the budget, drawing from reserves, and adding $79 to per-member costs.
To offset the increase, Clarke called for the board to eliminate the five-year funding plan, reducing dues by nearly $130 dollars.
“We still end up the year with $4.2 million in reserves as opposed to the $4.7 million that this budget calls for,” Clarke said. “That ‘aint a big swing, girls … and guys.”
According to Clarke, a $4.2 million reserve would represent the second-highest total during the last 10 years.
Treasurer Jack Collins argued against cutting the five-year plan, saying the board had a social contract with residents to use the funds to pay down the balance of the new $4.3 million yacht club.
Clarke, reading from the referendum on the yacht club, said, “The five-year funding plan was adopted four years ago to address the anticipated major facility cost of our community. Therefore, you have been paying into a reserve account via the plan for four years. This plan will be used as the long-term funding solution for this and other projects.
“What part of five-year funding plan are we not hearing?” Clarke continued.
“The understanding that I have is that we made a social contract with the individuals who voted for this yacht club that we would utilize the cash out of our historic reserves to fund and build this building,” Collins said. “What we were going to do, in order to be prudent, is replace those monies that we utilized out of that reserve through $1,980,000 a year to pay the historic reserves back,” Collins continued. “And it was estimated that that would take us through fiscal year 2018.”
“That’s a brand new, pull-it-out-of-your-hat,” Clarke said.
Clarke argued the community had already paid for the majority of the new facility, owing builder Harkins Contracting Inc. just $248,000.
Not so fast, countered Parliamentarian Tom Terry, who said Ocean Pines still needed to replace the funds it borrowed from itself.
“You haven’t paid off the yacht club, Marty,” Terry said. “It won’t be paid off until 2018. If you don’t understand it, I can’t help you.”
“What was said and what was promised in social contracts and stuff like that doesn’t mean anything,” President Dave Stevens said.
“It’s bogus,” Clarke said.
“Well, shut up,” Stevens said, clearly frustrated. “That has nothing to do with what we’re talking about now. The simple fact is that when we did this, I knew it and anybody that paid the slightest bit of attention, which wasn’t very many people by the way, knew that the amount for the yacht club was not going to be paid out of money we already collected. It was going to be paid by future monies that we were still going to collect out of this ‘five-year plan.’ And it was going to go out to 2017, 2018, except we kept adding more money into the five-year plan.
“We knew that,” Stevens said. “Not all the people who voted for it knew it.”
The open question, according to Stevens, was how much money the community needs in the historical reserve.
“It’s almost like an open sore,” he said. “The fact of the matter is we’ve used the historical reserves for a lot of things, including greens for an example, that we never put money in to begin with to pay for.
“Right now the biggest issue is the historical reserves and how much money should be in there and what the money is for,” Stevens continued. “Right now it’s a slush fund.”
Stevens said his “strong feeling” was to continue the five-year plan, but called for a study to examine the purpose and means of the historical reserves.
“I don’t think Marty’s questions can be answered until we’ve done that,” he said. “There’s a lot that I have doubts about, but there’s nothing in here that we can solve in this meeting now.”
Clarke, meanwhile, continued to push.
“Unless my calculator’s wrong, we have a balance and reserves of $4,247,835, April 30, 2016,” he said. “That’s doing everything that’s in this budget plus adding the $314,000 into roads, adding the $350,000 into golf drainage and removing the $1.98 million so-called five-year funding plan.
“We’re talking about a $400,000 difference in reserves, and we’ve lowered the assessment by a sizable amount of money,” Clarke continued. “There is no five-year plan that has ever been put up for a vote, a second discussion and approval. Never. It’s passed in the budget year after year after year because we have some people yelling, ‘the sky is falling.’”
Terry countered that the five-year plan was a “marketing name” applied to a series of incremental fees, starting at $30 and increasing until it topped out at $130, approved by the board each year as part of the budget.
“It is voted on every single year,” he said. “The dollars to pay off an internal loan for the yacht club were already baked into the current rate that they had at that time, and that is still a fact. That $130 was in the budget every year and has been every since the yacht club bill was put in.
“It was an honest statement to the membership and it still is,” Terry continued. “It becomes not correct if all the sudden we act like we don’t have to pay off the yacht club.”
“That smacks of a slush fund,” Collins said. “It does to me … and I think it would to the average person out there that there was a plan to pay for this building. Now, to hell with it, we’re not going to follow the plan.”
Clarke, again referencing the yacht club referendum, said, “The entire $4.3 million cost will be met without any special assessment.”
“That’s not a true statement,” Director Sharyn O’Hare said.
“Of course it’s a true statement,” Clarke countered. “We don’t have the authority to do a special assessment.”
Stevens, trying to restore order, banged on the table.
“Marty, lower your voice,” he said. “Stop.”
“I have the floor,” Clarke said.
“Stop, you didn’t have the floor,” Stevens said.
“Then take it away from me,” Clarke said. “Have fun.”
“You don’t have the floor until I give it to you,” Stevens said. “Look, what Tom said is accurate. It’s just flat-out accurate. What Tom didn’t say, [which] is also true, is that we never talk about the fact that we were borrowing it from ourselves and that the amount of money — or the source of where we were borrowing it — was in fact a large amount of money. And it was a large amount of money that … had a questionable basis in terms of how large that money should be.
“That is the issue,” Stevens continued. “How did that reserve get so big, what is it for and why are we just borrowing against it as if it had no purpose? I don’t think we can do this by yelling at each other.”
Clarke apologized.
“If we agree that this is the issue then we have to figure out how we’re going to resolve it,” Stevens said.
With three potential fee increases on the table, including $24 for Fire/EMS, $37 for roads and $42 for golf drainage, Terry suggested the board gather more information before making a decision.
“I don’t know if we can resolve it at this moment,” he said. “I think we’ve just got to have a little more information. I think we’ve probably done all we can do here without getting a more information on the roads program, a little more on drainage … and we still have to resolve the fire department.”
The board will likely reconvene next week following a briefing with Fire/EMS.
“I hate to say it, but I really do think this has been a useful conversation,” Stevens said.
“It’s been interesting,” O’Hare said.