By Josh Davis, Associate Editor
(April 26, 2018) Questions during a first of its kind Ocean Pines Association town hall meeting last Thursday took on a wide range of tone and topics, as General Manager John Bailey and several board members fielded inquiries for just over an hour.
One of the more heated exchanges of the evening occurred when former director and interim general manager Brett Hill questioned the logic of raising assessments $30 this year, to $951.
Hill said directors during the last regular board meeting listed operations as costing $792 per homeowner, plus $293 for “other sums” including reserves.
“It wasn’t actually money spent, it was money we put in the bank toward reserves,” he said. “Looking at the last financials, we spent $113 per household on reserves, which made the actual cost this fiscal year per household $905, meaning that this year we had a $16 surplus per household … even with this supposed deficit.”
Last year the basic annual assessment was $921.
“With that, how did the board justify raising our assessments by $30 next year, when even this year on a horrible year by any account we still have money left over?” Hill asked.
Hill said the association collected about $1 million more than it spent over the last three years.
“It seems like we’re racking up a lot of money and, even though we haven’t done the best job in operations, we still have money left over,” he said.
Director Ted Moroney said the purpose of reserves was “so that when something breaks down we don’t have big jumps [in assessments].”
“The reserves increased by approximately $1.5 million, even though the total balance sheet only went up a half a million,” Moroney said.
Moreover, he said cash assets last year at this time were $2.5 million and are now just $1 million.
“Somewhere, that’s money gone,” he said. “So, where the money really is, is money that we haven’t spent crazily the rest of this year on all kinds of stuff that wasn’t in the budget last year, or in the budget this year early on.
“We’ll get to the end of this year and see where we are operationally and make the proper adjustments,” Moroney continued. “There’s a lot more to it than just simply looking at a single line-item. You really need to look at where the reserves are, you need to look at your cash flow, and you need to look at what we budgeted versus what we spent.”
Last year, Moroney said, “We spent far more money in reserves than what we budgeted.”
“So the budget was a fake, because we added a whole lot of stuff,” he said.
Hill pressed, saying over the last three years Ocean Pines banked $135 per household.
“It’s reserves,” Moroney said. “Do you want to spend the reserves, or do you want to save it for the person that lives here who’s 40 or 45 years old and, five years from now, when they have to replace a roof there’s no money there to do it?”
Hill pressed further, saying because there was $8 million in reserves, collections did not need to increase $30.
“I’m telling you what, if you hadn’t lost $745,000 in a year, we’d be OK,” Moroney countered, referring to losses incurred while Hill was general manager.
Other exchanges were more subdued.
John Reeves, for example, asked what the yacht club would now be called under management of the Matt Ortt Companies.
“The yacht club is going to be called the yacht club,” Ortt said, drawing loud applause.
Frank Daly asked if recommendations from a recent “deep dive” audit had been implemented.
“I will tell on myself — I have not gone to the general manager and asked specifically if every single item that was listed as an audit deficiency has been addressed at the staffing level,” Association President Doug Parks said. “However, it’s incumbent on the GM to do that, so, as an action item, I will … go back to the GM and ask him to give us a line-by-line update on what happened.”
Moroney added that the board, during its last regular meeting, decided to include a review of the deep dive in the fiscal 2017 audit.
“You don’t have to take our word for it – we’re going to actually have the auditors go right back through that list again and check to make sure that everything is in place,” he said.
Jennifer Fold asked what the association was doing about cases of theft, fraud and corruption.
Bailey said some of that was being addressed in the fiscal year audit and in the upcoming forensic audit. He said the forensic auditors would have an initial meeting on Friday and he would perform additional operational audits.
“Between the three of those things, I think we can get at a lot of that,” he said, adding another important aspect was leadership by example. “To change people’s behavior, one you’ve got to have the right people, two, you have to stay on them, and you have to lead by example.”
John Broderick asked about fees and expected results for the forensic audit.
Moroney said $226,000 was set aside and, as for the expected outcome, “We don’t know.”
“That’s the whole idea of doing the audit – find out if there’s problems and follow the money. And that’s exactly what will happen.”
Another homeowner asked for an update on renovations at the county club. He said original estimates for the second-floor renovation were $536,000. Nine months later, he said estimates were over $1 million.
Bailey said current bids were more than $840,000, but only two of seven companies contacted replied to a request for proposals. He said the staff recommendation was to rebid the project during the fall.
“Looking back as far as why we didn’t do the original plan, I don’t really know, but at the same time we did make some changes to the design of the facility based on use of the space,” Bailey said.
Director Slobodan Trendic added the previous estimate was essentially a no-bid contract and not based on competitive procurement. He said recent bids were costlier because an elevator added about $100,000 and work was generally more costly during the spring and summer.
“This is the expensive season when everybody is busy … in the fall, prices will come down and the board will probably be looking at a much more aggressive and cost-effective proposal,” he said.
Vanessa Adams asked about flooding. She said her drainage ditches on Martinique Circle were eroded completely.
“In the last couple years, I’ve gone to meetings where you argue about what kind of French fries you’re going to serve, and I think a lot of people really care about their property and the drainage situation,” she said.
Bailey admitted drainage is a huge problem. He said a resident working group was looking at the issue with staff and county officials.
Last month, Bailey said there were five elements to address when looking at flooding: emergency response situations, chronic problem areas that don’t require engineering, chronic problem areas that do, preventative maintenance, and education.
“There’s all sorts of pieces to this puzzle and it’s not an easy answer,” Bailey said. “I’m not saying stuff doesn’t have to get done, but it’s going to be a big lift, it’s going to require a lot of money, and it’ll make everything else pale in comparison.”
Another resident asked about preservation of the crab pier on Manklin Creek. Bailey said he had just signed a contract for the third-party contract to inspect the pier.
Former director Marty Clarke questioned why Ocean Pines amenities were public, when the original community charter stated, “the general purpose of the association is to further promote community welfare of the property owners.”
“The words ‘general public’ do not show up in our documents, so why are we now open to the public?” he asked.
Trendic said the association’s tax-exempt status necessitated “certain requirements imposed by the IRS, including that our community common assets have to be accessible to the public.”
“If the community wants to change this, we have to change the tax-exempt status and it’s not an easy process,” he said, adding although the IRS requires assets to be open to the public, “they don’t mandate that they have to be free.”
Another resident wondered about delinquent assessment collections, a topic originally on the town hall agenda. Parks said that information would be provided during the April 28 regular board meeting.
Esther Diller asked for an explanation as to why the board voted 6-1 against a motion by Director Tom Herrick to issue a request for proposals for “back-office financial management and software.”
Director Pat Supik said that amounted to outsourcing and did not make sense with a new general manager and finance director, among other recent developments in the finance office.
“I think we’re at a point to develop a very, very strong financial department to take us forward,” she said. “Maybe another time that would be the right thing to do, but I don’t think that’s the right thing … for Ocean Pines today, given our current situation.”
Several directors, last month, offered Herrick a compromise to draft a request for information – considered less binding – rather than a request for proposals. Herrick rejected the compromise and the motion was defeated.
Parks, during the town hall, admitted there were concerns and reiterated a request for information could be helpful.
“Maybe this is a good sort of a reminder for us as the board … to go ahead and do the RFI and see where it leads us,” Parks said. “To put this in [as a request for proposals] is a little bit presumptuous.”
Larry Perrone asked how and why the association entered into a three-year contract with former food and beverage manager Brian Townsend, reportedly costing the association more than $100,000 in a severance package when he left employment.
Trendic said the board did not approve the contract, but had a legal obligation to honor it. He said the former acting general manager, Hill, signed the contract.
“After seeking legal counsel’s opinion, we basically dealt with the issue in the way that was necessary,” Trendic said. “Just for the record, the board was not aware of the contract, nor did the board approve it.”
Nancy Weber wondered about a reported excess inventory of fertilizer, which Bailey said was inherited from former golf management company, Landscapes Unlimited.
“The one good thing about the fertilizer, unlike alcohol – or the other things we had to throw away – it doesn’t have an expiration date,” Bailey said.
Donna McElroy asked about Mediacom and whether she would be stuck with the internet and television provider for the rest of her life.
Parks said the association is in negotiations with the company to continue its services. He said Comcast and Verizon were consulted about offering services in Ocean Pines, but were not interested because they did not consider it profitable enough.
He said Mediacom is in the process of upgrading its infrastructure in Ocean Pines at no cost to homeowners.
The final question of the evening came from Tom Janasek who asked, “Since we’re on [the topic] of IT, I know we have another $260,000 in iPads, laptops and all kinds of stuff we bought last year. Is there some point in time that we’re going to be able to get Wi-Fi in some of our facilities?”
“How about at the yacht club, where a lot of young people would probably come if they could actually get on and not talk to each other?” Janasek added.
“Tom, we’ll take that under advisement,” Parks said.