Director says $2M budget shortfall more than 27-year total from 1990 to 2016

By Josh Davis, Associate Editor

(Feb. 15, 2018) The projected $2 million operational deficit accumulated during the last two years is “the worst financial hole Ocean Pines has ever been in,” Ocean Pines Association Director Ted Moroney said in a public meeting Saturday.

“In the 27 years, from 1990 to 2016, if you added up all of the deficits, it was $1.85 million,” he said. “If you add up the last two years, it’s $1.9 million – and we went into the last two years with a $6,000 [positive] in the deficit line.

“We’re digging out of it. We’re working our way through everything. But, the biggest thing for us as a board is disciplining ourselves and saying this is the amount of money we’ve brought in and this is the maximum amount of money we’re going to spend,” Moroney said. “That’s what it basically boils down to.”

Director Slobodan Trendic clarified the 1990 to 2016 totals included some years with a budget surplus.

How did Ocean Pines get to almost $2 million in deficits?

According to the latest projections provided by General Manager John Bailey, total administration revenues were off by $345,000, including $115,000 in information technology consulting, $110,000 in legal, $70,000 in bad debt and $25,000 in accounting.

Revenues were off by $120,000 in golf, although that number was cut in half by expenses that were $60,000 less than projected.

The beach club missed budget projections by $320,000, including $245,000 less revenue than projected, a $30,000 overage in payroll and a $45,000 overage on promotions.

Worse was the yacht club, which was off budget by $600,000. Revenues were $680,000 lower than projected and promotions were $100,000 more than forecast. However, payroll was lower by $180,000.

Ocean Pines also spent $70,000 in unbudgeted capital additions, bringing the estimated shortfall to $1.595 million.

Over a two-year period, including a prior-year operating deficit of $363,640, the total deficit is estimated to reach $1.958 million by the end of the fiscal year.

Bailey said the gross revenues across all food and beverage operations were “overly optimistic.”

“At the yacht club, prior years’ actual gross revenue was $1.9 million, $1.8 million, and $1.7 million, respectively,” he said in a statement emailed on Wednesday. “For 2018, we budgeted $2.26 million (an increase of $560,000 more than the actual from the preceding year; and $360,000 above the actual of 2015).”

Bailey said the net operating budget at the yacht club was $1.605 million, $232,000 higher than the preceding year.

“At the beach club, the prior years’ actual gross revenue was $384,000, $443,000 and $440,000, respectively. For 2018, we budgeted $725,000 (an increase of $285,000 more than the actual from the preceding year),” Bailey said, adding the net operating budget was $238,000 – double from the year prior.

Combined, the clubs budgeted revenues $845,000 higher than the previous year, with a combined net operating budget better than the year prior by $470,000.

Bailey said auditing fees were higher because of “additional auditing work conducted.”

“We also had to pay some extra for assistance during the various finance director transition periods,” he said. Two finance directors, Mary Bosack and John Viola, resigned in 2017.

Bailey said two significant contractual services also were not budgeted.

“Due to the more than one Finance Director transition period, we needed the assistance of the former controller more than was anticipated,” he said. “Also, an IT consultant contractor was brought on; however, the expense for that effort was not specifically budgeted.”

As for legal fees, Bailey said, “We just simply had a year where there was a plethora of legal assistance needed and those needs greatly exceeded the amount budgeted.”

He said the overage in promotions, $145,000, was caused by the 20 percent discount offered at Ocean Pines restaurants to members.

“The 20-percent discount was pursued after the budget was adopted,” Bailey said.

Capital additions were harder to pin down.

“Fact is, there were multiple items that were accomplished even though they were not budgeted,” Bailey said. “The net overage is $70,000. However, there was $129,000 spent on things that were not included in the budget, yet approved for go-ahead; and then we had some savings on budgeted items as well as there being some items that were not purchased. The explanation of the majority of the overage here though is the $94,000 for the two platform tennis courts. The project was approved, however, the cost of the courts was not included in the budget.”