By Greg Ellison
(Feb. 13, 2020) Increased assessments for waterfront lots and how to differentiate canal dredging fees from payments into the bulkhead reserve were discussed last Wednesday during a public hearing on the Ocean Pines Association’s budget.
The recommended budget, which was issued on Jan. 24, maintains the $986 assessment charged for non-waterfront lots during the current fiscal year, but raises the bulkhead differential charge for waterfront properties.
Wood Duck Drive resident Doris Lloyd asked what the increase would be and how it would be used at the board of directors meeting last Wednesday.
General Manager John Viola said the additional assessment fee imposed on waterfront lots is proposed to increase from the current rate of $465 to $515.
“There was a $50 increase for the bulkheads for the waterfront assessment,” he said.
Viola said the intent is to catch up on bulkhead maintenance after repairs were slighted in recent years.
“The cost to do bulkheads has gone up substantially,” he said.
With the bulkhead reserve account balance estimated to be approaching $1.2 million to open the new fiscal year this May, and another roughly $900,000 in contributions slated, the neglected maintenance will now be undertaken.
“The bulkhead team has stepped up and increased our allocation of resources,” he said. “We’re eating into that balance with all the work we’re doing catching up.”
OPA Treasurer Larry Perrone said in light of the excessive untapped funds in bulkhead reserves, a $19 fee for bulkhead assessments was dropped for the last two fiscal years.
“That’s going back into place and we are increasing the lot owners’ bulkhead assessment this year and it’s probably going to be increased the next two years,” he said.
After the work slated for next fiscal year is completed, the bulkhead reserve account balance is estimated at about $638,000.
“The cost of materials has gone way up,” he said.
Lloyd, whose bulkhead is being updated, estimated that she has spent about $14,000 out of pocket for bulkhead upkeep during her 32-plus years of living in Ocean Pines.
“When they get finished, I have to replace the electricity and [address] the water coming from my crawl space, which will be more than $1,000 that they will not cover,” she said. “I’d rather pay my own bulkhead than have you take care of it.”
Board member Tom Janasek said the per foot bulkhead replacement cost has skyrocketed since the issue was last discussed.
“The cost has gone up so substantially in the last five years that it’s hard to recoup,” he said. “It’s going to go away faster than we’re putting it in.”
Lloyd said the situation would probably get worse.
“In five years, you’re going to have to raise it and it will cost a lot more,” she said.
Director of Amenities and Operational Logistics Colby Phillips said even with increasing the bulkhead assessments $50, the cost-benefit ratio doesn’t work.
“Statistically, it averages about $30,000 a lot for bulkheads, so with annual bulkhead waterfront assessments at $465, where it has been, it would take 61 years for the homeowner to pay for the cost,” she said. “With bringing it up to $515 it brings us down to 55 years.”
In light of those time constraints, wooden bulkheads, which have an average useful life of three decades, will be swapped out for vinyl.
“We’re going to vinyl which gives us about a 50-year [window],” she said. “We are trying to improve it … so it lasts longer.”
Phillips said the bulkhead repairs underway on Wood Duck Drive stem from Hurricane Sandy in 2012.
Richard Marchesiello, who lives on Mallard Drive, asked for an accurate accounting of the $90 waterfront differential fee collected for canal maintenance and dredging.
“The 1,600 waterfront lots are assessed about $145,000 a year,” he said. “The money has nothing to do with bulkheads.”
Marchesiello met in June with OPA leadership and asked how the accounting handled the differential fees charged over the last few decades.
“Canal dredging has not occurred in the last five years, during which $145,000 has been collected each year,” he said. “Those funds have been co-mingled in the bulkhead account even though they have nothing to do with bulkheads.”
Following the meeting, the U.S. Army Corps of Engineers sent a letter to Marchesiello that said dredging could cost more than $1 million if Ocean Pines was affected by a hurricane.
“If we are hit by a major hurricane, the last thing we’re going to have to worry about is dredging the canals,” he said. “The interpretation was my $90 could go to building bulkheads in other parts of Ocean Pines even though I pay for my own bulkhead.”
Marchesiello questioned whether the fee should remain at $90 or be abandoned, considering that he has paid about $2,000 over the last 20 years.
“I have never seen a dredge in my canal and I don’t believe very many people have,” he said. “This fee is just being collected out of rote.”
Viola said he tried to unravel the numbers in decades-old ledgers to see if differential fees had been comingled with bulkhead funds, but could not.
“If we could have, we would have done it,” he said.
Viola said while uncovering previous financial details is unlikely, the possibility of discontinuing the fee could be discussed.
Responding to Marchesiello’s repeated request for an accurate accounting of the waterfront differential fee and canal dredging money, Perrone replied, “We do not have it segregated as you would like.”
Viola, who said the so-called $90 dredging charge is also used to purchase buoys, lights and signs for canals, added that breaking out dredging as a separate fund is possible.
Unlike in recent years, dredge work plans have been established and are ongoing, Viola said.
“We can’t just go in there and arbitrarily dredge … the whole place,” he said. “There has to be a plan [and] there has to be the Army Corps of Engineers involved.”
suggested Viola establish a workgroup to examine the differential fee allocations.
“To be absolutely honest, it’s inexcusable that we haven’t done dredging, which is legacy of the past,” he said. “It’s inexcusable that funds are comingled but that’s an accounting issue of the past.”
Daly said during his first meeting after being elected to the board it was explained that more than 90 percent of bulkheads in Ocean Pines are privately owned, with the percentage of maintenance costs split 60/40 between waterfront and non-waterfront lot owners.
“I’m not saying what we do is wrong but … when you ask about the split and … the allocation and how it’s done, there’s this mystery [and] nobody knows,” he said. “That work group should reset something for all of our 8,452 lot owners that says, ‘this is the split, how we pay for it and why we pay for it.”
Coming up in the budget process is a final hearing on Feb. 18 at 9 a.m. in the Ocean Pines community center, where the board will hear final comments, consider any motions to amend the plan and vote to adopt the final budget
To review the recommended fiscal 2020/2021 visit www.oceanpines.org/wp-content/uploads/2020/01/20200124153101435.pdf.