(Dec. 26, 2019) After Ocean Pines Association members started the year with a proposed increase to annual assessment charges from soon-to-be-departed General Manager John Bailey, the subsequent leadership upheaval handed the reins to current General Manager John Viola, who employed expertise from existing personnel to produce profitable budget figures while continuing to erase prior fiscal deficits.
In January, community dissension peaked after Bailey pitched an assessment increase of $127 for the pending fiscal 2019/2020 budget.
Countering the proposal, and arguably undercutting the importance of enacting what would represent the second largest assessment escalation instituted by the OPA, Bailey reported the association had been profitable for the last five months of calendar year 2018.
To continue paying down the roughly $1 million OPA deficit, Bailey had also proposed a four-year payment schedule, earmarking $100,000 in 2020, $250,000 in 2021 and $325,000 in both 2022 and 2023.
During a budget presentation in January, Bailey referenced a compensation study that highlighted nearly three-dozen positions requiring wage adjustments totaling $128,000. Including both 2 percent merit increases and about a 10 percent rise in medical costs, Bailey forecast payroll costs to increase 8.4 percent to more than $7.6 million.
Other significant figures in the draft budget included tapping more than $3.4 million from reserve funds, including approximately $1.6 million to finance the golf course club house renovations and roughly $800,000 to renovate the police/administration building.
Bailey reported bulkhead reserves would begin the start of the upcoming fiscal year on May 1 at $1,598,000, while estimating a fiscal 2019/2020 contribution at $22,500 and planned spending of $1.6 million would essentially empty the fund with just over $1,400 remaining to close the budget year.
The questionable budgeting led to Bailey’s departure and the installation of Treasurer John Viola as the association’s top executive.
Operating under Viola’s oversight, numerous department heads strived to scrub expenses in preparation for approval of the fiscal 2019/2020 budget that began May 1.
Instrumental in the emergency changeover was Colby Phillips, shortly to be promoted to operations director, and Finance Director Steve Phillips.
Colby Phillips, working in tandem with Public Works Director Eddie Wells, quickly managed to significantly reduce the $620,000 Bailey had budgeted for drainage pipe repairs.
For example, after Wells directed crews to dig up the road near Mumford’s Landing, it was discovered a proposed pipe replacement, which had been addressed seven years earlier, could be repaired instead for a savings of more than $240,000.

While several other large pipe replacements were found to be warranted, Phillips said public works would focus attention on the most problematic flooding areas, while also investigating less costly alternatives to the bulkhead replacement plan proposed by Bailey.
Simultaneously, Steve Phillips took the leadership role on implementing the new Northstar software system, starting with developing a timeline in conjunction with an outside consultant, while also tracking a nearly completed forensic audit conducted by Baltimore firm Gross Mendelsohn.
The board approved the fiscal 2019/2020 budget on Feb. 23, which totaled $12.8 million and set assessment fees at $986 per homeowner, significantly lower than the $1,078 figure suggested by Bailey in January.
The week before, the board hashed out numerous cost-trimming measures, including reducing expenditures for marketing and human resources among other department cuts, along with restructuring health care coverage rates to assign 20 percent of costs to employees.
Looking to reverse the scales after suffering significant financial losses in 2017 and 2018, Viola’s initial move as general manager was to form multiple workgroups that paired elected officials with staff and association members to examine dredging and drainage, building construction, a new compensation study and contracts for food and beverage.
Following budget approval, in early March the board voted for a compensation study to determine of pay and benefits were on par with surrounding communities.
By June, the final figures for fiscal 2018/2019 were released and showed the association closing more than $130,000 ahead of budget.
This represented a marked improvement over the prior fiscal year where OPA operating funds ended more than $1.2 million below budget.
Viola reported revenues were $535,000 more than had been budgeted, with expenses doing some $392,000 better than anticipated.
By June, results of a forensic audit of the

Ocean Pines Association General Manager John Viola shared a brighter fiscal outlook during a financial report presented during the homeowners Annual Meeting in August.

and Public Works departments, ordered the year before, were released.
The report from accounting firm Gross Mendelsohn found that the losses of more than $700,000 in food and beverage operation and the public works department in fiscal 2017/2018, were due mostly to bad management.
In August, residents were presented further evidence of the association’s financial turnaround during the annual homeowners’ meeting, when Viola shared a financial forecast far brighter than in recent years.
“We were favorable this year $116,000 to the budget, [which] is a big difference from the last two years where I stood up here and had to inform you of losses of around $350,000 and $1.4 million,” he said. “We’re definitely moving in the right direction.”
Fiscal 2018/2019 assessment revenue was roughly $5.8 million and overall expenses for operating departments was approximately $6.25 million versus budget estimates of $6.27 million, reflecting a savings of about $27,000.
Viola said positive financial trends were also tracked among the array of amenities provided in Ocean Pines.
During fiscal 2018/2019, the net from amenities, which was budgeted at $474,000, totaled approximately $575,000, for a positive variance of just over $101,000.
“Food and Beverage [operations] this year is approximately $13,000 favorable to budget, [which] is a big difference from the prior two years,” he said.
Viola said to help reduce the previously accrued debt that weighed down the operating budget, annual assessments, were raised in 2019, with $71 of that charge dedicated to paying down operating fund deficits.
Viola said the operating fund, which had a balance of merely $6,000 in fiscal 2016, dropped to a negative tally of $369,000 the next year, before falling to a deficit of about $1.3 million by fiscal 2018.
Viola said the recent assessment increase has helped trim about $600,000 off the operating fund deficit, which ended fiscal 2019 at about $895,000.
“We went from the $1.3 million negative … to a positive $115,000 and that’s the way we will track,” he said.
In December, Viola said the current fiscal year has continued trending in the right direction, with ledgers sitting about roughly $551,000 favorable to budget.
While cautioning that the favorable figures at the mid-point in the current fiscal year will scale down slightly through next April, Viola said ending in the black is virtually assured.
“Keep in mind the next six months we do utilize cash [but] I feel comfortable saying that we definitely will be favorable to budget for the year,” he said.