Daly defends board stance, recommends different limit
By Greg Ellison
(April 29, 2021) The referendum question to hold the Ocean Pines Board of Directors to a $1 million spending limit for unauthorized capital projects generated sparks during its meeting last Wednesday.
During public comments, Director Frank Daly stood up and walked to the microphone facing the board to offer several legal arguments.
Daly began by voicing unwavering support for the board’s request that association members vote against the spending limit referendum ballot mailed to property owners earlier this month.
“I’ve opposed it from day one and continue to do so,” he said.
The current board spending threshold for any single capital expenditure without a referendum is 20 percent of the income derived from annual charges, or about $1.8 million based on collections during fiscal year 2020-21.
The proposal would limit capital expenditure spending to $1 million without a referendum.
The association was required to hold the referendum after Worcester County Circuit Court ruled in favor of former Director Slobodan Trendic’s lawsuit last October over a previously rejected petition drive regarding unauthorized spending limits.
Trendic resigned from the board in April 2019 after abstaining from a vote to renovate the police and administration building, as well as construct a new golf clubhouse, which combined cost more than $3 million.
Trendic sued in November 2019 after the board rejected a membership petition to amend OPA bylaws to include the $1 million cap for unauthorized spending.
Regardless of maintaining his position, Daly was concerned by a recent communication sent to the board from former Ocean Pines Assistant Treasurer Gene Ringsdorf.
Daly said Ringsdorf pointed out a potential error and misleading statement in a board referendum position mailed to lot owners regarding bulkhead repairs.
“I do believe that Gene’s email was correct and encourage the board through counsel and our CFO to validate and correct any misleading statement,” he said.
Ringsdorf, who spoke after Daly closed his commentary, raised the issue because of a board statement that contended the limit on capital expenditures could lead to requiring a referendum to approve annual bulkhead repairs.
Ringsdorf, after first confirming each board member received his letter, said the board has failed to offer any response.
“Bulkhead expenditures are not capitalized,” he said. “Based on that, do you all concur the referendum is only speaking of capitalized expenses.”
Association President Larry Perrone said legal counsel has advised the board not to comment further on the referendum question.
During his speech to the board, Daly argued that concurrent passages in OPA Bylaws section 5.13 outlining board powers would render the proposed spending cap meaningless.
Daly said after first establishing the current 20 percent of assessment fees limit, the next paragraph in 5.13 grants the board the ability to bypass that method.
Daly said the passage states, “if the board is undertaking a planned replacement, renovation or repair of existing facilities or the acquisition of new facilities or land, that will be accompanied in phases, ‘single capital expenditure’ refers to the current phase, provided the association is under no contractual obligation to undertake successive phases.”
Daly said because of those bylaws, the referendum proposal would give homeowners a false sense of security regarding their ability to limit capital expenditures.
“This section does not limit the type of projects nor the total dollar amount of projects that can be phased,” he said. “As written, it can be used for anything.”
Daly suggested a better means for homeowners to alter expenditure limits would be amending the 20 percent mark and eliminating the bypass provision.
Speaking this week, Trendic concurred with Ringsdorf while countering Daly.
“He’s misinterpreting the bylaws,” he said.
Trendic said association bylaws specify existing or new “facilities” completed in phases could have each segment deemed a single capital expenditure.
“The language is written so it applies clearly to multiple facilities,” he said. “You couldn’t do a single facility in phases to overcome … the spending authority.”
Trendic said the Ringsdorf was correct in his assessment of bulkhead expenses.
“It’s largely privately owned and not an OPA asset,” he said. “It’s a false argument because it’s not their asset.”
Referendum ballots were mailed by April 8 and are due back by May 13 to be tallied by the Elections Committee on May 14.