By Greg Ellison

Staff Writer

(Sept. 26, 2019) In preparation for January discussions of next year’s budget, the OPA Budget and Finance Committee offered guidance during a Board of Directors meeting last week.

OPA President Doug Parks said the annual operating budget is prepared by General Manager John Viola, the board and the Budget and Finance Committee.

“From a budgetary guidance perspective, it gives us that first look,” he said.

The next step in the fiscal approval process is a three-day budget committee meeting in the first week of January, when Viola presents a budget draft, Budget and Finance Committee member Dick Keiling said.

The draft would be vetted and returned for final board review before its approval in late February.

Parks said the budget committee would perform a line item review of the budget in January.

“The Budget and Finance Committee provides guidance to the board at the beginning of the budget preparation process,” he said.

Parks said the discussions inherent in the approval process helps chart a clear course.

“The board considers all of that when we do our three-day meeting,” he said. “This is the framework for what we want to do for the upcoming year.”

Keiling, who was joined by fellow budget committee members John O’Connor and Thomas Piatti, said a budgetary breakdown by department is being compiled.

“If there’s an increase in any particular line item over $5,000 [or 5 percent] it needs proper documentation to be presented at budget review time,” he said.

Keiling said performance metrics would be analyzed to chart financial forecasts, especially for revenue,

“If you have any new revenue proposals … we want to make sure there’s sound forecasting and input given into what kind of revenues are being projected,” he said.

In light of payroll accounting for nearly half of non-capital expenditures, Keiling said when the current pay rate study is completed, the committee needs to consider any associated recommendations.

“Merit increases should not be across the board,” he said. “Merit increases should reflect some kind of reasonable salary inflation component to it compared to what’s happening in the rest of the world.”

Parks said once the pay scale study data is available, the operations team would work to revise policies concerning merit raises.

“We have to consider for our discussions the idea that there are going to be some things that don’t get adjusted and some that do,” he said.

Parks also suggested overtime pay costs should be analyzed to ascertain if any staffing needs require tweaking.

“I would be interested in understanding the total amount spent on OT and the reasons,” he said. “It could be a driver for another position.”

Director Larry Perrone highlighted the unknown impacts of the new minimum wage rates approved by the General Assembly this year.

“We know there’s going to be growth in salary whether we do anything or not just because of the hourly increase that we will be facing … mainly with … part-time,” he said.

Keiling also credited Director of Finance Steve Phillips for conducting an “OPA salary walk,” by department last year, which will again be employed to reconcile payroll costs.

“If you see one department going up and one department going down, it causes you to ask a lot of questions,” he said. “It’s important to look at the overall payroll so you know what the macro picture is as far as growth in payroll.”

Turning to amenities, Keiling said the committee also recommends requiring the Matt Ortt Companies to provide enhanced fiscal forecasting with a recently executed contract extension that begins next year.

“We’re saying the margins should be highlighted and explained, [which] includes the cost of food and beverages,” he said.

Keiling also recommended the Ortt Companies provide a detailed budget plan for banquet services and that profit and loss estimates for Tern Grille reflect the pending Golf Club House expansion.

Additionally, the committee is recommending the Ortt Companies compile metrics and performance indicators to continue improving food services.

“I think it behooves the organization to look to Matt Ortt to develop and share with us the kind of things any professional food service company would be doing to improve the quality of … customer service, efficiencies and costs,” he said.

Keiling also noted Viola is working with Matt Ortt to develop an accurate profit and loss statement for the Beach and Yacht Clubs and Terns Grille.

Looking at amenities overall, Keiling said the ideal time to consider any potential fee changes is during the budget review process in January.

“We’re saying that managers for fee-based amenities should provide comprehensive details on new revenue-generating proposals,” he said.

Shifting to unintended revenues, Parks asked for clarity when the issue of pool passes and unused monetary allotments would be discussed.

Joe Groves noted the topic became a point of consternation for numerous residents this year.

“People think it’s unfair … at the end of every year everybody’s money is going to be taken that is not spent,” he said.

Board member Dr. Colette Horn said although estimating funds for pool passes became an issue this summer, with the pending introduction of NorthStar accounting software Association, members will find that a distant memory.

“Next year, with the member access within NorthStar to purchase, that should no longer be a problem,” she said.

Horn also said there is a misperception among some that money is being kept haphazardly.

“People are buying what they think they need,” she said. “If they overestimate, we are not taking from them, they are buying what they think they need.”

Groves argued association members have voiced different perspectives.

“Maybe its $5, but in their mind the association should not be taking their $5,” he said.

Parks said the topic would be delved into with solutions for this year being sought.

Expanding to larger dollar items, Keiling said budgeting for capital expenses should be prepared separately from the operating budget using a multi-year formula that incorporates prior year unexpended funds.

“The multi-year plans should be approved with the reserve amounts,” he said. “Unexpended amounts from the prior year approved budget must be approved and re-approved as part of the new budget process,” he said.

Keiling also said business plans would need to accompany any new large dollar capital expenditures.

“Replacement capital expenditures from replacement reserves should include dollars and rationale for expenditures,” he said. “Part of the justification process should include ongoing costs associated with maintenance … or the operations of the asset.”

The committee also noted the need to address long-neglected road maintenance.

“The roads plan needs to be developed and approved prior to allocating any budget increases,” he said.

In addition to recommending more research of alternative funding measures for future capital projects, Keiling said the committee believes prior year losses should continue to be a top priority.

“This year we recovered $600,000 of prior year loss,” he said.

Parks said Viola is developing timelines and schedules to complete the budget approval process by the end of February.

“I’m looking forward to the process,” he said. “I think we have a great opportunity to figure out exactly what it is we need to do for a solid budget for this next operating year.”