By Greg Ellison

(Aug. 29, 2019) Detailed explanations of financials, budget processes and long-term fiscal goals were presented to newly elected Ocean Pines Association Board of Director members Tom Janasek, Larry Perrone and Camilla Rogers as part of an informational session  Monday at the Beach Club on 49th Street in Ocean City.

OPA General Manager John Viola told the board newcomers that monthly financial statements are broken down by department with current numbers stacked up against the prior year figures.

Viola said doing thorough monthly reports helps make compiling OPA annual financial report much easier.

“It’s pretty much exactly what was reported each month,” he said.

Director of Finance Steve Phillips said monthly financial balance sheets are posted to the OPA website after being reviewed by the chief financial officer, followed by the general manager and then the board of directors.

“The big drivers on revenue is $306,000 for the combined food and beverage,” he said. “From an expense standpoint, we’re pretty much right on budget.”

By listing department specific numbers, Phillips said substantial increases or decreases are easily isolated.

“We break down each department [with] any variances of $10,000 or more [to see] what the driving factor was,” he said.

In addition to largely sunny forecasts bolstering attendance at pools operated by the OPA and at the Beach Club, Phillips said parking revenues, while slightly down this summer, were up overall.

“The marina has been doing extremely well, once again this summer, and setting record levels,” he said.

The monthly financial reports provide performance data for the past 30 days and year to date, while also offering a comparison to the prior year .

Phillips said the top three revenue-earning departments or amenities are the Yacht Club, Recreation and Parks and Public Works.

“Overall, just about everybody is favorable, some more so than others,” he said.

Viola said a proactive approach has been adopted to forecast future impacts on balance sheets.

“We don’t just give you what we spent today in detail, but also what’s forecast,” he said. “The reserve study … projects what spending will be spent on.”

While the OPA budget currently sets aside just over 15 percent in reserve funds, Viola said the goal is to increase that number.

“We’d like to see the reserves stay somewhere between 22-28 percent,” he said.

Viola estimated that mark could be reached within 4-6 years.

Perrone, who serves as Budget and Finance Committee Chairman, said new capital projects added to the budget this year have had costs divided evenly among homeowner assessments.

In light of four current capital projects, totaling around $4.3 million, Perrone said membership may incorrectly conclude the OPA is operating at a substantial profit.

“You’ll hear from certain individuals that we have all this money,” he said. “Well, yeah, we had all this money at the beginning of the year.”

After making project-related expenditures, Perrone said by the end of the fiscal year the tally for reserve funds was roughly $2.9 million.

“From a placement standpoint, our obligation is to make sure that going forward, if we have to build something, [or] if we’re replacing a building like the Country Club, if we do our job appropriately, the money should be in the bank,” he said.

Unlike previous campaigns to revamp the Yacht Club that involved a special assessment, Perrone said with boosted reserves the process to finance new capital initiatives would likely be smoother with boosted reserves.

“Whatever we do for new capital, anything that we don’t’ own … or spend money on, goes directly to the annual assessments,” he said.

The total related spending for capital projects can be divided among the membership base and added to assessment charges, Perrone said.

“The problem we’ve had historically is past boards wanted to limit increasing assessments,” he said. “I’m not saying that’s a bad thing, but the first thing that the board looks to cut from the budget process is the capital spend because that has the first impact on the assessment.”

The result is that improvements are delayed or abandoned, Perrone said.

Looking ahead and hoping to avoid previous pitfalls, Perrone suggested creating a new reserve funding stream to finance capital improvements of limited dollar amounts.

“What I’m proposing we’re going to do is establish … a new capital reserve fund,” he said.

Perrone said the plan would set aside 10 percent of incoming depreciation for the additional reserve fund.

“For this year, after we make a spend of $4.2 million, we’ll be down to 15.6 percent, which is below what we want but we knew that going in because we’re spending a lot of money this year,” he said.

By enacting his proposal, Perrone said earmarking the 10 percent figure would drop the percentage of reserve funds a touch next year before beginning to trend upward.

“Getting us back to 22.6 percent would take us to fiscal year 2022/2023,” he said. “In my mind, we knew it would take us two years to get there.”

Foreseeing critics characterizing the proposal as a “slush fund,” Perrone said controls would be included to limit the fund from growing over $1 million with a maximum expenditure of $500,000 annually.

“I had [Director of Finance] Steve [Phillips] run the numbers for the last six years on what we actually spend on new capital ,” he said. “That number is under $200,000 per year but does not include projects cut to avoid raising assessments.”

In closing, OPA President Doug Parks reviewed expectations about meeting preparations with the trio of new board members.

“One of the things I’ve done in the past is share information prior to a meeting,” he said.

Parks said in many instances rudimentary questions can be addressed prior to delving deeper into issues included on meeting agendas.

“I try to engage as much as possible. That way we spend meeting time on more interesting points, not the minutiae,” he said. “If we can turn a four-hour meeting into a two-and-a-half-hour meeting that’s a good thing.”