By Greg Ellison
(May 21, 2020) Following the OPA Board of Directors’ unanimous vote last Tuesday to keep $1.143 million in Payroll Protection Program funding, OPA Treasurer Larry Perrone spoke two days later about the fiscal challenges faced during the covid-19 pandemic.
Perrone said the OPA, which was notified PPP funds were deposited through the Small Business Administration on April 21, has until June 21 to spend the money.
“That money will cover salaries for full-time employees, plus the additional 25 percent we’re able to use it for,” he said. “The money that we received enables us to keep all of our full-time employees employed.”
Of the vote last Thursday to keep the money, Perrone said, “The meeting the other night was to go back over all the information that has developed since that time and to decide if we were going to keep the money,” he said. “We didn’t have to take a vote, but we all agreed yes we need the money.”
Perrone said the OPA also confirmed comparable entities in the region were also applying for PPP funding.
“There are other homeowner associations and condo associations that have received PPP money,” he said. “We’re not here on our own.”
Perrone said the rationale for seeking the PPP money, which is forgivable if used for mandated expenses, primarily salaries, was to retain staff.
“The PPP loan/grant has allowed us to move forward for the two-month period and not have to lay anybody off,” he said. “What happens after June 21 we have to wait and see.”
Looking ahead, the financial picture appears bleak, he said, with significant losses anticipated in dining operations plus the OPA Golf Course and recently completed Clubhouse building.
“There were … many banquets and weddings that were all cancelled during April, May and June because you can’t have those things,” he said. “On top of that, we’ve lost at least $400,000 in golf packages.”
Besides still awaiting roughly $4 million of more than $9 million in annual assessments, with the May 1 deadline extended 90 days because of the current health emergency, other fiscal uncertainties exist.
“Assessments … is only 60 percent of the budget,” he said. “The other 40 percent comes from revenue and grants that we get from the county and various places.”
At this time, the board doesn’t know if the OPA will receive its entire annual operational grant from Worcester County.
“We know that our grants are already impacted and we’re not going to get all of it,” he said. “It may be locked into a budget but that doesn’t mean you’re going to get the money.”
Reduced funding for road repairs covered by casino revenues is also anticipated.
“We’re fully expecting that number to be reduced too because they’re not doing any business over there,” he said. “That doesn’t effect employee salaries but that’s just another example of how this whole thing is effecting revenue.”
Perrone also noted that using funds in replacement and capital reserve accounts is not feasible.
“We don’t have an operational reserve account,” he said. “We have a replacement reserve account that is not designated for operations.”
Under the OPA bylaws, the board is permitted to assign reserve account funds to offset operational deficits with a super majority vote.
Perrone estimated the replacement reserve account would end fiscal 2019/2020, which closed on April 30, at about $3.2 million.
“During the Brett Hill era, the thing that got us in trouble is they produced a budget that was extremely optimistic and the results never happened,” he said.
The outcome was artificially low assessment rates based on unrealistic revenue projections.
“When that didn’t happen, the next year now we had a huge deficit and we’ve got to make it up with the assessments.”
Perrone said about $650,000 remains of the roughly $1.6 million deficit incurred under the leadership of Brett Hill.
The current challenge continues to be remaining abreast of the fluid fiscal situation.
“We don’t know what our deficit is going to be this coming year and even with the PPP money, we are still going to have a deficit,” he said.
While the precise revenue losses can’t be forecast, a negative balance is a certainty.
“I can say that with 100 percent accuracy there’s going to be a deficit because our big money earning period is June, July, August and we don’t know what’s going to happen,” he said.
With talk of a covid-19 resurgence in the fall the budgetary impacts could bleed into next year, Perrone said.
“Everyone is expecting that this thing will have a two-year impact,” he said. “You have to wonder if people who normally come down to Ocean City and Ocean Pines for the summer are going to say, ‘wait a second, I don’t want to be involved in those crowds.”