By Greg Ellison

(June 11, 2020) The possibility of increasing assessment fees to offset expected operational losses, was discussed by the Ocean Pines Association Board of Directors last week, as it also worked out reopening plans for the community’s aquatic facilities.

During a virtual board meeting on June 3, the directors reviewed new procedures to provide limited access to pools for members and residents only, starting with the Yacht and Beach Clubs that weekend.

General Manager John Viola said department heads and staff members from various amenities had formed teams to prepare for the state’s eventual rollbacks of covid-19 health-restrictions.

“As with all amenities, we had plans in place,” he said. “Golf was able to open within a day.”

Viola worked with Director of Amenities and Operational Logistics Colby Phillips to head a team coordinating aquatics plans, which were employed after Gov. Larry Hogan announced outdoor pools could re-launch at 25 percent normal capacity starting on May 29.

“Colby has a plan to institute reservations,” he said. “Monitoring is important.”

Viola said price increases are not included with pool reopening plans.

“There’s no playbook [and] there’s unanticipated challenges,” he said. “Golf has been successful and aquatics is taking same approach.”

OPA Treasurer Larry Perrone, however, said reopening pools exclusively to members and residents could raise conflicts with the association’s 501c4 nonprofit tax status.

“Trying to give priority to somebody is just going to create a lot of problems for us,” he said. “It should be first come, first serve.”

Perrone reminded the other directors that OPA had run afoul of IRS regulators once before over maintaining 501c4 status.

“There’s where we got in trouble before because we limited our amenities to the outside,” he said.

Perrone also advised a conflict resolution plan should be created to stem potential enforcement issues surrounding state-issued health mandates.

“I would like to think our residents are going to play by the rules and be cooperative [but] I’m not so sure about people coming from outside or renters … using the pool,” he said. “I can anticipate there are going to be problems.”

While acknowledging reopened pools at the Yacht Club and Beach Club would bolster revenue figures for associated food operations, Perrone said aquatics in general is destined for substantial operational losses this year.

“I hate to be the wet blanket … but as the chief financial officer I want to make sure everybody understands what we’re talking about dollar-wise and the impact on the assessments,” he said.

Prior to the covid-19 pandemic, budget projections for fiscal 2020/2021, which opened May 1, showed aquatics losing six figures.

“We budgeted revenue of $887,000 [and] … expenses at about $990,000 [so] we budgeted a loss for the pools of about $102,000,” he said.

Perrone said the previously anticipated loss was expected to add roughly $12 to assessment rates but cautioned that figure would grow if revenues dropped off more.

“Our expenses are not going to go down,” he said. ‘’If our income for the pools is reduced to 25 percent, which is a distinct possibility, the loss goes from $102,000 to $768,000.”

Perrone estimated if revenue were only reduced by half, the loss would be roughly $546,000.

Perrone said assessments would need to increase about $79 to compensate for a 75 percent reduction to pool revenues, while a 50 percent drop could add around $52 annually.

The aquatics numbers are only part of an overall bleak fiscal picture.

“Our operational loss this year could be in the $1.5 to $2 million area,” he said. “We certainly know it’s going to be a large sum.”

Perrone said to reconcile a $1.5 million operational deficit the following year, assessment rates would have to increase $178, while a potential $2 million loss would raise fees by $236.

Perrone said already troubling budget projections could be further exacerbated if pool facilities experience significant losses.

“These are not fantasy numbers,” he said. “They are projections, no doubt, but these are serious numbers.”

Board member Frank Daly agreed the fiscal outlook is dour.

“The losses this year will be staggering,” he said. “There is no goddam way out if it.”

In terms of pool facilities, Daly said besides initial capacity restrictions, public acceptance could also dampen returns.

“We have a fixed supply right now of pool spaces [but] we have no idea what the demand will be,” he said. “People may want to stay away from the pools because they’re afraid.”

OPA President Doug Parks, while noting the importance of Perrone airing financial data, stressed that the staggering figures about are projections subject to change.

“We made a projection of only being able to collect 25 percent of the assessments by May 1 and we exceeded that number,” he said.

Parks also said since golf operations kicked off in early May, returns have outpaced projections.

“It also presupposes that we’d want to make up that deficit in one year,” he said. “We’ve had a deficit before, and we didn’t make it up in a single year.”

Aware that the association will operate in the red this year, Parks said the focus should be minimizing potential losses.

“Rather than worry … our best approach is to manage it under those conditions,” he said.

Perrone said airing projections was not intended to stoke fears.

“If I didn’t bring these numbers to everyone, then next January or February there’s no doubt in my mind what I would be hearing is, ‘Nobody told me,’” he said. “I’m letting everyone know now this is possible [but] I hope I’m wrong.”

Viola noted the unprecedented reservation system enacted to re-open pools is a manual process with future tweaks likely.

“This weekend we’ll learn a lot,” Viola said. “If you have a team in place who wants it to succeed, I believe it will.”

Following the Yacht Club pool opening on Friday and the Beach Club on Saturday, the aquatics team will reconvene to assess maters.

“We may get feedback [and] decide to go another way,” Viola said. “We have these amenities [and] it’s my job to open them.”