Vote will decide whether to restrict board spending
By Greg Ellison
(April 1, 2021) The Ocean Pines Board of Directors on Saturday began to prepare for the referendum that will ask association members later this spring whether the board’s spending authority should be limited to $1 million or less without voter approval.
The limited attendance public hearing at the Ocean Pines Community Center followed a ruling last fall by the Worcester County Circuit Court in favor of former-director Slobodan Trendic’s lawsuit against the association.
Trendic took the association to court over a previously rejected petition drive requesting the board seek membership approval for capital expenditures costing more than $1 million.
Speaking on Saturday, Trendic said all 880 Ocean Pines residents who signed the petition felt the issue carried weight.
“The petition is a very important vehicle to the membership,” he said.
The proposal would limit capital expenditure spending to $1 million without a referendum.
The current spending threshold without a referendum is 20 percent of the income derived from annual charges, or about $1.8 million based on collections during fiscal year 2020-2021.
Trendic said if approved by a majority of homeowners, the referendum question would require amending related association bylaws.
“This is simply having the membership instill oversight over how our money is being spent if it’s over a million dollars,” he said. “It doesn’t mean we don’t trust the board.”
In Trendic’s view, the issue boils down to assuring financial transparency for high-dollar projects.
“We want to know what will be spent,” he said.
Trendic resigned from the board in April 2019 after abstaining from a vote in 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.
Ocean Pines President Larry Perrone said the board already operates under a spending cap established at 20 percent of annual assessment collections, which is currently nearing $2 million.
“This referendum would lock that number into $1 million,” he said.
Perrone said the present percentage rate outlined in the bylaws was enacted in 2008.
“The percentage of assessment dollars takes into account the inflated costs as we move forward,” he said.
OPA Treasurer Doug Parks said the percentage approach takes into consideration the time and value of monetary assets.
“It allows us to make sure that as things change in the economy we can address and adjust as necessary,” he said.
OPA Attorney Jeremy Tucker said the proposal would require membership approval for any projects costing beyond the million-dollar mark.
“This is not creating a limit where there was no limit,” he said. “This is reducing and fixing the limit.”
Tucker said proposed amendment language does not include exceptions for additions, alterations of improvements costing beyond $1 million.
Pointing to current bulkhead repairs, Perrone questioned the impact of enacting the lower spending limit.
“It will be over $1 million every year, or more as we move forward, unless we don’t do it,” he said. “Those expenditures would require a referendum every year.”
Highlighting the importance of transparency, Perrone also quashed any suggestion the board could shift bulkhead spending among multiple contracts to cut bottom-line totals.
“That’s exactly what we’re trying to avoid here,” he said. “Breaking up costs just to fit it under our referendum dollar.”
Parks concurred that adopting the piecemeal approach for bulkhead repair costs would be problematic.
“We would be scrutinized,” he said.
Parks said the current percentage-based spending limit affords the association flexibility with contractors to lock in labor rates and material charges.
“There’s a benefit in allowing us to create a contract with the vendor in order to protect those costs,” he said.
Trendic said the board is responsible for oversight of all Ocean Pines assets and infrastructure.
“We have over 66 miles of roads and we have over 100,000 linear feet of bulkheads,” he said. “Clearly … very important critical infrastructure[s] to the membership.”
Trendic said association bylaws provide flexibility for board spending tied to bulkheads or road repairs.
“You can do it in phases,” he said.
Trendic said if a referendum vote for bulkhead or other recurring expenses was needed in subsequent years, the estimated cost of $30,000 could be offset significantly.
“It could be done at the same time as our annual elections,” he said. “The savings would be tremendous and the bylaws allow us to do that.”
Ocean Pines Budget and Finance Committee member John O’Connor said the proposed spending limit would not significantly restrict the board.
“Should anything come along that costs more than a million dollars, come ask us if it’s OK to do it,” he said. “So you could have the majority of the residents as opposed to four members of the board making decisions over $1 million.”
Perrone said other corrective measures exist if residents take issue with future financial commitments by the board.
“The biggest oversight … if the community thinks the board is improperly spending their money, is to vote those individuals off the board,” he said. “That is the ultimate oversight.”
The OPA is scheduled to mail homeowners referendum ballots and a position statement from Trendic and the board by April 8.
Ballots are due by May 13 and will be tallied by the Elections Committee on May 14.