OCEAN PINES – A discussion on a referendum involving board spending limits highlighted a public hearing in Ocean Pines last week.
Last Saturday, the Ocean Pines Association (OPA) Board of Directors held a public hearing on a referendum proposal to lower the board’s spending limit on capital expenditures.
Currently, the board can spend 20% of assessment income – which is about $1.8 million in fiscal year 2020-2021 – on capital expenditures without a referendum. The membership will soon vote on a bylaw change that will lower that threshold to $1 million.
In 2019, former board director Slobodan Trendic filed a lawsuit against the association after its board rejected his petition to hold a referendum that would lower the board’s spending limit. And late last year, a Worcester County Circuit Court judge ruled the petition met OPA requirements and that the association was required to put the question to a vote.
President Larry Perrone told community members last week a public hearing was the first step in the referendum process.
“A mailing has to go out that will include a brief statement from Mr. Trendic as well as from the OPA board,” he said. “We intend to have that mailing go out to the community no later than April 8. The ballots will have a return date of May 13, and the count of the ballots will be Friday, May 14. The count will be done by the Election Committee.”
In his comments last week, Trendic thanked the 800-plus community members who signed his petition, as well as those who donated money to help cover his legal expenses.
“This started two years ago, and we are finally sort of at the finish line,” he said. “Petition is a very important vehicle to the membership and that’s why I felt it was necessary to preserve our rights as members to voice our interest and to present to the board and to the membership either a proposal or action – or in my case a question – that requires, if approved, changing the bylaws.”
Resident Grant Helvey told the board last Saturday he supported the bylaw change. He noted examples of prior boards spending hundreds of thousands of dollars on projects, one of which that never came to fruition.
“It does appear we should let the community decide on such issues that exceed $1 million,” he said. “I’m going to vote yes on the referendum question, knowing that a yes vote could lead to restricting the board’s spending limit to $1 million without community approval.”
Jeremy Tucker, the association’s general counsel, stressed that the board currently has a spending limit of 20% on capital expenditures without a referendum. He said it would be up to the membership to decide if that limit should be reduced to a fixed $1 million.
“The language of the amendment does not create carve-outs for additions, alterations or improvements costing more than $1 million needing approval,” he added. “It’s any expenditure requires approval, a single project over $1 million requires approval.”
Board members, however, said the proposed bylaw change would have unintended consequences, most notably for the association’s bulkhead replacement program. Perrone noted annual bulkhead work could exceed $1 million in the coming years.
“Those expenditures would require a referendum every year,” he said.
Trendic and several community members suggested the association put together a five-year replacement plan with cost estimates and bring it before community members in a referendum. Officials, however, argued varying material and labor costs made it impossible.
Association members also noted the bylaws allowed the association to divide bulkhead work into phases, with work not exceeding $1 million.
“That’s exactly what we’re trying to avoid here, breaking up costs just to fit it under a referendum dollar,” Perrone replied. “You want to talk about transparency, that is a lack of transparency.”
Resident Jay Perskie said he had concerns about a bylaw change that would restrict board spending on capital expenditures to $1 million. He said maintaining a percentage threshold, even one that is less than 20%, would allow the association to take inflation into account.
“Sadly $1 million isn’t what it used to be …,” he said. “We may want to consider a more thoughtful way of setting it rather than just freezing it and not taking anything into consideration for inflation or for deflation.”
When asked why he proposed a referendum question that set a spending limit of $1 million, Trendic said he did so at the suggestion of community members. He said he supported that limit after looking at the association’s assets and future capital projects.
“It has nothing to do with handcuffing the board, current or future boards,” he said. “It has to do with giving the membership an opportunity to have a voice in any capital expenditure that exceeds $1 million.”
Resident Paula Marple agreed, adding the proposed bylaw change would give community members a say in how money is spent.
“There have been boards we have not been able to trust because they turned out to be not trustworthy,” she said. “So it is not that we do not trust this board. The problem is we have been burned and have not been able to trust former boards.”
Board members, however, said community members have an opportunity to voice their opinions and concerns throughout the budget process and during public hearings and town hall meetings.
“The referendum is not an efficient way to have a voice in my view,” Director Colette Horn said. “The engagement of the membership in coming to our monthly board meetings and receiving very detailed financial reports put out by our treasurer with very detailed project updates and operations updates from our general manager provides a great deal of transparency of where exactly your assessment dollars go.”
Director Camilla Rogers added holding a referendum costs the association roughly $30,000 in postage, printing and legal review.
“There’s a lot to be considered here,” she said. “When you get your ballot, I hope you’ll think about it.”