OCEAN PINES – Discussions on favorability and amenity revenue highlighted a public hearing on the fiscal year 2023-2024 budget.
Last week, the Ocean Pines Association held its annual budget hearing on the coming year’s proposed spending plan. General Manager John Viola said the revised budget for fiscal year 2023-2024 now calls for a $4 assessment reduction.
“The recommended assessment at this point in time for the 2023-2024 budget is $892,” he said. “That is a decrease of $4 from the 2022-2023 approved budget we are in now. And that is a $104 reduction from the year before that.”
Officials explained general operations contributed $676 to the assessment, while amenity revenues reduced the assessment by $147. Safety operations added another $289.
“So 33% of your assessment goes to fire, EMS and police,” Viola said.
In total, the proposed spending plan reflects total revenues and operating expenses of $14.59 million, bulkhead replacement expenses of $1.15 million, and capital expenditures of $1.02 million. The budget, Viola said, also accounts for inflation, statutory wage increases, labor challenges and higher insurance premiums.
“In preparing this budget, and even the year we’re in now, we definitely have headwinds,” he said. “There’s no question about it.”
Viola noted, however, that the association estimates a $1 million surplus at the end of the current fiscal year. That money, combined with previous surplus funds, will allow Ocean Pines to lower assessments, replenish the drainage reserve account and fund the kayak launch addition.
“In 2019, going into 2020, we had a deficit of $1.6 million, and now at the end of this year we’ve projected favorability of $1.6 million …,” he said.
Director Stuart Lakernick questioned why the association would not contribute more of its surplus funds to lower the assessment.
“I see we have a projected $1 million plus in our surplus this year,” he said. “Going forward, we’re still going to have a surplus based on our assessments. I don’t understand why we only have a $4 proposed reduction in our assessment.”
Viola explained the estimated $1 million surplus was just that, an estimate, and that those funds had not yet been realized.
“Since day one, I have reported to the board that we should really not touch that,” he said. “Let us close out the books for the year, realize it, and then address it … That’s not realized yet.”
Viola said the board could instruct him to use unrealized funds to lower the assessment. However, he did not recommend it.
“That’s a board call right now,” he said. “If you want to lower the assessment and use that number, you’ve not tasked us to do it.”
Director Colette Horn said she did not support using surplus funds until they were realized.
“I would not be in favor of touching those unrealized funds,” she said. “They will be available for us to touch and use for future capital spend, raising reserves … I refuse to go against the advice of our financial experts who have gotten us from a $1.6 million deficit to a $1.6 million surplus in four years.”
Director Steve Jacobs agreed.
“We’re talking about anticipated favorability, which is money we don’t have yet …,” he said. “To me, it would be unwise to spend money we don’t have when we know we have all of these continued headwinds facing us.”
Association President Doug Parks noted the preliminary budget that was presented in December proposed a $21 assessment reduction.
“If we go back to the original $21 assessment reduction, are we running a risk …?” he said. “I feel comfortable now and don’t feel a need to change the assessment. But I feel it’s prudent for us to discuss why we wouldn’t.”
Viola reiterated that he was not directed to focus on lowering the assessment.
“When we started this process, no one came to me and said we want the assessment lowered,” he said. “I can do that, just tell me to do that. But I’m being told we want our reserves higher, we want to improve our infrastructure. I’m covering that, as well as the headwinds I mentioned.
Director Frank Daly said he had no objections to the proposed budget.
“Last year we faced the largest inflation in a generation,” he said. “We had a $16 million budget. If you take the rate of inflation … that budget could have legitimately gone up by $1.3 million, or $153 per homeowner. That’s what good management brings.”
He noted, however, that something should be done to increase amenity revenue within the aquatics department.
“Given that our governing documents say our amenities should break even or better, what can we do on the revenue side?” he said. “Because I don’t see much on the cost side that we can do.”
Resident Rebecca Ferguson also advocated for improvements at the racquet center. She suggested not only increasing usage fees, but enhancing amenities and hiring a racquet center director.
“There is potential for growth at the racquet center if it is exceptionally managed,” she said. “More revenue collected at our amenities means more assessment reductions.”
Officials last week also reviewed capital projects and the general replacement reserve fund. The association’s fiscal year begins on May 1 of each year and ends on April 30 of the next calendar year.
