(Jan. 22, 2015) The confusingly named “five-year funding solution” continues to stay on the books in Ocean Pines, almost certainly entering its seventh year with the fiscal 2016 budget.
The measure showed up on General Manager Bob Thompson’s proposed budget this month and passed through the budget and finance committee last week without much fanfare.
Several members of the board of directors also came out in favor of the funding, which goes towards capital projects and deficit reduction.
“They call it the five-year funding plan because it took five years to put it completely into place,” Parliamentarian Tom Terry said. “It was basically a capital fund that was established for major capital projects like the yacht club.”
During the first year, property owners paid $26 for capital improvements and $4 for deficit reduction, according to Terry. That included the IRS debt associated with the beach parking lot in Ocean City.
The fee increased approximately $30 each year until reaching a capped limit of $146; the $4 fee did not increase during the fifth year.
“Ocean Pines put this in place over five years as opposed to raising the dues all at once for hundreds of dollars,” Terry said. “Right now $130 a year goes into the capital reserve from the five-year plan and $16 goes into the capital deficit reduction, which takes care of deficits from previous years and/or IRS debts that we may owe. The increase per year has now stopped, but the funding will go on.”
Thompson called the funding was “a mechanism that’s used to pay for major facilities and major initiatives.”
Most recently, that includes the yacht club.
“The yacht club is a great example,” Thompson said. “Our referendum materials and everything we said was by 2018 we will have that paid for, and that still holds true with the understanding we’re using that five-year funding solution to pay for that.
“What that does, is instead of having to borrow funds to pay for the yacht club, the yacht club pool, the golf greens, we’re able to borrow out of our reserve account because we have reserves built up, but then pay it back out of this annual assessment to replenish it,” Thompson continued. “We certainly don’t have enough in reserves to do some of these projects, so this is a strategy that was created, adopted and has been in place for seven years.”
There is a chance, though highly unlikely, that the board could vote to terminate the funding.
“Every year the board has to reaffirm the inclusiveness, or exclude it, from the budget,” Thompson said.
In his opinion, the funding should stay.
“The folks that put it together really had a thorough understanding of our reserve situation, of our potential needs as we move forward, the fact that our reserve funding to date is lower than it could have been,” Thompson said. “This is a great way to bridge that gap and do it in a way that was reasonable without borrowing money from outside sources at higher rates. I think this was a reasonable approach.”
Terry agreed the fee “has to” remain in place.
“This is where the money is coming from to pay for the yacht club, and it’s what we say in the documents that were sent out in the referendum that the yacht club would be paid for by these dollars,” he said. “These funds have to continue.”
Director Bill Cordwell also backed continuing the funding.
“We’ve got so many buildings that are 40-some years old and need major renovations or complete tear-downs,” he said. “This won’t cost residents any more money. It’s already built into assessment. I’m definitely in favor of keeping this until we get the next couple of things done, which is going to be years.”
Treasurer Jack Collins hinted that the board could eventually choose to explore excluding a portion of the fee, especially once the community makes up its IRS debt.
“The question is, in this year’s budget, whether or not that is completed,” he said. “That’s a good question, and that may come up in future meetings with the board as far as going through the budget is concerned.”
The measure showed up on General Manager Bob Thompson’s proposed budget this month and passed through the budget and finance committee last week without much fanfare.
Several members of the board of directors also came out in favor of the funding, which goes towards capital projects and deficit reduction.
“They call it the five-year funding plan because it took five years to put it completely into place,” Parliamentarian Tom Terry said. “It was basically a capital fund that was established for major capital projects like the yacht club.”
During the first year, property owners paid $26 for capital improvements and $4 for deficit reduction, according to Terry. That included the IRS debt associated with the beach parking lot in Ocean City.
The fee increased approximately $30 each year until reaching a capped limit of $146; the $4 fee did not increase during the fifth year.
“Ocean Pines put this in place over five years as opposed to raising the dues all at once for hundreds of dollars,” Terry said. “Right now $130 a year goes into the capital reserve from the five-year plan and $16 goes into the capital deficit reduction, which takes care of deficits from previous years and/or IRS debts that we may owe. The increase per year has now stopped, but the funding will go on.”
Thompson called the funding was “a mechanism that’s used to pay for major facilities and major initiatives.”
Most recently, that includes the yacht club.
“The yacht club is a great example,” Thompson said. “Our referendum materials and everything we said was by 2018 we will have that paid for, and that still holds true with the understanding we’re using that five-year funding solution to pay for that.
“What that does, is instead of having to borrow funds to pay for the yacht club, the yacht club pool, the golf greens, we’re able to borrow out of our reserve account because we have reserves built up, but then pay it back out of this annual assessment to replenish it,” Thompson continued. “We certainly don’t have enough in reserves to do some of these projects, so this is a strategy that was created, adopted and has been in place for seven years.”
There is a chance, though highly unlikely, that the board could vote to terminate the funding.
“Every year the board has to reaffirm the inclusiveness, or exclude it, from the budget,” Thompson said.
In his opinion, the funding should stay.
“The folks that put it together really had a thorough understanding of our reserve situation, of our potential needs as we move forward, the fact that our reserve funding to date is lower than it could have been,” Thompson said. “This is a great way to bridge that gap and do it in a way that was reasonable without borrowing money from outside sources at higher rates. I think this was a reasonable approach.”
Terry agreed the fee “has to” remain in place.
“This is where the money is coming from to pay for the yacht club, and it’s what we say in the documents that were sent out in the referendum that the yacht club would be paid for by these dollars,” he said. “These funds have to continue.”
Director Bill Cordwell also backed continuing the funding.
“We’ve got so many buildings that are 40-some years old and need major renovations or complete tear-downs,” he said. “This won’t cost residents any more money. It’s already built into assessment. I’m definitely in favor of keeping this until we get the next couple of things done, which is going to be years.”
Treasurer Jack Collins hinted that the board could eventually choose to explore excluding a portion of the fee, especially once the community makes up its IRS debt.
“The question is, in this year’s budget, whether or not that is completed,” he said. “That’s a good question, and that may come up in future meetings with the board as far as going through the budget is concerned.”