(April 14, 2016) No formal action was taken, but the Ocean Pines Association Board of Directors on Monday did seem to come away with a better understanding of the reserve study produced by Design Management Association Inc.
The original proposal for the study was dated July 23, 2015, with a price tag of $25,800 and was approved by the board on July 30.
A first draft was released to the directors in late January, but during recent meetings, several directors questioned the logic of the study, which suggested the association’s reserves were grossly underfunded.
General Manager Bob Thompson said Virginia-based DMA arrived at its findings using existing data and visits to several Ocean Pines facilities. He also said the document was largely a “snapshot” of current assets set against a 30-year replacement and repair schedule.
Doug Greene, a senior partner with DMA who led the discussion, said the study was more of an “active tool” than a classical reserve study, and that it used an XML spreadsheet, which was easy to update and adjust.
Concerning reserves for bulkhead repair and replacement, Greene said Ocean Pines only has about nine percent of the estimated $11.3 million it would need over a 30-year period.
“The goal is to be better funded,” he said, adding that most communities were in the 30-100 percent range. He said 50-75 percent was “a good place to be.”
By increasing Ocean Pines’ annual contribution to the bulkhead set aside by 1.5 percent, the community would be able to comfortably fund bulkhead replacement, Greene said.
“This is the best account you’ve got,” he said, with a laugh. “This was the easiest one to solve.”
Looking at roads, Greene said OPA has roughly 5.5 percent of the nearly $4.6 million it would need to meet its road replacement schedule. Ocean Pines had almost exclusively used it $250,000 share of casino revenue distributions to communities to pay for road replacement.
“My concern about this is … you need a lot more down the road, it you’re not going to have it,” he said. “That’s the value of this study.”
He recommended an annual contribution of about $250,000, above casino revenues to make up the difference.
Golf course drainage projects were estimated to cost $3 million, but were only 12.75 percent funded, according to Greene. He recommended a step increase in funding, from about $213,000 annually, to $420,000. That level, he said, could be decreased in time.
“The reality is, this has been something that was deferred. It needs to be done. To do it, you need money now,” he said. “Once you do that, you can probably then reduce the funding.”
Greene said Ocean Pines has about $3 million in overall replacement reserves, but needed roughly $15 million in order to fully fund future projects, a level of 20.31 percent.
Director Dave Stevens argued that several of the numbers in the study needed to be corrected in order to paint a better picture. For example, he said the association actually had more than $4 million in replacement reserves.
Possible state funding for bridge replacement could also be a factor, he said.
Still, Greene said Ocean Pines had serious work to do in addressing its reserve deficits.
“You’ve got to decide what your priorities are and how you want your community to age and live,” Greene said. “You haven’t had this tool before. In the absence of this tool, you just do it from year to year.”
Because the fiscal year 2017 budget was just passed, he said Ocean Pines essentially had a year to rethink its funding levels.
Thompson agreed, saying the association needed to “start thinking [about] long-range planning so we can start to identify when we actually believe we’re either going to replace or repair an item.
“The country club is a great example, because that’s kind of a hot topic,” Thompson said. “We need to decide what our … funding policy needs to be. Should we be at 30 percent, which is minimum? Should we be at 50 percent? Should we be at 70? Whatever the board decides is a policy, then we [can] develop a strategy … to get us there.”
At the conclusion of the meeting, former Director Jeff Knepper, speaking as a member of the audience, said the Pines needed to pick a funding level, and get to work selling it to the public.
“The key missing ingredient is the funding percentage. Once you set that, then mathematically, the balance falls out,” he said. “How you get that can have some political implications … and there may be really hard work in there. That’s what you all, in my opinion, need to work on.”
“Even if the new [replacement reserves] total is $10 million, we’re still $7 [million] short,” Knepper added. “What are we going to do about that, and how are we going to do it, and how do we get the membership on board with the strategy, so they see the value? Because, if they don’t see the value, you’re going to get a finger back in your assessment envelope – and not money.”
The original proposal for the study was dated July 23, 2015, with a price tag of $25,800 and was approved by the board on July 30.
A first draft was released to the directors in late January, but during recent meetings, several directors questioned the logic of the study, which suggested the association’s reserves were grossly underfunded.
General Manager Bob Thompson said Virginia-based DMA arrived at its findings using existing data and visits to several Ocean Pines facilities. He also said the document was largely a “snapshot” of current assets set against a 30-year replacement and repair schedule.
Doug Greene, a senior partner with DMA who led the discussion, said the study was more of an “active tool” than a classical reserve study, and that it used an XML spreadsheet, which was easy to update and adjust.
Concerning reserves for bulkhead repair and replacement, Greene said Ocean Pines only has about nine percent of the estimated $11.3 million it would need over a 30-year period.
“The goal is to be better funded,” he said, adding that most communities were in the 30-100 percent range. He said 50-75 percent was “a good place to be.”
By increasing Ocean Pines’ annual contribution to the bulkhead set aside by 1.5 percent, the community would be able to comfortably fund bulkhead replacement, Greene said.
“This is the best account you’ve got,” he said, with a laugh. “This was the easiest one to solve.”
Looking at roads, Greene said OPA has roughly 5.5 percent of the nearly $4.6 million it would need to meet its road replacement schedule. Ocean Pines had almost exclusively used it $250,000 share of casino revenue distributions to communities to pay for road replacement.
“My concern about this is … you need a lot more down the road, it you’re not going to have it,” he said. “That’s the value of this study.”
He recommended an annual contribution of about $250,000, above casino revenues to make up the difference.
Golf course drainage projects were estimated to cost $3 million, but were only 12.75 percent funded, according to Greene. He recommended a step increase in funding, from about $213,000 annually, to $420,000. That level, he said, could be decreased in time.
“The reality is, this has been something that was deferred. It needs to be done. To do it, you need money now,” he said. “Once you do that, you can probably then reduce the funding.”
Greene said Ocean Pines has about $3 million in overall replacement reserves, but needed roughly $15 million in order to fully fund future projects, a level of 20.31 percent.
Director Dave Stevens argued that several of the numbers in the study needed to be corrected in order to paint a better picture. For example, he said the association actually had more than $4 million in replacement reserves.
Possible state funding for bridge replacement could also be a factor, he said.
Still, Greene said Ocean Pines had serious work to do in addressing its reserve deficits.
“You’ve got to decide what your priorities are and how you want your community to age and live,” Greene said. “You haven’t had this tool before. In the absence of this tool, you just do it from year to year.”
Because the fiscal year 2017 budget was just passed, he said Ocean Pines essentially had a year to rethink its funding levels.
Thompson agreed, saying the association needed to “start thinking [about] long-range planning so we can start to identify when we actually believe we’re either going to replace or repair an item.
“The country club is a great example, because that’s kind of a hot topic,” Thompson said. “We need to decide what our … funding policy needs to be. Should we be at 30 percent, which is minimum? Should we be at 50 percent? Should we be at 70? Whatever the board decides is a policy, then we [can] develop a strategy … to get us there.”
At the conclusion of the meeting, former Director Jeff Knepper, speaking as a member of the audience, said the Pines needed to pick a funding level, and get to work selling it to the public.
“The key missing ingredient is the funding percentage. Once you set that, then mathematically, the balance falls out,” he said. “How you get that can have some political implications … and there may be really hard work in there. That’s what you all, in my opinion, need to work on.”
“Even if the new [replacement reserves] total is $10 million, we’re still $7 [million] short,” Knepper added. “What are we going to do about that, and how are we going to do it, and how do we get the membership on board with the strategy, so they see the value? Because, if they don’t see the value, you’re going to get a finger back in your assessment envelope – and not money.”