Forecasting in time of covid makes setting next budget much greater challenge

By Greg Ellison

(Jan. 7, 2021) With questions outnumbering answers regarding the continued financial impacts from coronavirus, the 2021 outlook for the Ocean Pines Association Board remains guarded.

President Larry Perrone said the pending fiscal 2021-22 budget would come into sharper focus this week during a multi-day department presentation to the Budget and Finance Committee.

“Our biggest concern is continuing to manage the association through this covid period,” he said. “We’re trying to make assumptions and educated guesses and hoping we’re going to be correct.”

Perrone said thoughts vary regarding the possibility that health safety restrictions will remain in place next summer.

“Some people have the opinion that in March and April the vaccine will be rolled out enough that people will be fine,” he said. “Others, and I’m one of them, believe it’s going to take until the fall.”

Perrone said the initial proposed fiscal 21-22 budget included assessment increases of $121 for non-waterfront lots and $221 for residences on the water, but those figures do not account for possible declines in revenue because of coronavirus.

“If the covid situation remains the same, we’re looking at another $77,” he said. “There are a lot of unanswered questions going into the new budget year that starts on May 1.”

While likely ending with a budget surplus to close the current fiscal year, Perrone highlighted the importance of roughly $1.143 million in federal Payroll Protection Program funding the association received in 2020.

“Without the PPP money we probably would have had about a $900,000 loss this year and probably would have been laying people off,” he said.

Perrone said the odds are not favorable for the association to reap any future covid-related funding.

“They sort of closed the doors on not-for-profits after we had gotten our money last year,” he said.

Treasurer Doug Parks said the immediate challenge to begin 2021 involves forecasting what this year’s finances will look like at the end of the fiscal year in April, and then projecting next year’s revenues and expenditures.

“We’re going to be facing, most likely, an increase in the assessment,” he said.

Parks said at this point, the current fiscal year is projected to beat the budget bottom line by more than a half-million dollars.

“We’re projecting some kind of surplus,” he said. “The question is how do we effectively manage that surplus, because we have options.”

The budget vetting process for the year ahead will have to look for potential cost efficiencies that can be gained, Parks said.

“I don’t want to get to the point where we’re cutting services just to control the potential increase to the assessment,” he said.

Another means to trim costs would be assessing the viability of completing currently proposed capital projects

“Should we do them or not,” he said. “If not, what is the impact, direct or indirect, on assessments.”

The financial picture will be discussed in depth during a multi-day departmental presentation to the Budget and Finance Committee this week, followed by continued contributions from General Manager John Viola before the board finalizes numbers.

“You’re going to get a lot of different input,” he said.

Parks said deciding how to allow for the possibility of lingering covid-19 health safety restrictions will be the challenge in setting the budget.

“How do we effectively predict, without becoming overly confident, that everything will be 100 percent?” he said.

Parks stressed the importance of forecasting revenues based on some limitations on the availability of amenities.

“We have to be careful and do the due diligence that’s associated with creating a budget that’s able to account for those potential restrictions associated with covid and control the amount of potential increase to the assessment,” he said.

Vice President Dr. Colette Horn said even with the financial havoc caused by covid-19, strong financial oversight from Viola and Director of Finance and Operational Logistics Steve Phillips allowed the association to complete several capital projects and maintain positive budget numbers.

“One of the big goals of 2021 is to continue that effort to make sure we manage with good fiscal responsibility with respect to the operating of our amenities and administration,” she said.

Horn said both the new Golf Clubhouse and Police/Administration building projects wrapped up on time and under budget during 2020.

“The opening of the clubhouse and the successes that golf operations realized,” she said.

Horn also counted the work to complete the Bainbridge drainage project in sections two and three as a major success during 2020.

“I think the other major goal for 2021 is to continue that effort with drainage throughout Ocean Pines,” she said. “There are also sections on the south side by Manklin Creek that have some serious drainage issues that need to be addressed.”

Perrone said resolving longstanding drainage issues tied to storm water runoff is a top priority this year.

“We’re budgeting more money for drainage,” he said. “From a budgetary standpoint, that’s a big item.”

Parks said before proceeding with expenditures planned for fiscal 21-22, close consideration needs to be given to the financial impacts on residents.

“We can’t assume all residents can shoulder an increase without repercussions,” he said. “At the end of the day it’s the assessment number that is near and dear to everybody in Ocean Pines.”