Directors could negotiate with consulting group after budget hearing on Saturday

By Josh Davis, Associate Editor

(Feb. 8, 2018) Ocean Pines officials indicated during budget meetings on Tuesday that a decision could be made later this week as to whether the yacht club and beach club would be managed in-house, or by an outside consulting group.

General Manager John Bailey previously said three groups had submitted proposals to manage the yacht and beach clubs, and indications are that the focus was narrowed to just one group following a closed meeting, Jan. 27.

Current fiscal 2019 projections for the yacht club and beach club combined are close to breaking even, with the former losing $100,000 and the latter estimated to post a $100,000 gain. If an outside group were to be brought on, they would likely be held to those standards and given bonuses for any improvement on those projections.

Board members on Tuesday, during day-two of deliberations on Bailey’s recommended 2019 budget, wondered just how they could approach adjusting the financial plan for the yacht club and beach club with the decision on who would run those facilities still looming.

“We haven’t decided are we going to operate [the facilities], going forward,” Director Slobodan Trendic said. “That’s still a debate, whether we keep it in-house, outsource it, or turn it over to a third-party management company.”

Bailey said the budget was prepared assuming the association would operate both facilities in house, but that “the management fee is incorporated into this figure as the food and beverage director.”

He said the budget also assumed year-round operations, with greatly reduced hours during the winter months at the yacht club. The beach club traditionally runs only during the summer months.

Changing any of the bottom-line projections, Bailey added, could affect negotiations with a consultant group.

“Because we’re still looking at talking to firms and getting options, I think it’s difficult for us to provide too much detail because … it could affect our negotiating position,” Association President Doug Parks said.

Trendic suggested reducing the estimated losses at the yacht club to zero, in part by cutting funds budgeted for promotions ($50,000) and entertainment ($100,000).

Parks argued that cutting either would almost certainly decrease revenue, while Bailey said it was extremely unrealistic to budget breaking even at the yacht club, given its recent history.

The club posted net losses in 2015 (-$181,874), 2016 (-$76,429) and 2017 (-$230,688), and is projected to lose more than $450,000 this year.

Bailey projected a more than $300,000 loss for the next fiscal year, but that was cut to just $100,000 after the budget and finance committee recommended adjusting labor costs to be more in line with industry standards.

“If I had come in with a negative $100,000 after all these other things, ya’ll would have thought I was smoking something. And if I’d come in at zero, you’d really think I was smoking something, given our history,” he said. “Not that that’s not a goal, but I was trying to be pragmatic about it.”

Bailey said there are four options on the table: run the operations in-house, bring in a management consultant, lease the clubs, or close the yacht club.

He said closing isn’t viable, in part because of the potential for weddings and banquets.

“Closing it, alright, everybody can pick a bride’s mother to call to deal with all of that. I don’t think that’s an option,” Bailey said.

“To me, the logical piece at this point in time is a management contract,” he continued. “The question remains … can we get to terms that protect the association and get us a good business model for our business partners – it’s gotta do both.”

Bailey said the budget hearing for membership, scheduled for Saturday at 10 a.m. inside the Tern Grille, was an ideal deadline to make a decision.

“If we continue with [the budget hearing] and have a special meeting in conjunction with that, then you go into closed session and you try and work out a contractual arrangement,” he said. “If we can’t work that management-type contract out … then we have to look at those options.”

Larry Perrone, representing the budget and finance committee, suggested having representatives from the consulting group at the meeting on Saturday and prepared to discuss a contract during a closed session.

“That’s what we have planned,” Bailey said.