Challenges ahead for FY 21-22 budget

(Dec. 22, 2020) Ocean Pines could finish the fiscal year roughly $650,000 positive to budget, but there are plenty of challenges – and options – for the next fiscal period.  

During his monthly report on Saturday, General Manager John Viola broke down the current and projected numbers, as well as what’s been done so far in the process to craft the budget for fiscal year 2021-2022.  

First, he said the Association projects to finish the current fiscal period ahead of budget by around $650,000. He said federal Paycheck Protection Program grants of $1.15 million and $275,000, as well as $125,000 from the federal Affordable Care Act, helped offset $900,000 in loses. 

Those loses, he said, were largely because of lost revenue caused by the COVID-19 pandemic.  

"It wasn't easy, without a playbook, to go through this," he said.  

Breaking down the department forecast for fiscal 2020-2021, Viola said Administration ($1.037 million), Public Works ($81,000), Marinas ($63,000) and other ($85,000) projected to finish favorable to budget, while Aquatics (-$270,000), Beach Parking (-$202,000) and General Maintenance (-$144,000) all projected to finish below budget estimates. 

The large favorability in Administration was because of the Paycheck Protection Program, Viola said, while the losses in General Maintenance were because of money reallocated for a major drainage project. 

"We have a top priority in drainage, especially the Bainbridge project that's been approved by the Board," he said. "It's the number-one initiative and we all support it.” 

Viola said the fiscal 2021-2022 budget was prepared using a "bottom-up" approach, with each department having considerable input.  

He said the Association sent preliminary proposed budget binders to Budget and Finance Committee and Board members on Dec. 18 this year. That’s one day earlier than last year, which was the earliest date that Ocean Pines had sent out budget binders for review.  

The committee will next review the budget draft during a series of public meetings, starting in January. Following that, the Board of Directors will review the document, also during public meetings.  

"Everything will be spelled out – everything is spelled out," Viola said. "But there are challenges. There's variables this year [because of the pandemic]." 

Viola said key items addressed in the preliminary proposed budget include drainage, depreciation, bulkheads, fire and EMS funding, Aquatics and Beach Parking loses incurred during the current fiscal year, and salaries, medical benefits and liability insurance for Ocean Pines workers. 

Drainage funding was a challenge, Viola said. Because of a healthy drainage reserve a year ago, the Association did not budget any additional money for drainage. However, as Ocean Pines spent that reserve, any funds budgeted during the next period would affect assessments.  

"We had a drainage reserve, we had money put away, and we had that money budgeted [for spending projects]. It was around $500,000-$600,000," Viola said. 

This year, he said Ocean Pines received $549,000 in grant funding for the Bainbridge Pond project and added $300,000 in reserve funding to that total. On top of that, there were plenty of other drainage projects to fund.  

"This current year, I needed to still fund the [drainage] pipes that we said we're going to do, separate from Bainbridge, and that's where you saw that reallocation of several hundred thousand dollars," Viola said. "Now, when we look at [fiscal year] 21-22, I don't have any money in drainage, and drainage is one of our top priorities." 

He said the preliminary proposed budget had about $350,000 to $380,000 in new drainage funding. 

"That alone would be an increase to last year's budget [assessment] of $44," Viola said. "I'm just trying to show you all the challenges, all the items and the initiatives we have this year that wasn't there last year."  

Medical benefit costs were also estimated to rise 30% this year, which could add another $30 assessment increase. Rising salaries could add $13 and liability insurance could add $7, Viola said.  

"You just look at salaries, medical benefits [and] liability insurance – that's $50 that was not in last year's budget," he said, adding that mandatory minimum wage increases contributed to rising salary costs.  

Viola said the $650,000 projected favorability from the current year could help offset some of those increases.  

"We certainly can address this, and this Board can get at where they decide to be," Viola said. "And [Director of Finance and Operational Logistics] Steve [Phillips] and myself and my department heads ... will break it all out, as we all make this decision on what this assessment is going to be this year – whether it is no assessment increase, or there is an assessment increase." 

He added a "COVID adjustment" to cover losses in Aquatics, Beach Parking, the Yacht Club, Golf, Beach Club, and Recreation and Parks was not part of the preliminary proposed budget. That could have added another $77 to assessments.  

"I didn't include it, but it's certainly a challenge – it's certainly something that needs to be discussed over the next seven or eight weeks," Viola said.  

"As compared to other years, there's a lot of challenges" to the budget process this year, Viola continued. "We have to look at the variables. We have to have a feeling [as to] what kind of stomach we have for this assessment. 

"I'll do my part to [and] my team will do their part. Steve [Phillips] certainly is doing his part ... to break everything out for everybody [and] to vet everything," Viola said.