A New Dawn Over Oriental Harbor Marina.

Teddy Roosevelt once said, “Complaining about a problem without proposing a solution is called whining."

I promised you I’d give you solutions as well as problems so in this final segment I’m going to lay out a comprehensive and step-by-step plan that will turn our marina around. If we follow this plan, we’ll reclaim our reputation as being the best marina in the area and we’ll bring our property values back to where they should be. It won’t be easy, but then nothing worth having ever was.

Solution 1: Fix Our Structural Problems.

Under our current structure, once elected, a Director either has to either die or quit to ever leave the Board. It’s much like being on the Supreme Court. Since almost nobody wants to be a “quitter” and even fewer want to die, that means we rarely have any “new blood” with their new insight and new ideas. This causes that echo chamber effect I referred to earlier. It’s not intentional, but it's real, nevertheless.

Unlike most companies or organizations, there is no built-in mechanism that allows board members to rotate out. There’s no doubt that the lawyer who drafted our Bylaws simply overlooked setting terms for Directors which is the norm for most corporate structures. The fact is, if we are ever to solve our problems, we need to pass three amendments to our Bylaws so that we will never face this same structural problem again:

Voting of Proxies. There is an inherent problem when the President of the Board, regardless who that is, can solicit proxies from the members, and then vote those proxies. That makes our annual meeting nothing more than a show meeting. All the important decisions have already been made and the meeting just formalizes it for the record. I’m not against proxies, per se, but management voting those proxies en masse is a clear conflict of interest. I therefore propose two changes regarding proxy voting:

1. Number of Proxy Votes. No member should be able to vote more proxies than he has ordinary votes. If a member owns one slip, he has one vote and can then vote up to one proxy. If a member owns two slips, he has two votes and can then vote up to two proxies, and so on. Concentrating three-fourths of the vote into anyone’s hands, President or otherwise, is dangerous.
   

2. Board Members Voting Proxies. Board members have an inherent conflict of interest when it comes to voting proxies. It allows them to collect the needed votes to support or defeat an issue before ever bringing it to the floor. As slip owners, Board members should still be able to vote their own ordinary votes but they should not vote proxies.

I therefore propose to amend Article 2.3 of the Bylaws. Here is the current 2.3 language: “Votes may be cast in person or by written proxy. Proxies shall be valid only for the meeting designated therein and must be filed with the Secretary prior to such meeting.” I propose we change the current language by adding the following two sentences: “No member shall cast more proxy votes than ordinary votes as set forth in Article 2.2 (above). Directors shall be ineligible to vote as proxies.”

Term Limits. The Bylaws should be amended to include language that limits the terms of Directors to two years. After that they must go off the Board for at least one year before they may return as Director. This is a very common structure. With our current number of seven Directors (four officers and three at large) we could elect two new Directors each year and two would retire each year. That way there would always be five “veterans” to give the Board continuity, but it would solve the problem of the same people staying on forever.

I propose the following amendment to Article 4 of the Bylaws, to be inserted after number 4.10 as section 4.11: “Directors shall serve two-year terms. After a one year break, a director may be elected to return to a directorship.‌ Director terms shall be staggered, with two outgoing and two incoming directors each year.”

Conflict of Interest. While our current policy may “technically” meet the requirements of Article 1 § 47F-3-118 and Article 8 § 55A-8-31 of the North Carolina General Statutes, our practice simply does not pass the smell test. Nobody receiving a check should ever be authorizing that check. Or to put it simply, you can either be a Board member or you can be a contractor or employee, but you can’t be both. If you have a financial interest in any decision, you should never be guiding the decision making process.

I propose the following amendment to Article 4 of the Bylaws, to be inserted after number 4.11 as section 4.12: “Notwithstanding the Conflict of Interest statutes as found in Articles 1 § 47F-3-118 and 8 § 55A-8-31 of the North Carolina General Statutes; Directors, whether in person or through a company in which they have a financial interest, shall not: have any direct or indirect business relationship with, be an employee of, or be a contractor for the Association.”

Solution 2: Change Our Hurricane Policy.

The Directors should amend the Rules and Regulations of Oriental Harbor Village Marina Association to change the current hurricane evacuation policy.

I propose replacing the current Rule #12 of our Rules and Regulations, in its entirety, with the following new Rule #12: “No marina is a hurricane or significant storm safe facility and therefore we strongly advise each vessel owner to evacuate the Marina in the event of the National Weather Service listing Pamlico County within a Tropical Storm Warning, Hurricane Watch or Hurricane Warning. We also realize that evacuation is not always possible, therefore, should any Member choose to leave his vessel in the Marina, or allow his tenant to leave a vessel in the Marina during a hurricane or significant storm, that Member does so at his own risk, and further agrees that he will be liable for any damages to his vessel, to the tenant’s vessel, to the Marina, or to other property, caused by his or his tenant’s vessel.”

This new Rule #12 not only solves the underlying problem that is driving our high turnover rate but it still accomplishes the original purpose of Rule #12: establishing liability. It states the simple truth that no marina is safe in a hurricane without proclaiming for all the world to hear, that our marina “is not a hurricane or significant storm safe facility” contrasting us to other marinas who don’t have this policy. Then it assigns liability for any damages to the Member who chose not to evacuate. Clean, simple, and effective.

Solution 3: Fix Our Insurance Problem.

Like changing our hurricane policy, the Directors should also resolve to “self-insure” the Marina. The Board should spell out what that new self-insurance plan looks like, including its plan to cover any shortfall of the “100% replacement cost” requirement in the Bylaws.

I propose that the Board pass the following resolution:

STATE OF NORTH CAROLINA

COUNTY OF PAMLICO

RESOLUTION TO SELF-INSURE

WHEREAS, the Directors of Oriental Harbor Village Marina Association (“the Board”) has the responsibility under Article 9.1 of the Bylaws to “keep all improvements upon the Property including but not limited to the Marina Facilities (but not separate property of any Member) insured against loss of damage by fire, wind, water, hail, and other hazards or risks normally insured against in an amount equal to one hundred (100%) percent of the replacement costs thereof as determined by the Board”; and

WHEREAS, the Marina has historically carried insurance provided by a third-party insurance company; and

WHEREAS, over the years, the Marina has had two previous significant insurance claims; and

WHEREAS, insurance carriers have raised the premiums and deductible requirements on insurance coverage; and

WHEREAS the recent increases in the premiums and deductible requirements of third-party insurance coverage has made purchasing such insurance coverage cost-prohibitive.

NOW THEREFORE BE IT RESOLVED that the Marina will self-insure against property damage and shall set aside reserve funds sufficient to satisfy the requirement of Article 9.1.

APPROVED this the ____ day of __________, 2022 at Oriental, North Carolina by:.

__________________________________ __________________________________

Director Director

__________________________________ __________________________________

Director Director

__________________________________ __________________________________

Director Director

Solution 4: Lower Owner Fees.

This one is a little tricky. On the one hand, our high owner fees, relative to the other marinas in the area, are driving high turnover, and yet on the other hand, our marina does not have any other lines of revenue to pay our operating expenses and to fund our reserves. Because of our underfunded reserves, however, it would be financially irresponsible to slash owner fees at this time.

Nevertheless, we must make a real commitment to the owners that we are committed to bringing owner fees down to a level that competes with other area marinas that together average 6.65% fees-to-equity. I believe we should set our goal to be 5-6%. Grace Harbor Marina at River Dunes operates at 3.47% fees-to-equity and Sea Harbor Marina, who self-insures against property damage, operates at 6.15%.

Unfortunately, being at 13.09% fees-to-equity, we have a long way to go to get to 6%. But remember, “fees-to-equity” is driven by two things: the dollar amount of the fees and the value (or equity) of our slips. Just making the other changes will itself have a huge impact on our property values. If fees remained the same and values were to double, our fees would essentially be where we want them to be.

Because making the other changes will likely bring our fees in line, we could initially hold fees constant or possibly reduce them slightly as a good faith gesture to our owners. As we see values increase, our fees-to-equity will decrease.

I propose we reduce fees to last year’s level as a show of good faith, and commit to parity in owner fees by passing the following resolution:

STATE OF NORTH CAROLINA

COUNTY OF PAMLICO

RESOLUTION TO OWNER FEE PARITY

WHEREAS, the Directors of Oriental Harbor Village Marina Association (“the Board”) has the responsibility under the DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS OF ORIENTAL HARBOR VILLAGE MARINA, ARTICLE VII, Section 7.1(a)1 to establish and collect regular assessments from each Member; and

WHEREAS, those regular assessments (“owner fees”) are used to maintain and operate the Marina; and

WHEREAS, other area marinas have similar assessments to fund their marina operations; and

WHEREAS, the owner fees of Oriental Harbor Village Marina Association have become unusually high in terms of “fees-to-equity”; and

WHEREAS the Board has determined it is in the best interest of the Marina to seek to obtain owner fee parity.

NOW THEREFORE BE IT RESOLVED that the Board of Directors will hereby set the regular assessments to 2021 levels (rolling back the 6% increase for 2022 passed in October 2021), and will hereafter endeavor to hold fees at that level while focusing on increasing shareholder equity, effectively lowering our “fees-to-equity” until we obtain parity with the other area marinas.

APPROVED this the ____ day of __________, 2022 at Oriental, North Carolina by:.

__________________________________ __________________________________

Director Director

__________________________________ __________________________________

Director Director

__________________________________ __________________________________

Director Director

Solution 5: Change Our Image.

Our image problem is actually the easiest of our five problems to solve. Simply making all the other changes will make great strides toward a new image. Lowering our turnover will instantly improve our image. We could become that “exclusive” marina where no slips are available, much like the nightclub with a big line out front. But when everyone is “running for the exit” it’s hard to convince the public that this is the marina they want to be at.

Changing our hurricane policy, alone, will drastically improve our image in the community. No longer will our competitors be able to weaponize our policy against us. In fact, we might even take it a step further and be the only marina to offer assistance in moving vessels when storms come up. But eliminating that huge negative will go a long way toward repairing our broken image.

And there are other relatively simple things we can do that will have a huge impact on our image. We need to renew and replace our signage. Our old signs look dated and unmaintained, hardly the image of a successful marina. Our grounds should be maintained well all year round and not simply the week of the owners meeting. I believe that improvements in our landscaping will create a much better image.

Remember who our audience is: the people who live here and shape the public perception. They see our marina regularly, not just once or twice a year like many of our owners. If we only make it look great once a year to impress our owners, we’re missing a huge opportunity to change our image. Don’t believe me? Take a drive out to River Dunes or to Pecan Grove. They keep their marinas looking great all year round. It might even cost us slightly more, but it would be money well spent.

But let’s not overlook the visual image many still have of Rabid Rabbit perched on A-dock for over a month. We need to find a way to spin that long-lasting mental image into a positive one. The principle in marketing is to embrace the negative and turn it into a positive.

Last, and this is not a small thing, we need to be careful how we speak about our marina. Sadly, many of our owners actually believe our competitors’ messaging that somehow our marina is uniquely dangerous. Jim all but said as much at our annual meeting. The fact is Oriental Harbor Marina was engineered to withstand even the most powerful hurricane and so far it has done just that, and remarkably well. And we have lots of other things that set us apart.

We’re the closest marina to the Village of Oriental. We’re one of the easiest marinas to access from the water. We offer long-term, short-term, and transient dockage. We allow liveaboards. We’ve got wide cement docks while many of our competitors have narrower wooden docks. We have modern electronics and dock boxes, much better than some of our competitors. And we have an art gallery and restaurant at the marina providing visitors with recreational opportunities. In short, we have a lot to brag about and brag we should!

But we have to correct our course before running aground. Overall owner frustration is nearing critical levels and as you may recall from our last annual meeting, there was much more talk about selling than there was optimism. That’s not a good sign. Happy owners don’t sell and selling drives down prices.

Closing Thoughts.

First I’d like to sincerely thank you for sticking with me through this entire presentation. I realize it’s a lot to absorb and I’m honored that you gave me this much of your valuable time. I’ve tried my best to identify what I believe to be the biggest problems facing our marina and instead of simply griping about them, I’ve offered some viable solutions.

But you’ve also taken the time to hear me out and hopefully to give this information serious thought. I don’t think for an instant that I have all the answers, but my background in real estate and company turnarounds does give me a unique perspective. You may have a background that gives you a similarly unique perspective.

To that end, I’d very much like to have a conversation with the Board and see if there is a way we can solve these problems together. I’m not looking for a position and I’m not looking for recognition. I’m simply looking to increase the value of my investments. Unlike a growing number of owners, I am very optimistic that we can turn this marina around but it will take a group effort. Let’s work together to bring about a new dawn at Oriental Harbor Marina.