Being Proactive to Avoid Assessments, Save Money and Improve Your Building

But today, the seven-member board at this 120-unit, 13-story brick apartment house built in 1962 is a textbook example how a co-op benefits from proactive board members. Those benefits are both fiscal and physical, beginning at the bottom line and extending, literally, from the basement to the roof.

"There was a different culture before we took over," says Ray Ochs, 55, a professor at St. John's University who was elected board president in 2005. The old, passive board of mostly retirees had begun to turn over about three years ago. With new blood came fresh ideas, and the energy to see them through.

Cleaning Up After the Old Board

And just in time. When oil prices spiked in 2005, alarm bells finally rang. "We started meeting a lot more frequently as financial problems arose," says David Englander, 53, a corporate lawyer who served on the board in the 1990s before rejoining in 2005, and is now its secretary. The new board immediately imposed an energy surcharge of $1.60 per share over six months. It wasn't popular, but, "It covered our energy costs," Englander says. "It also built up our operating account and put us back in a position where we could repay the money the previous board had borrowed from the reserve account" to pay bills. The co-op now has a healthy $300,000-plus reserve.

That foresight was only the beginning. Scrutiny of bill-paying was tightened. A superfluous handyman position was eliminated. The co-op's lawyer, its management company and its site manager were all replaced. A mid-year meeting was added to the annual board meeting, to give shareholders a chance to make suggestions and ask questions. Board-members began attending seminars run by the Council of New York Cooperatives & Condominiums.

Perhaps most importantly, says Ochs (left), "We added a finance committee [that meets] every month in addition to the regular monthly board meeting. People made suggestions that actually got implemented, like making sure our reserve fund was only in safe investments and that we never had more than $100,000 in any bank, which is the [federal] limit for insurance.

The board's boldest initiative was its approach to every co-op's greatest looming challenge: how to handle spiraling energy costs.

"Although our boilers work, they're more than 40 years old," says Englander. "We recognized they're approaching the end of their life. So we applied to NYSERDA [New York State Energy Research and Development Authority] for an energy audit" and engaged the state-approved firm Power Concepts, which issued a report on the co-op's energy usage and gave a dozen recommendations, including to replace the boilers and the rooftop cooling towers and install a propane unit to generate electricity for common areas.

This last measure, a potentially huge money-saver, required switching from direct metering to submetering. If the co-op could develop a plan that would reduce energy consumption by 20 percent, it would be eligible for incentive payments and low-interest NYSERDA loans. The total upfront cost was $1.1 million.

At a critical meeting in April 2007, shareholders voted overwhelmingly to switch to submetering, which has the added benefit of allowing the co-op to buy electricity at a bulk rate, which is lower than Con Ed's residential rate.

As well, the board has commissioned an inspection of the building's exterior — even though mandated Local Law 11 repairs will not fall due until 2011. "That's a good example of proactive planning," says board president Ochs. "We know we have a few leaks, but the larger question is the status of the entire building."

Don't Forget the Little Things

In addition to such high-profile projects there have been more modest initiatives that also illustrate the benefits of a proactive board. For as far back as anyone can remember, the building's 3,000-square-foot basement had been divided into bins for residents' storage use — free of charge and first-come, first-served. The board realized that the space was an amenity that could be turned into money, benefiting the entire co-op. It invested $21,000 on new cages and started charging residents from $20 to $40 per month for storage, depending on the size of the space.

"We'll recoup our investment within two-and-a-half years," adds Dave Abrahmov, 30, an investment analyst who has served on the board since 2005 and is now treasurer. "Being proactive all comes down to coming up with creative ways to improve the building and raise capital. It's either that or go to the shareholders on a yearly basis for a maintenance increase or assessment."

To Englander, communication is the key. "Once you tell people, 'We're doing what we can to avoid assessing you,' not many people are going to fight you."

Adapted from Habitat July / August 2008. For the complete article and more, join our Archive >>