New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Savings Solutions Suggestion Box

From loans and light bulbs to insurance and energy, there are a variety of ways that your building can save money. In the following section, we've collected some of the most useful tips from both industry professionals and Habitat readers alike, detailing what the tips are, who they're good for, and how much money you can potentially save.

Cogeneration

HOW IT WORKS: Cogeneration allows for efficient production of two forms of energy from a single fuel-powered device (usually natural gas). In residential apartment buildings, it can significantly reduce energy costs by generating a portion of the building's electricity needs at a cheaper rate than can be purchased at a utility. It can also generate enough thermal heat for domestic hot water usage on a year-round basis.

Cogeneration units are usually located in the basement, near the building's mechanical and electrical systems. According to www. CogenerationOnline.com, a typical unit needed for a 200-unit building will take up roughly ten-by-twelve feet of floor space, and stand seven feet tall.

WHO IS IT GOOD FOR? Apartment buildings with over 150 units.

POTENTIAL SAVINGS: Not only will you save energy costs, but also, if you have an 80/20 problem, cogeneration will ease it because shareholders will pay the co-op for electricity instead of paying a utility. Additionally, the New York State Energy Research Development Authority (NYSERDA) can help pay for the cogeneration unit, defraying significant upfront costs.

Easy-to-Do Energy Savings

HOW IT WORKS: Easy-to-implement energy-savings solutions include:

Adding computerized heating controls that coordinate firing of the burner to true temperature conditions.

Retrofitting existing gas burners (which fire a building's boiler) with modulating burners. These coordinate the intensity of the flame (and gas usage) with computerized energy controls. Payback is in a matter of months.

Utilizing thermal photography. All buildings lose heat, but the questions to ask are: How much? Where is it being lost? Can the loss be contained? Thermal photography of your building is an easy way to document from where the heat is escaping.

Finding any leakage from your oil tank, which is not only environmentally hazardous, but wasteful. Have your super undertake a degree-day analysis to determine how much oil you actually require.

SOURCE: Charlie Stuart, engineer, The Replacement Reserve Report

Bulk-Buying Insurance Collectives

HOW IT WORKS: Essentially, one building becomes part of a collective of properties purchasing insurance as a group. "Think of the way you buy medical insurance," observes Carla Vel, president of The Distinguished Programs Group, an insurance program. "If one doesn't have to, one doesn't buy medical insurance outside a group. It's more expensive."

By consolidating accounts and providing the insurance carrier with greater economic security, there is more competitive pricing offered in the premiums. "The underwriter gives a dispersion credit to a building because the risk is dispersed among several locations," explains Herb Feldman, president of Alpha Risk Management, an insurance consultant. There is a master program that the buildings sign onto and then they are each issued their own set of policies.

A co-op may get involved in such a collective in one of three ways: the management company may have created one (several already have) in conjunction with a broker; the building can join an already existing collective; or the building can form one with others. The negative side of the first method is that if you leave the management firm you also leave the collective. Not all insurance companies offer such programs.

WHO IS IT GOOD FOR? All buildings.

POTENTIAL SAVINGS: First, the building gets the clout of mass purchasing power. Since the insurer only has the administrative cost of underwriting one policy instead of ten, the property gets a discount on premiums. In addition, the insurer will lower premiums because of the dispersion of risk.

A building can add more savings to the pot if the collective has a "coverage pool," set up by its manager or an insurance consultant, in which the properties in the collective fund some claims on their own. "Say you have 10 buildings in the group," explains Feldman. "Each puts $5,000 in the pool, so you have $50,000. Out of that you pay for damages up to $10,000." This pool, which is constantly replenished by building contributions, will allow the collective to take a higher deductible for fire, smoke, and damage claims. "That way you don't have to make as many claims to the insurance company. Premiums are based on frequency and severity and are raised every time you make a claim. This [pool] cuts down on that."

"The market has shrunk, so there are fewer choices," adds Vel. "I think this is an absolutely viable alternative."

SOURCE: Eugene Andrews, president, Andrews Building Corp.

Stairway Dual-Lighting Systems

HOW IT WORKS: A dual-lighting system is designed to satisfy all stairwell lighting requirements in one fixture. It consists of a two-lamp fluorescent lighting fixture that incorporates an integrally mounted ultrasonic motion detector, a system display panel, and a full battery backup. It can deliver reduced operating and maintenance costs because it has virtually no power consumption.

Proponents say it can enhance the usefulness, safety, and reliability of the emergency lighting system. The fluorescent lamps remain off when there is no sound or movement in the stairwells. The stairwells remain dark. As sound or movement occur, the lights go on. Typically, the lights remain on for 10 minutes. Should the power go out these light will remain on for 90 minutes. Such fixtures have been successfully tested for over three months in one building at Halston House, a 221-unit condominium association in Westchester County.

WHO IS IT GOOD FOR? Large, multistory properties with stairwells.

POTENTIAL SAVINGS: Halston House purchased 64 lighting units at $225 each for its stairwells at a cost of $14,400. NYSERDA gave the property a rebate of $70 per unit for a total of $4,480 (a one-time savings). It is estimated that the condo will save $1,775 per year in electricity costs and save $1,045 per year in labor and replacement bulb costs. Total estimated savings: $2,820 per year

SOURCE: Robert Beranger, board president of Halston House

Submetering

HOW IT WORKS: Submetering is the process whereby electricity comes through a master meter first and is then distributed to individually metered apartments. New York City buildings are either directly metered or master-metered. In a directly metered building, the meter is owned by the utility, and the user pays the utility at the individual residential retail rate. In a master-metered building, the utility owns a single meter and provides electricity to the entire building, including the apartments and the common areas. The building receives one electric bill, often at the bulk residential utility rate.

With submetering, co-ops buy their electricity in bulk from a utility or energy service company and sell it individually to shareholders. With submetering in a directly metered building, the utility no longer bills the apartment, the utility only bills the whole property in accordance with the newly installed building master meter.

The Public Service Commission requires that 70 percent of shareholders who participate in the vote agree to a submetering program if the building is directly metered, and more than 50 percent of the shareholders who participate in the vote need to approve if the building is master-metered.

WHO IS IT GOOD FOR? All multifamily, hi-rise buildings. There are initial changeover costs when a directly metered building goes to a master-meter. The amount depends on the property and the number of meters. In some cases, NYSERDA will pick up as much as half the cost for replacement meters (see www.submeteronline.com for more information).

POTENTIAL SAVINGS: There are many savings. The building obtains the utility bulk rate. The co-op or condo can improve its negotiating position with energy service companies to take advantage of electricity competition by purchasing total building (units and common areas) electricity from one supplier at a discounted bulk rate.

Residents get the benefit of the utility's bulk rate, which is then applied to each unit's individual use. The shareholders pay the corporation directly for their share of the electricity, which is an incentive for them to save. Electricity sold through one main building meter costs less for residents than when each resident is metered and billed directly. People who know they are paying exactly for what they are using tend to turn off their lights. If the building residents use much less electricity after the meters are installed, it pays for itself quickly.

There is another form of payback, as well. Master-metered buildings must keep electrical costs as part of the budget, but those that are submetered can reduce their yearly co-op budgets, since the individual tenants will be picking up electrical costs on their own.

Weather-Sealing a Building

HOW IT WORKS: The staff or a contractor weather-seal a building's elevator machine rooms, bulkhead doors, hallway windows, and basement windows and doors. The board can also provide free air-conditioning covers to the residents to keep out the cold wind.

POTENTIAL SAVINGS: Such endeavors can resulted in lowering the firing time for the boiler. On average, one building saved 27 gallons of oil a day this past winter and it expects a payback on this investment by next fall.

SOURCE: Peter Grech, superintendent at 25 Fifth Avenue, president, Superintendents Club of New York.

Loan Modification

HOW IT WORKS: A loan modification is a way to benefit from better interest rates without having to incur all the legal work, prepayment fees, closing fees, and hassles of refinancing your mortgage. A loan modification simply changes the rates of your loan without extending the loan term or increasing the amount of the initial loan. You can only modify a loan by keeping your loan with the existing lender.

WHO IS IT GOOD FOR? Any building or shareholder with a mortgage that wants to take advantage of better interest rates without needing to borrow any additional money.

POTENTIAL SAVINGS: A loan modification will generate significant cost savings for the borrower quickly as monthly payments are reduced. Savings depend on the terms of each mortgage, but because there are no substantial closing fees associated with a modification, the out-of-pocket cost to the borrower is minimal. Some mortgages have prepayment penalties written into the loan terms - these may be, on a case by case basis, negotiated through a broker with the existing lender. Contact your mortgage broker to find out if your mortgage would benefit from a modification.

SOURCE: Allan Lieberman, Meridian Capital

Water Cost Management

HOW IT WORKS: Water cost consultants can help buildings reduce water costs through a variety of tactics. Firms will typically first analyze a building's physical and demographic characteristics and determine what the lowest reasonable consumption for the building's components should be. Then, by fixing any hidden leaks or inefficiencies, installing a metering device, and supplying monthly reports and analysis, the firms help buildings reduce their consumption, which results in lower water bills. Some firms will even help buildings reduce previous overcharges and obtain a refund or credit.

WHO IS IT GOOD FOR? Any building that consumes water. Buildings with commercial components are particularly vulnerable to being overcharged.

POTENTIAL SAVINGS: Most firms get paid only if they are able to uncover any cost-savings for the building, so there is little upfront cost involved. Installation of meters runs around $250 net and monthly summaries run from $25 to $75. Savings will vary depending on the building, but even a 10% savings per year can be a significant gain for buildings.

SOURCE: Alan Rothschild, The Vantage Group

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