When someone brings up continuing education, we may think of going back to school and taking a class on something outside our career – maybe insurance, business, photography, cooking. For a real education and experience, become a board member.
I can’t begin to say how much I’ve learned over my 20 years as board treasurer at an 86-unit co-op in Bay Ridge, Brooklyn. But I’ll try to describe some of the issues and solutions.
Shortly after I purchased my co-op with my wife, we received our first annual financial statement. It didn’t mean too much to us; the co-op had money in reserves, bills were being paid. When we received our second annual financial statement and I compared it to the first, I saw that the reserve fund had dwindled, and I wasn’t aware of any major improvements that were performed.
I realized that the maintenance had not been increased since the co-op had been formed and was then at about 80 percent of annual expenses. Ouch. I didn’t want to see my investment lose value, so I got on the board.
After two board meetings, I was able to convince the board that we needed to do about a 30 percent maintenance increase, having already gone through over one-third of our reserve fund to pay bills. Further inspections found that the building needed a lot of work.
Some of the issues included roof leaks, old laundry equipment, no storage, 600 feet of sidewalks in poor condition, water leaking into the foundation from courtyards, sagging entrance doors, sagging apartment entrance doors, plumbing leaks, the boiler running on No. 6 oil with many heatless moments when the boiler went out, poor/ugly/inefficient hallway and lobby lighting and décor, no usable service entrance, old elevator equipment frequently breaking down, and leaking boiler return lines.
Other items included the “oil and grease” elevator contract, gardening services, the union contract, rising property taxes, and an underlying balloon mortgage. The board had to get more involved, quickly.
Our first step was to hire an engineering firm to examine the building exterior. Roof leaks, sagging window lintels, wall leaks, and deteriorating parapets needed to be addressed immediately to stop water infiltration and a parapet collapse. The engineer’s work proposal was bid out to about a dozen firms, with resulting bids ranging from about $40,000 to $420,000, for the same work! Welcome to the contractor and bidding world.
After some scaling back and intense bidding, we selected a contractor to repair the parapet walls, and the work started. Of course, more damage was uncovered as the work progressed, adding about 75 percent to the original proposal cost. An assessment spread over 12 months helped us pay off that job. But only a fraction of the engineer’s work proposal was completed.
Since then, we have whittled away at all the other issues. It has been necessary to have an attorney review some of our contracts. But the board does the negotiating with laundry room vendors, most contractor work, and negotiating the union contract (we’re not 32BJ).
Since switching the boiler to dual fuel (gas and No. 2 oil) in the early 1990s and now on firm gas, along with installing a heat computer, we have eliminated virtually all the boiler headaches. Shopping out our insurance coverage lowered that cost by more than 15 percent. Refinancing our underlying mortgage for a second time will now eliminate it entirely in less than eight years. A full-service elevator contract after major upgrades ended our elevator outages.
Trying to keep maintenance increases and assessments to a minimum is the major challenge today. Our property taxes have gone up by 247 percent since 2008. We decided to do assessments each year approximating the co-op abatements and STAR tax credits received by most shareholders. That gives us a little extra cash to use towards projects, but we try to have a balanced budget.
Most of the residents understand why we have the assessments and infrequent maintenance increases. They see building improvements regularly and have hot water, heat, and a clean, well-lit, and safe building. And the board? It continues to get an education in financial planning, contracts, building management, capital planning, budgeting, building systems, and, above all else, working with lots of people.