Elevator modernizations are getting more and more expensive. How are boards dealing with it?
It isn’t easy. At one of our condos, we had two elevators that were nearly 25 years old. Not only that, they were operating on DC motors and had to have a transformer to convert them to AC current. They were very close to dying. We invited our elevator consultant and contractor to discuss it, and they told us that if done within the next four or five years, a modern-ization project would cost a total of $550,000 to $600,000.
Talk about sticker shock!
One of the reasons costs are so astronomical now is that installing mandatory door-monitoring devices is taking up much of the elevator contractors’ time, which leaves very few mechanics to do the modernizations. The prices have really gone haywire.
When the board heard those numbers, what was the reaction?
Panic. Some members didn’t feel comfortable even addressing the issue because they’re retired and on fixed incomes, but others wanted to. One of the problems we faced is that we had only so many avenues to obtain the money – the residents and the reserves. Bank financing wasn’t an option.
In this particular condo, we had a sponsor who had at least 25 to 30 apartments in an 80-unit building, and banks shy away from giving loans to condos with a high sponsor investment. We really didn’t have any choice but to look to ourselves for financing.
What was the first step?
First, we looked at the capital projects coming up that we have to deal with. The main roof needs to be replaced in the next five years. There’s also the work that’s mandated by local laws, which for us had been at least $100,000 per project. So it added up to about $800,000.
An even scarier number.
We have about $500,000 in the reserves, and knew we wanted to keep a certain amount of money that we don’t touch. So we ran 48 months’ worth of assessments based on $550,000 and $600,000 and broke it down over 80 apartments. Once you could see the monthly numbers, it was a little less frightening.
And you presented them to the board?
Yes. We also pointed out that even if the board took out a loan, it would still have to pay it back and include the cost in the operating expenses. And with an assessment, you get a tax write-off, but you don’t with a loan. The board went with the assessment, but there was a difference of opinion on how much we needed to accrue. Three members voted for $550,000, and four members voted for $600,000. That works out to about $170 a month for each unit over four years, which is not an outrageous sum.
Spreading it out over a number of years made it palatable?
Absolutely. For any aging building that’s dealing with these kinds of issues, you have to look ahead and not bury your head in the sand.