CUTTING COSTS TODAY, P.2

 

Conversely, Mitch Tenzer, president of his 117-unit co-op's board at 196 East 75th Street, has learned firsthand that these times also demand board members learn to be flexible.

His co-op has a policy that shareholders must live in the building full-time for one year before they can sublet. Sublets can last up to one year, with board approval, and must be reviewed annually. But when a Chicago-based couple tried to sell their pied-à-terre apartment there after the economy tanked, they were unable to find a buyer. Distraught, they came to the board asking for an exception that would allow them to sublet the apartment until the economy improves.

Sublet Win-Win

"For me," says Tenzer, "it would have been easy to say no. Rules are rules. But we have a good balance and perspective on the board," he notes. One board member "said we should look at this in a different light." And it was a win-win: By bending the rules, the board also collected a sublet fee from the Chicago couple.

Meanwhile, that board has had to attack major structural problems. The pipes that feed the heating and cooling system in the 20-story, postwar building began to fail two years ago. Three major leaks sapped about $100,000 from the reserve fund and forced the board to make critical decisions about priorities.

"[W]e've hired an engineer and we're having plumbers cut out sections of pipes," says Tenzer. "We'll send them to metalworkers and structural engineers. We've put off other capital improvements until we know how much this is going to cost." After redoing the lobby a year ago, the board has shelved planned work on hallways, a roof deck and bicycle storage.

The board constantly monitors oil prices, and is considering raising the sublet fee and instituting a flip tax. It's fighting the city's tax assessment. And it cut back one of the two doormen who were on duty during heavy weekend travel times.

"In these times, it's critical to … reduce any expense you can," says Lynn Whiting, director of management at The Argo Corporation. That's hard to do, she notes, because about 80 percent of expenses — mortgage, real-estate taxes, payroll — are fixed. Boards must monitor the other 20 percent: expenses for supplies, services, payables, staff overtime. "For instance, on a holiday that falls on a Monday, like Presidents' Day, do you really need all scheduled employees working that day? Maybe the porter and super should be on call."

Regardless, she warns, "If the building needs work on a mechanical system or if there are leaks that's a mandatory expense. If you try to put a Band-Aid on it, that's penny wise and dollar foolish."

Cut Part-Timers, Investigate New Management

At Byron House, a 132-unit co-op in Murray Hill, "We're looking at every item to see where we can cut,"says board president Silvana Vlacich. "Last year, we were very generous using part-timers to help the staff do things like cleaning the air-conditioners. This year, we're saying the staff is going to have to do it themselves. We're looking at every line item in the budget to see if we can cut it completely or scale it back. You have to control the staff and control payroll overtime."

When economic jitters set in last fall, the board took a hard look at what its managing agent was doing to save money. The board didn't like what it saw, so it interviewed six management companies and hired Cooper Square because the company promised savings on energy, supplies and insurance. The board also put off cosmetic work on elevators and external bricks.

In January 2008, before the economic downturn, the board had refinanced its mortgage, saving the co-op about $60,000 a year. The board also raised maintenance by eight percent this year, in the hope there won't be any increase next year. As a result of these prescient and fortuitous moves, the co-op has a healthy $600,000 reserve fund.

"My advice is to do your homework on every aspect of your building," says Vlacich. "If you're not getting service from your professionals, or if your staff is not performing, you've got to fix it. … Re-evaluate everything you're doing."

But look before you leap. Mary McDaniel, board president in the 57-unit co-op housed in the former Ex-Lax laxative factory in Brooklyn's Boerum Hill, says the seven-member board is moving with caution. The reserve fund, which once stood at $500,000, is now less than half that, thanks to a $200,000 hallway renovation and repairs to the roof, boiler, garage door and plumbing. Replenishing the reserve fund is proving difficult. "We have a transfer tax," says McDaniel, "but we had only one sale last year."

The board increased maintenance by four percent this year but has not, so far, levied an assessment. It is taking bids on repairing the front doors and patching and painting the building's facade. "Now we have to rethink the timing of when these things have to be done — or if they have to be done, or if we can wait," McDaniel says. "We're being careful, which is a good thing."

 

Adapted from Habitat May 2009. For the complete article and more, join our Archive >>