Bill Morris in Board Operations on August 9, 2016
In the February issue of Habitat, we told you about the remarkable turnaround of the Lindenwood Village (Section D) co-op in Howard Beach, Queens. After years of self-mismanagement, which culminated in a theft of $88,000 of corporate funds by the office manager, a group of shareholders took control of the board and proceeded to clean house.
As our story stated: “The turnaround, considering the years of turmoil that preceded it, has been astonishingly swift. In its first year, the board cut expenses, reduced the deficit by two-thirds, collected arrears, paid vendors, systematized bookkeeping, and started rebuilding the reserve fund.”
That rosy assessment, it turns out, was not nearly rosy enough.
Eliot Tokar, the current board president and a leader of the turnaround at Lindenwood Village, reports that the co-op recently got a pleasant surprise. “When the numbers came in, we actually had a small but meaningful budget surplus of $24,000,” Tokar says. “We were able to do this without raising maintenance or levying an assessment.”
They did it, instead, by getting expenses under control. The board switched from frontage to metered water billing, reviewed all vendor contracts and invoices, addressed non-existent record keeping, and tightened the management of staff schedules and overtime pay. For instance, every staffer used to have a personal credit card, which led to uncontrolled purchasing. No longer. The resulting savings from all these initiatives made it possible for the co-op to pay for $400,000 of Local Law 11 facade work out of its reserve fund, which is now at a “reasonable” level, according to Tokar.
But maybe the true key to this turnaround was that the board dared to be unconventional.
“There’s a certain orthodoxy in the co-op field,” Tokar says. “It often overlooks what a co-op is – a collective enterprise where cooperators share expenses. It’s a democratic approach to ownership, and a way to share savings. A lot of times, professionals blur the lines between co-ops, condos and rental properties.”
The conventional approach to the Lindenwood Village mess would have been to generate more revenue. Tokar resisted this.
“There was a lot of pressure to raise revenue through an assessment or maintenance increase,” he says. “My approach was to diagnose the causes of the problems – mismanagement, overspending, the improper management of staff, vendors and purchasing – and then work through a cure.”
As much as this is a story about recovering from mismanagement, Tokar also believes it offers as a pair of lessons for all co-op boards and their professionals. “First,” he says, “we have to remember the unique character of co-ops. While professionals can be a board’s allies, the job of the board is to be aware of how those professionals function. You can’t give in to the conventional wisdom of the moment. You don’t want to micro-manage, but you want to oversee your professionals and then make the decisions.”
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