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Long-Range Planning Helps Boards Avoid Sticker Shock

Gene Ferrara in Building Operations on July 26, 2019

New York City

Sticker Shock
July 26, 2019

Unfortunately, buildings age, and maintaining them has gotten very expensive. There is no Medicare or Medicaid in place to save building systems that have reached the end of their useful lives and need major work. Every system has a lifespan. It’s not forever. Even if you’re restoring them on a regular basis, some of those items will never last past a certain period of time.

What we tell our board clients is that they should have some type of survey done on the building by an engineering firm. You can't look 30 years into the future, because so many things change in 30 years, but you can look 10 or 15 years ahead, and you can put together your project outlooks and what's going to be necessary. That’s when the board should start saving money, $100,000 or $200,000 a year, so that after 10, 15, or maybe 20 years, they’re able to do a $3 million job. And it’s not $3 million and never come back. They’ll be doing another $3 million job in another 10, 15, 20 years. In other words, it's wise to build up the reserve fund, the building’s Medicaid, rather than assessing people when you get surprised by the need for a job.

If boards just focus on the bare minimum, that becomes a big mistake down the road. About 10 years ago I told a client that the building needed to do a large facade project. Board members got shell-shocked, and they went to another consultant. They got through that Local Law 11 cycle with what they thought was a major job. They find us again, and they ask us, "Can you come back and take a look? We’ve got to take care of it again.” We find that they spent millions of dollars, and nothing really was done. Now you present it to them again, and they look for another person to come back and tell them what they want to hear. That's one client base – people who just keep going around in circles. It really is a shame.

But then you have the other kind of client, where there's consistency. They are managers – people who remain on the board year to year and over the long term. There’s always a plan. We did a major facade project about 20 years ago for a client on the Upper East Side. We have not done any major facade work since, and now we're coming up on a $2 million job. They’ve been saving about $100,000 a year. They’re well maintained and happy, and they didn't have to go through the five or six major projects in between facade repairs that other buildings do because they don't plan it out. They are knowledgeable. They are appreciative – because they have money set aside to do these things.

Foresight is the key here – instead of outrage, surprise, disbelief. As you get older, you start feeling more pain. Your building does as well. But if you have the techniques and the practices to deal with that as the building ages, you can maintain it within reason – and without shell shock.

Gene Ferrara is president of JMA Consultants.

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