Budgeting in a Self-Managed Building Can Be Overwhelming

Paula Chin in Legal/Financial on March 9, 2018

Tribeca, Manhattan

Self Budgeting

Treasurer Judy Levine outside her self-managed Tribeca co-op.

March 9, 2018

When Judy Levine was recruited as treasurer at 177-179 Duane Street in Tribeca in 1994, the board thought her day job – as executive director of Cause Effective, a nonprofit organization that helps other NPOs raise money – would give her a leg up.

But when she started tackling her first budget for the self-managed 10-unit co-op, Levine discovered that her skills were going to be put to the test. Capital expenses and operating expenses had been lumped together, making big line items impossible to decipher. There was a tangled web of loans, which were just scraps of paper stuffed into manila folders. Worst of all, with residents in arrears, so little money was coming in that the building was running in the red. “The whole thing,” says Levine, “was overwhelming.”

Tracking income, scrutinizing expenses, paring down payables, guesstimating future costs – the work that goes into creating a realistic budget is never easy. For co-ops and condos that don’t have a managing agent, it can seem like mission impossible. 

“Preparing budgets is definitely harder for the layman,” says Rebecca Poole, executive director of Big Apple CAI, an association of board members, property agents, and business partners. “But there is a protocol to follow, and the process only gets easier and more efficient the longer you do it.” 

The equation seems simple enough: balance income against expenses to arrive at a bottom line – ideally, a healthy one that doesn’t require hikes in the maintenance or common charges. The tricky part is that many expenses must be estimated. While you can use the current year’s budget as a starting point to chart your accounts, “you need to look closely at the prior 12 months’ data and analyze it,” says Poole. “If you were over budget on an item, ask why. Examine every expense, and note whether it was a one-time thing, or if it’s an accurate representation for the average year.” 

Plugging in the same numbers from one year to the next is a common mistake, adds Tina Larsson, CEO of the Folson Group, a consulting firm that helps co-ops and condos pare down costs. “Certain fixed expenses, like real estate taxes and fuel, can be predicted fairly accurately, if you know where to look,” she says. 

Because the city’s fiscal year runs from July to June, you only have to forecast the second half of the year, which you can do by checking your expenses over the previous three years to get a running average of increases. For proposed water and sewer rates, go to nyc.gov, and pull out data on your building’s past electricity and gas usage from your utility company. “You can even go to the New York State Energy Research and Development Authority website, which has monthly weather data that will help you estimate costs,” says Poole. “There’s a lot of information available for boards to tap into.” 

While non-fixed costs constitute only 20 percent of a building’s operating budget, boards should be relentless about looking for ways to cut them. “Try to negotiate cheaper contracts with your vendors,” Poole advises. “While there may not be much savings with incidentals like copying, paper, and postage, every little bit adds up. And the savings compound, just like an investment.” 

Now that she has more than 20 years of budgeting under her belt, Levine can offer some sage words of advice. “I’ve learned that you should always over-explain things,” she says. “At annual meetings, I go through the budget and balance sheets item by item, and I share my notes on how the board made their decisions. People can be concerned that you’re using their money wrongly, so you have to be as transparent as possible.”

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