While I should be writing my review of Turandot, I thought some folks who were not at this evening’s (May 26, 2009) board meeting on professional management might want to know something about what happened.
It was a full house in the West Lobby. ECA Woody Cunningham made interesting opening comments. He said we have been operating like a family business with a management team that is out of control: no policy on hiring and firing, no training for our employees, no performance reviews, no backup for engineering, a five year plan that is a sham, and reacting to one crises after another. He answered the allegation that this Board is not transparent by saying that this has been a Board much more open than the previous Board that hired Ed Polite (operations manager) in secret. He said this had not been a rubber stamp board.
Next came comments from those in attendance. There were comments from 18 people that I noted including one man who did not live or own in the building. Comments included such suggestions as presenting comments in a civil manner, postponing the vote, how much Legum and Norman (L & N) are bonded for, how personnel who will be let go will be treated financially, what yardstick we will measure L & N performance, costs that might go up over time from L & N, more time to consider big decisions, outright desire not to change things as the stand, what happens if the building is left to deteriorate.
Board Members followed Association members and stated their comments and which way they were voting. The most surprising statement came from Jeffrey Axelrad who said The Elizabeth had been cited for a building code violation by the County for failing to fix some structural problem. Yes, we really need some proactive building management!
The vote was 4 for professional management (Woody Cunningham, Jeffrey Axelrad, Judi Barth, and Al Muller. Three were against: Charles Bressler, Monique Fridell, Alexander Kielty. Fridell said she wanted to restructure the personnel and would have done the plan herself except the Board rejected her offer. Both Fridell and Kielty vowed to work with the Board no matter if professional management was voted for. Bressler said he had a fiduciary responsibility to the owners and wanted the vote on professional management postponed.
Judi Barth provided information about L & N, a 40-year firm that manages 125 building representing over 70,000 units. She said they took one year to study many professional management firms. The most interesting set of comments came from Al Muller who pointed out that we must keep our condo competitive in the current buyer’s market. He reaffirmed that the cost of hiring L & N had been evaluated by a third party (our accountants DeLeon & Stang). He said we will realize lots of cost saving in the next few years but we need a team effort meaning everyone in the Association, the Board and the staff. Muller said when he was on the Friendship Heights Village Board, people said they didn't want the Village bus service and later they didn't want the community center. He asked did anyone want to give up those things now? Alexandra Kielty was mostly concerned with things she didn’t understand in the contract and got those questions answered by our condo lawyer Jason Fisher.
Ok, now I am free to think about why Puccini’s Turandot would kill so many men who sought her hand. Fear of change! Time to find the love.
Tuesday, May 26, 2009
Response to Jim Rich's Posting
Jim -- I seems to have hit some nerves with you.
Yes, I do have a "burr" under my saddle -- it is called being offended by the Board's lack of meaningful communication with the owners. I frankly don't know if they all know what they are doing (not the overarching decision to hire, but at the level of consequences of their decision and, GOD Forbid, those pesky "unintended" consequences). I believe, as others do, that the Board hasn't shown that they do know. Transparency, forthrightness, open-mindedness and amenability to the concerns of owners are qualities I would like--and expect even though I get disappointed--from my Board members. So lynch me for that!
My "attack" on the Board reflects my wanting to be on record with saying how upset I am with the Board's handling of this matter. Unlike what you suggest, I am not opposed to hiring Legum & Norman. I just think everyone should know what this entails and the true costs -- both gross and net costs. By the way, you will see that I credit L&N with the $89,000 saving as one of the "value-added" aspects of outside management.
The Board is altering 10% of the operating Budget. Lynch me for thinking that that is important to owners, expecially if the replacement system has an open-ended cost structure. You know how owners love to have those increased fees!!! Doubly so when it is unexpected!!!
To the extent I am mixing fact and fiction -- that is a result of the Board's lack of transparency. I'd love to have the real numbers to work with. Could even become an advocate for the L&N contract if I knew what the cost implications were. But to paraphrase Mason Williams "Believeing in something isn't enough, you NEED to know what it is." I mean, what is so hard about telling the owners what the contract will cost--both gross and net. What is so hard about owning up to the impact on the present management structure. After all, the DeLeon and Stang analysis clearly shows the elimination of the bookkeeping position. No one has claimed that that is a personnel matter and shouldn't be discussed. Au Contraire, the Board and others have used the savings from eliminating the bookkeeper position to reduce the overall cost of the L&N contract. It seems a bit unfair to let one side raise the elimination of a position and not the other side. But then, fairness isn't everyone's suite in this decision process. Since the Community Manager will have the same responsibilities as our Manager, what is wrong in asking if the Elizabeth will retain that position? What is good for the goose is suppose to be good for the gander!
Love your "cowboys getting all liquored-up at the saloon as some agitator stirs them into a frenzy so they can go lynch someone they don't like". But, if you'll just "put your bottle and rope down" Jim, you will see that I have not proposed the Board reject the Legum and Norman contract, just that they postpone accepting the contract until such time that they know -- and I guess I should have spelled out that they tell the owners" the whole story. If this is "agitating", then so be it.
You are all wrong about my mixing up cost analysis and personnel matters. Cost analysis in the understanding of the components (line items of a budget IS NOT an operations activity. It is a policy activity. I don't know of any budgets that say hire so-and-so, fire so-and-so. But if the budget reflects a decision to "contract out", yes that will ultimately have personnel reamifications. The fact that the logical outcome of contracting out means personnel changes, does not justify a prohibition on talking about the policy/management. You are arguing that the owners have no right to know what the budget implication of the Board's actions are. I can't disagree with you more. By the way, I have had 20 years as a Budget Analyst for federal agencies, as an OMB Budget Examiner, and as a Budget Policy Analysis for the House Budget Committee. I think I know something about budget proposals. The way budget proposals are put forth is by line items, such as the "Administrative Staff" line item in our Budget. What action the Board takes regarding who constitutes personnel is absolutely a Board matter, as you point out Jim, but what is in the Budget is a matter for all owners. That is why the budget is handled in open meetings and why it is distributed way before the Board takes action on it. What the Board is doing is making a major revision to our Budget--whether or not you want to acknowledge that.
So Jim, take a breath, reread your excellent paragraph about how professionals do business and think about how you have conducted yourself on this matter--especially when identifying the "rantors". I am sure the best you and I can do is "agree to disagree" on who is liquored up, wanting to lynch individuals.
See you tonight at the OK Corral. Molly Frantz
Jim -- I seems to have hit some nerves with you.
Yes, I do have a "burr" under my saddle -- it is called being offended by the Board's lack of meaningful communication with the owners. I frankly don't know if they all know what they are doing (not the overarching decision to hire, but at the level of consequences of their decision and, GOD Forbid, those pesky "unintended" consequences). I believe, as others do, that the Board hasn't shown that they do know. Transparency, forthrightness, open-mindedness and amenability to the concerns of owners are qualities I would like--and expect even though I get disappointed--from my Board members. So lynch me for that!
My "attack" on the Board reflects my wanting to be on record with saying how upset I am with the Board's handling of this matter. Unlike what you suggest, I am not opposed to hiring Legum & Norman. I just think everyone should know what this entails and the true costs -- both gross and net costs. By the way, you will see that I credit L&N with the $89,000 saving as one of the "value-added" aspects of outside management.
The Board is altering 10% of the operating Budget. Lynch me for thinking that that is important to owners, expecially if the replacement system has an open-ended cost structure. You know how owners love to have those increased fees!!! Doubly so when it is unexpected!!!
To the extent I am mixing fact and fiction -- that is a result of the Board's lack of transparency. I'd love to have the real numbers to work with. Could even become an advocate for the L&N contract if I knew what the cost implications were. But to paraphrase Mason Williams "Believeing in something isn't enough, you NEED to know what it is." I mean, what is so hard about telling the owners what the contract will cost--both gross and net. What is so hard about owning up to the impact on the present management structure. After all, the DeLeon and Stang analysis clearly shows the elimination of the bookkeeping position. No one has claimed that that is a personnel matter and shouldn't be discussed. Au Contraire, the Board and others have used the savings from eliminating the bookkeeper position to reduce the overall cost of the L&N contract. It seems a bit unfair to let one side raise the elimination of a position and not the other side. But then, fairness isn't everyone's suite in this decision process. Since the Community Manager will have the same responsibilities as our Manager, what is wrong in asking if the Elizabeth will retain that position? What is good for the goose is suppose to be good for the gander!
Love your "cowboys getting all liquored-up at the saloon as some agitator stirs them into a frenzy so they can go lynch someone they don't like". But, if you'll just "put your bottle and rope down" Jim, you will see that I have not proposed the Board reject the Legum and Norman contract, just that they postpone accepting the contract until such time that they know -- and I guess I should have spelled out that they tell the owners" the whole story. If this is "agitating", then so be it.
You are all wrong about my mixing up cost analysis and personnel matters. Cost analysis in the understanding of the components (line items of a budget IS NOT an operations activity. It is a policy activity. I don't know of any budgets that say hire so-and-so, fire so-and-so. But if the budget reflects a decision to "contract out", yes that will ultimately have personnel reamifications. The fact that the logical outcome of contracting out means personnel changes, does not justify a prohibition on talking about the policy/management. You are arguing that the owners have no right to know what the budget implication of the Board's actions are. I can't disagree with you more. By the way, I have had 20 years as a Budget Analyst for federal agencies, as an OMB Budget Examiner, and as a Budget Policy Analysis for the House Budget Committee. I think I know something about budget proposals. The way budget proposals are put forth is by line items, such as the "Administrative Staff" line item in our Budget. What action the Board takes regarding who constitutes personnel is absolutely a Board matter, as you point out Jim, but what is in the Budget is a matter for all owners. That is why the budget is handled in open meetings and why it is distributed way before the Board takes action on it. What the Board is doing is making a major revision to our Budget--whether or not you want to acknowledge that.
So Jim, take a breath, reread your excellent paragraph about how professionals do business and think about how you have conducted yourself on this matter--especially when identifying the "rantors". I am sure the best you and I can do is "agree to disagree" on who is liquored up, wanting to lynch individuals.
See you tonight at the OK Corral. Molly Frantz
Monday, May 25, 2009
Response to Molly Frantz’s Post
There seems to be a burr under Molly’s saddle. Why she is attacking the Elizabeth board is not clear. What is the purpose of her post? Why haven’t her comments been posted before now? The issue of professional management has been on the front burner for months.
While Molly’s post suggests that she wants to stop the board from moving forward with professional management and is upset about using a professional management company versus self-management, she has mixed fact and fiction with her own opinions and has not offered any solutions. One example is that Molly’s has failed to note the $89,000 dollar rebate for the Elizabeth paying unnecessary taxes on utilities over the past three years. Legum and Norman pointed this out (at no charge to the ECA).
Her arguments and comments come across more like a bunch of cowboys getting all liquored-up at the saloon as some agitator stirs them into a frenzy so that they can go lynch someone they don’t like. This is not the way professionals do business and is not in the best interest of the Elizabeth residents.
Let’s discuss the Elizabeth management like mature adults. Let’s discuss the pros and cons of different approaches to building management and then offer real solutions (and not rants). Let’s work together and use facts and logic to make sound business and financial decisions that will help the ECA community be a better place to live. In my view, that is what the board has been trying to do while others in the ECA are misbehaving.
I don’t have all the facts about the Legum and Norman contract and I don’t think Molly does either. However, I believe that most members of the Board are operating in good faith and that the Legum and Norman contract is a reasonable attempt by our Board to use good business sense to remedy current and future issues that the Elizabeth faces. Our current management has had years to perform. Their track record is poor. Overall the current management is not equipped to handle current and long-term matters that will help owners optimize the ECA operating expenses and maintain the value of our investment here.
Lastly, it appears Molly is mixing her own idea of cost analysis with Elizabeth personnel matters. My understanding is that personnel matters are not discussed in public. Those rules are part of the Elizabeth by-laws and local laws. The Elizabeth’s officers (our elected officials) are the only ones who can deal with personnel matters and are NOT allow to discuss them outside of the board. If board members do discuss them with non-board members, they are in violation. Most of the board is doing exactly what they are supposed to do in a clear and transparent way. If Molly or others wants to be a self-appointed lynch mob, then so be it.
Responsible replys are welcomed.
Jim Rich #301
Recommendation to Board--Postpone Vote
May 25, 2009
To: Board of Directors
Elizabeth Condominium
From: Molly Frantz
Apartment #1007
Subject: Proposed Management Contract with Legum & Norman -- My Understanding, Comments, Concerns, Worries, and Alarm
Recommendation: Postpone the vote to accept the Legum & Norman (L&N) contract until the Board has the facts and figures to support an affirmative vote.
Committing to an unspecified -- dare I say, unknown -- six-figure payment to L&N is (1) fiscally irresponsible, (2) a breech of Board responsibility to the owners of the Elizabeth Condominium, and (3) and abuse of Board power. To fire employees (or whatever you want to call it to ease your consciences) without cause and in the absence of supporting cost-benefit analyses is (1) morally reprehensible, (2) fiscally irresponsible, (3) a breech of Board responsibility to the owners of the Elizabeth Condominium, and (4) and abuse of Board power.
The manner in which the Board of Directors of the Elizabeth Condominium has approached the need for and selection of a Professional Management firm brings to mind these quotes:
"Not only should you believe in what you’re doing/ But you should know what you’re doing." (Mason Williams F.C.C. Rapport (Liveright))
"This update on our recent discussions concerning a management firm for the Elizabeth Condominium is the first of what we expect to be a continuing transparent process." (emphasis added) (Woody Cunningham (For the Board) Letter to friends and neighbors dated February 24, 2009)
"Prior to that meeting owners will be provided the Board’s estimated one time costs as well as the annual costs for professional management." (emphasis added) (May 13, 2009 notice to Residents and Owners)
Thinking Behind My Recommendation:
1. The Board’s decision-making process has been anything but transparent, forthright, open-minded and amenable to the concerns of the owners.
Administrative services account for 10 percent of the Elizabeth Condominium’s operating budget. Eliminating this line item from the Budget significantly and irrefutably alters the management structure of the Elizabeth Condominium. This is not just simply a personnel issue involving the firing and hiring of individuals. And, as such, such a change deserves to be openly presented and discussed with the owners. I do not believe the Board has come anywhere close to doing this.
It is pretty hard to believe the Board was interested in what the owners had to say at their first public information meeting (January 14, 2009) about hiring a management firm. Mr. Cunningham’s remarks were general, although he did indicate the net cost of hiring outside management was estimated to be $67,000 more than what is currently paid to manage the Elizabeth Condominium. No gross cost estimate or limit on any contract was provided. Mr. Cunningham refused to discuss the ramifications on Elizabeth administrative staff/management structure, claiming this was a personnel matter that can only be discussed in Executive session. Owners were permitted to speak for 3 minutes. Immediately thereafter the Board voted (4 yes and 3 abstention votes) to proceed with contract talks with Legum and Norman.
The February 24, 2009 communication to owner’s (1) again mentioned the $67,000 net cost associated with hiring a management firm. This figure was now "whittled down" to $17,000 because the Board "saved" $50,000 by eliminated one security/doorman sift – an example of "apples" and "zebras" (not even "oranges") cost analysis and budget scoring! (2) Reaffirmed that only the Board has the authority to hire and fire Elizabeth employees, but failed to address the actual concern/question (as expressed at the January 14 meeting) -- i.e., what will happen to our Administrative Staff if their responsibilities are to be performed by L&N? This is a budget question, NOT a personnel question! (3) Agreed to explore a "hybrid" form of management with L&N, but nothing was said about what that meant. And (4) indicated that any management contract would not be long-term (e.g. 5 years). Of course, there was no indication of what the Board considered "a fair evaluation time" period.
At the April 21, 2009 Board Meeting, Mr. Cunningham indicated that drafts of a contract with L&N were being exchanged; he would provide NO information on the content; AFTER the contract was signed there will be an information meeting. He also informed the owners that there would be NO discussion or ballot initiative regarding the proposed contract/action at the Annual meeting.
May 6, 2009 Annual Board meeting. I did not attend but know it was ugly.
The May 13, 2009 notice for the upcoming May 26, 2009 open Board meeting "to discuss and vote on a proposed contract with Legum and Norman" indicates "Prior to that meeting owners will be provided the Board’s estimated one time cost as well as the annual costs for professional management."
At the May 20 meeting, Mr. Rhodes and Ms. Harrington, representing L&N, and Mr. Cunningham went to great lengths to provide the owners only general information about Legum and Norman, as a company, and the generic responsibilities and management structure L&N would provide the Elizabeth Condominium. There was no information forthcoming on the fate of the Elizabeth’s Administrative management structure/staff if the L&N contract is signed, even though these responsibilities would be assigned to L&N. After the discussion period, Mr. Cunningham distributed a "Cost Analysis for Legum and Norman Professional Management at the Elizabeth" that laid-out the basis for the $67,000 net cost figure that had been previously provided. Reflections on the May 20 meeting:
Mr. Cunningham stated that "there will be a complete staff restructuring" .
He also stated that he "expects there to be a substantial number of Elizabeth employees that will be supervised by a L&N Site Manager". The implication was that these employees will remain Elizabeth employees, however, the Cost Analysis indicates that there will be NO Elizabeth employees.
How many Elizabeth Administrative Staff positions are slated to be eliminated?
Accountant/Bookkeeper Position: The Cost Analysis’ narrative states that "Handling of all financial matters would be centralized at L&N Headquarters." The accompanying financial details clearly indicate that the accountant/bookkeeping position will be eliminated from theElizabeth’s budget and, presumably the management structure.
Manager and Assistant Manager Positions: The L&N handout identifies 15 "Specific job responsibilities of your Community Manager". These duplicate the responsibilities of our current Manager and Assistant Manager positions. Unlike the accountant/bookkeeping position, the Cost Analysis does not show any offsetting cost savings and, by inference, changes in the Elizabeth budget. Is the Board really proposing to pay for the same services twice? Or is the Board intending to fire these employees in Executive session once the contract is signed? Is this the "promised" transparency?
2. It is clear that the identified $117,978 cost estimate laid out in the Cost Analysis is no where near whatthe actual L&N contract payments will be. In fact, I have serious doubts the Board has any idea what the L&N contract will actually cost the Elizabeth Condominium.
The first-year costs of the L&N contract is either (1) grossly understated on the Cost Analysis ($117,978 or $89,850 Base annual fee plus $28,128 in per-incident service fees) or (2) the Elizabeth Condominium has been overpaying for the administrative responsibilities carried-out by the Elizabeth’s administrative staff ($217,777 based upon the FY 2009 Budget amount of $202,440 for Administration Salaries plus FICA of 7.58%, but excluding an unknown amount for insurance and other employee expenses) more than twice what L&N purports to be able to do the work for.
The L&N proposal calls for a part-time Community Manager, a full-time Site Manager, and a Resident Services Coordinator. Is the $89,850 Base annual fee really adequate to cover their costs? It is clear from the Cost Analysis and from Mr. Bressler’s questions at the May 20 meeting, that a significant portion of L&N’s payments will be generated by per-incident items. Is this how L&N will recoup the "cost deficit" for managing the Elizabeth? Does the Board know what these fees are, let alone what they are expected to amount to? Is there a reason the owners are not privy to this information?
How open-ended is the contract’s cost structure? Has the Board made provisions to have L&N provide the kind of information necessary to evaluate how effective and how economical L&N’s services are (i.e., to be able to carry out the "fair evaluation" referenced in the February 24, 2009 communication)? How detailed will that information be? What controls will be in place to monitor and -- if need be -- limit these service fees? For instance, the Cost Analysis indicates that all of the Elizabeth staff will actually be L&N staff. L&N charges an additional 2.5% service fee for Payroll Administration when the employee is an L&N employee as opposed non-L&N employee. Who is going to monitor these fees?
Has L&N ever provided the Board an estimate of what it’s contract will cost? The Cost Analysis provided the owners was done by our accounting firm (DeLeon and Stang) on January 4, 2009, even before the Board voted to enter into negotiations with L&N! The numerous NL (not listed or addressed) entries make it clear this can not possibly be a comprehensive cost estimate. Yet this is what was provided the owners, presumably in accordance with the May 13 notice. Why is the cost estimate coming from a third-party and not from L&N? Shouldn’t a firm as experienced as L&N be able to provide their own cost estimate of their proposed services? After all, if they can’t do that, what is so great about their expertise!
What due-diligence has the Board undertaken to assure itself that the L&N contract is the best approach to meeting the management challenges the Board is trying to fix? For instance, our financial system. Mr. Axelrad wrote, "While we have excellent personnel running and overseeing our finances, our system is antiquated." (undated correspondence, handed out at the May 20, 2009 meeting). Is hiring L&N the only way to modernize our finance system? What did the cost-comparison for upgrading/replacing our current software coupled with providing training to "our excellent personnel running and overseeing our fiances" show? Was such a comparative cost-analysis even performed? I have to think that there is more to L&N’s assuming the finance responsibilities than meets the eye (or the public record). Two explanations might be: (1) there are problems with our employee that the Board has previously failed to address and has now chosen contracting-out as the way to resolve the situation, or (2) L&N wants to perform the financial responsibilities because it will be a cash cow for them.
Why hasn’t the Board provided the owners accurate and current information regarding the estimated cost of the L&N contract and compared that to the offsetting line-items in the FY 2010 Budget? Is the Board even able to provide the owners such an analysis? This begs the question "What else isn’t the Board sharing with the owners?"
3. The proposed annual increase in the L&N contract (CPI + 1.5%) is incredibly generous and will yield double- to triple-digit percentage growth in L&N’s profits over a five-year span, while the overall payments to L&N will only increase modestly during the same 5 year period.
It is very interesting that the proposed L&N contact is not a cost plus contact. It made me wondered just what that 1.5% factor above CPI growth would mean to L&N’s bottom line. I did three analyses -- assuming L&N had build-in a profit margin in the first year of 1%, 5% and 10%. An initial 1% profit margin grows to 6.5% of contract payments by the 5th year, a 700% growth in profits. A 5% initial profit margin grows to 10.3% of contract payments by the 5th year, or a 155% growth; and a 10% initial profit margin grows to 15% of contract payments by the 5th year, or an 86% growth. The total payments to L&N grow only 30.7% during the same period. (Spreadsheet attached to the Board Member’s hard copies).
The disproportionate growth in profits reflects the wonderful power of compound interest, especially since the 1.5% factor is applied to the total cost of the contract, not just to the profit portion. I can’t imagine why the Elizabeth would agree to an automatic increase in the L&N’s profit margin without requiring a commensurate increase in benefits for the Elizabeth. Why would the Elizabeth Board agree to pay more for an actual service than its actual cost (remember, the profit is already built-into that "cost")! Am I missing something here? One of the arguments for hiring L&N is to have access to their "best-practices". Well, shouldn’t the Board also use "best practices" in structuring the contract? There is a reason for cost-plus contracting -- it keeps down the gaming of the system.
Besides this wonderfully profitable profit margin windfall for L&N, an automatic annual increase above costs would seem to discourage any incentive for efficiency. I strongly suspect that the proposed contract does not contain any provision/expectations for productivity savings. To the extent the L&N achieves productivity savings, these would all be retained by L&N.
There are "Value-Added" reasons to hire L&N. Wednesday evening Mr. Rhodes listed the following things to illustrate what L&N "brings to the table": access to more resources; economy of scale when purchasing things like energy, insurance, trash; access to best practice knowledge and expertise; cross-training of L&N employees as well as back-up staff. And L&N has certainly contributed to reducing our expenditures by alerting us to the error in paying State sales taxes on utilities. But is a Automatic Increase contract provision of 1.5% over CPI (or any amount for that matter) the fiscally responsible way to reward them? Wouldn’t a bonus (i.e., a one-time sharing of the savings) mechanism be more appropriate? Wouldn’t that provide incentive to L&N to identify/facilitate future cost savings for the Elizabeth?
To: Board of Directors
Elizabeth Condominium
From: Molly Frantz
Apartment #1007
Subject: Proposed Management Contract with Legum & Norman -- My Understanding, Comments, Concerns, Worries, and Alarm
Recommendation: Postpone the vote to accept the Legum & Norman (L&N) contract until the Board has the facts and figures to support an affirmative vote.
Committing to an unspecified -- dare I say, unknown -- six-figure payment to L&N is (1) fiscally irresponsible, (2) a breech of Board responsibility to the owners of the Elizabeth Condominium, and (3) and abuse of Board power. To fire employees (or whatever you want to call it to ease your consciences) without cause and in the absence of supporting cost-benefit analyses is (1) morally reprehensible, (2) fiscally irresponsible, (3) a breech of Board responsibility to the owners of the Elizabeth Condominium, and (4) and abuse of Board power.
The manner in which the Board of Directors of the Elizabeth Condominium has approached the need for and selection of a Professional Management firm brings to mind these quotes:
"Not only should you believe in what you’re doing/ But you should know what you’re doing." (Mason Williams F.C.C. Rapport (Liveright))
"This update on our recent discussions concerning a management firm for the Elizabeth Condominium is the first of what we expect to be a continuing transparent process." (emphasis added) (Woody Cunningham (For the Board) Letter to friends and neighbors dated February 24, 2009)
"Prior to that meeting owners will be provided the Board’s estimated one time costs as well as the annual costs for professional management." (emphasis added) (May 13, 2009 notice to Residents and Owners)
Thinking Behind My Recommendation:
1. The Board’s decision-making process has been anything but transparent, forthright, open-minded and amenable to the concerns of the owners.
Administrative services account for 10 percent of the Elizabeth Condominium’s operating budget. Eliminating this line item from the Budget significantly and irrefutably alters the management structure of the Elizabeth Condominium. This is not just simply a personnel issue involving the firing and hiring of individuals. And, as such, such a change deserves to be openly presented and discussed with the owners. I do not believe the Board has come anywhere close to doing this.
It is pretty hard to believe the Board was interested in what the owners had to say at their first public information meeting (January 14, 2009) about hiring a management firm. Mr. Cunningham’s remarks were general, although he did indicate the net cost of hiring outside management was estimated to be $67,000 more than what is currently paid to manage the Elizabeth Condominium. No gross cost estimate or limit on any contract was provided. Mr. Cunningham refused to discuss the ramifications on Elizabeth administrative staff/management structure, claiming this was a personnel matter that can only be discussed in Executive session. Owners were permitted to speak for 3 minutes. Immediately thereafter the Board voted (4 yes and 3 abstention votes) to proceed with contract talks with Legum and Norman.
The February 24, 2009 communication to owner’s (1) again mentioned the $67,000 net cost associated with hiring a management firm. This figure was now "whittled down" to $17,000 because the Board "saved" $50,000 by eliminated one security/doorman sift – an example of "apples" and "zebras" (not even "oranges") cost analysis and budget scoring! (2) Reaffirmed that only the Board has the authority to hire and fire Elizabeth employees, but failed to address the actual concern/question (as expressed at the January 14 meeting) -- i.e., what will happen to our Administrative Staff if their responsibilities are to be performed by L&N? This is a budget question, NOT a personnel question! (3) Agreed to explore a "hybrid" form of management with L&N, but nothing was said about what that meant. And (4) indicated that any management contract would not be long-term (e.g. 5 years). Of course, there was no indication of what the Board considered "a fair evaluation time" period.
At the April 21, 2009 Board Meeting, Mr. Cunningham indicated that drafts of a contract with L&N were being exchanged; he would provide NO information on the content; AFTER the contract was signed there will be an information meeting. He also informed the owners that there would be NO discussion or ballot initiative regarding the proposed contract/action at the Annual meeting.
May 6, 2009 Annual Board meeting. I did not attend but know it was ugly.
The May 13, 2009 notice for the upcoming May 26, 2009 open Board meeting "to discuss and vote on a proposed contract with Legum and Norman" indicates "Prior to that meeting owners will be provided the Board’s estimated one time cost as well as the annual costs for professional management."
At the May 20 meeting, Mr. Rhodes and Ms. Harrington, representing L&N, and Mr. Cunningham went to great lengths to provide the owners only general information about Legum and Norman, as a company, and the generic responsibilities and management structure L&N would provide the Elizabeth Condominium. There was no information forthcoming on the fate of the Elizabeth’s Administrative management structure/staff if the L&N contract is signed, even though these responsibilities would be assigned to L&N. After the discussion period, Mr. Cunningham distributed a "Cost Analysis for Legum and Norman Professional Management at the Elizabeth" that laid-out the basis for the $67,000 net cost figure that had been previously provided. Reflections on the May 20 meeting:
Mr. Cunningham stated that "there will be a complete staff restructuring" .
He also stated that he "expects there to be a substantial number of Elizabeth employees that will be supervised by a L&N Site Manager". The implication was that these employees will remain Elizabeth employees, however, the Cost Analysis indicates that there will be NO Elizabeth employees.
How many Elizabeth Administrative Staff positions are slated to be eliminated?
Accountant/Bookkeeper Position: The Cost Analysis’ narrative states that "Handling of all financial matters would be centralized at L&N Headquarters." The accompanying financial details clearly indicate that the accountant/bookkeeping position will be eliminated from theElizabeth’s budget and, presumably the management structure.
Manager and Assistant Manager Positions: The L&N handout identifies 15 "Specific job responsibilities of your Community Manager". These duplicate the responsibilities of our current Manager and Assistant Manager positions. Unlike the accountant/bookkeeping position, the Cost Analysis does not show any offsetting cost savings and, by inference, changes in the Elizabeth budget. Is the Board really proposing to pay for the same services twice? Or is the Board intending to fire these employees in Executive session once the contract is signed? Is this the "promised" transparency?
2. It is clear that the identified $117,978 cost estimate laid out in the Cost Analysis is no where near whatthe actual L&N contract payments will be. In fact, I have serious doubts the Board has any idea what the L&N contract will actually cost the Elizabeth Condominium.
The first-year costs of the L&N contract is either (1) grossly understated on the Cost Analysis ($117,978 or $89,850 Base annual fee plus $28,128 in per-incident service fees) or (2) the Elizabeth Condominium has been overpaying for the administrative responsibilities carried-out by the Elizabeth’s administrative staff ($217,777 based upon the FY 2009 Budget amount of $202,440 for Administration Salaries plus FICA of 7.58%, but excluding an unknown amount for insurance and other employee expenses) more than twice what L&N purports to be able to do the work for.
The L&N proposal calls for a part-time Community Manager, a full-time Site Manager, and a Resident Services Coordinator. Is the $89,850 Base annual fee really adequate to cover their costs? It is clear from the Cost Analysis and from Mr. Bressler’s questions at the May 20 meeting, that a significant portion of L&N’s payments will be generated by per-incident items. Is this how L&N will recoup the "cost deficit" for managing the Elizabeth? Does the Board know what these fees are, let alone what they are expected to amount to? Is there a reason the owners are not privy to this information?
How open-ended is the contract’s cost structure? Has the Board made provisions to have L&N provide the kind of information necessary to evaluate how effective and how economical L&N’s services are (i.e., to be able to carry out the "fair evaluation" referenced in the February 24, 2009 communication)? How detailed will that information be? What controls will be in place to monitor and -- if need be -- limit these service fees? For instance, the Cost Analysis indicates that all of the Elizabeth staff will actually be L&N staff. L&N charges an additional 2.5% service fee for Payroll Administration when the employee is an L&N employee as opposed non-L&N employee. Who is going to monitor these fees?
Has L&N ever provided the Board an estimate of what it’s contract will cost? The Cost Analysis provided the owners was done by our accounting firm (DeLeon and Stang) on January 4, 2009, even before the Board voted to enter into negotiations with L&N! The numerous NL (not listed or addressed) entries make it clear this can not possibly be a comprehensive cost estimate. Yet this is what was provided the owners, presumably in accordance with the May 13 notice. Why is the cost estimate coming from a third-party and not from L&N? Shouldn’t a firm as experienced as L&N be able to provide their own cost estimate of their proposed services? After all, if they can’t do that, what is so great about their expertise!
What due-diligence has the Board undertaken to assure itself that the L&N contract is the best approach to meeting the management challenges the Board is trying to fix? For instance, our financial system. Mr. Axelrad wrote, "While we have excellent personnel running and overseeing our finances, our system is antiquated." (undated correspondence, handed out at the May 20, 2009 meeting). Is hiring L&N the only way to modernize our finance system? What did the cost-comparison for upgrading/replacing our current software coupled with providing training to "our excellent personnel running and overseeing our fiances" show? Was such a comparative cost-analysis even performed? I have to think that there is more to L&N’s assuming the finance responsibilities than meets the eye (or the public record). Two explanations might be: (1) there are problems with our employee that the Board has previously failed to address and has now chosen contracting-out as the way to resolve the situation, or (2) L&N wants to perform the financial responsibilities because it will be a cash cow for them.
Why hasn’t the Board provided the owners accurate and current information regarding the estimated cost of the L&N contract and compared that to the offsetting line-items in the FY 2010 Budget? Is the Board even able to provide the owners such an analysis? This begs the question "What else isn’t the Board sharing with the owners?"
3. The proposed annual increase in the L&N contract (CPI + 1.5%) is incredibly generous and will yield double- to triple-digit percentage growth in L&N’s profits over a five-year span, while the overall payments to L&N will only increase modestly during the same 5 year period.
It is very interesting that the proposed L&N contact is not a cost plus contact. It made me wondered just what that 1.5% factor above CPI growth would mean to L&N’s bottom line. I did three analyses -- assuming L&N had build-in a profit margin in the first year of 1%, 5% and 10%. An initial 1% profit margin grows to 6.5% of contract payments by the 5th year, a 700% growth in profits. A 5% initial profit margin grows to 10.3% of contract payments by the 5th year, or a 155% growth; and a 10% initial profit margin grows to 15% of contract payments by the 5th year, or an 86% growth. The total payments to L&N grow only 30.7% during the same period. (Spreadsheet attached to the Board Member’s hard copies).
The disproportionate growth in profits reflects the wonderful power of compound interest, especially since the 1.5% factor is applied to the total cost of the contract, not just to the profit portion. I can’t imagine why the Elizabeth would agree to an automatic increase in the L&N’s profit margin without requiring a commensurate increase in benefits for the Elizabeth. Why would the Elizabeth Board agree to pay more for an actual service than its actual cost (remember, the profit is already built-into that "cost")! Am I missing something here? One of the arguments for hiring L&N is to have access to their "best-practices". Well, shouldn’t the Board also use "best practices" in structuring the contract? There is a reason for cost-plus contracting -- it keeps down the gaming of the system.
Besides this wonderfully profitable profit margin windfall for L&N, an automatic annual increase above costs would seem to discourage any incentive for efficiency. I strongly suspect that the proposed contract does not contain any provision/expectations for productivity savings. To the extent the L&N achieves productivity savings, these would all be retained by L&N.
There are "Value-Added" reasons to hire L&N. Wednesday evening Mr. Rhodes listed the following things to illustrate what L&N "brings to the table": access to more resources; economy of scale when purchasing things like energy, insurance, trash; access to best practice knowledge and expertise; cross-training of L&N employees as well as back-up staff. And L&N has certainly contributed to reducing our expenditures by alerting us to the error in paying State sales taxes on utilities. But is a Automatic Increase contract provision of 1.5% over CPI (or any amount for that matter) the fiscally responsible way to reward them? Wouldn’t a bonus (i.e., a one-time sharing of the savings) mechanism be more appropriate? Wouldn’t that provide incentive to L&N to identify/facilitate future cost savings for the Elizabeth?
Professional Management Pros & Cons
What is professional management?
Why do I bring up this question when the Elizabeth Condominium Association (ECA) just had an informational briefing May 21, 2009, on professional management by Legum & Norman, the firm that is under serious consideration to become the supplier of building management services? The reason is that most of the questions asked by ECA members attending the meeting indicated that despite the clearly explained details and handouts from Legum & Norman principals John Rhodes (President) and Brenda Harrington (executive Vice President, Operations), ECA members for the most part do not understand the responsibilities of those who provide management services (no matter whether the services are by a in-house manager or a professional management company’s employee who serves as the ECA manager) versus the responsibilities of our elected Board of Directors.
THE PLAN: SITE AND COMMUNITY MANAGERS
Let me recap briefly the organizational structure Legum & Norman (L & N) have been discussing with our Board members. L & N would put in place a site manager (this is what we know as our in-house manager) and a community manager. Why? Let me first offer this example from those who oppose professional management: some people have said (I will paraphrase here), including our current Board Treasurer, that our current manager has too much to do and that’s why we don’t get proper maintenance of the building. The thought was that our manager should be concentrating on contracts while her assistant should be attending to the daily issues. The belief is for those who support in-house management that our manager should act as a community liaison while the assistant manager should be the site manager.
Now here is what L & N lists as the responsibilities of the community manager:
• Supervise the site manager.
• Visit the property at least once a week.
• Approve all payments on behalf of the property.
• Inspect the property monthly and prepare inspection report.
• Prepare and present monthly management and financial reports.
• Attend Board of Director meetings.
• Coordinate and attend the annual meeting of owners.
• Communicate frequently with the Board’s liaison.
• Develop specifications for service contracts and bid those contracts.
• Analyze contract proposals and make recommendations to the Board.
• Implement and supervise contracts.
• Purchase equipment and supplies in accordance with the budget and an approved purchase order system.
• Administer community covenants and rule enforcement procedures.
• Investigate and follow up resident complaints.
• File insurance claims and supervise restoration of property as appropriate.
THE ARGUMENTS FOR IN-HOUSE MANAGEMENT
To be fair to those supporting in-house management, I have heard a number of these proponents say that they advocate restructuring our staff. This means that our current manager and assistant manage would be replaced by new hires. Those of us who have been in our manager’s office know that the way her office looks (cluttered, unorganized, and unclean) stands as a metaphor for the service we get and the way the building is deteriorating.
Although there are those that say all they have to do is go tell our current manager about a problem and the problem will be addressed, I find that most of the fixes are cosmetic and do not treat the source of the problem. For example, one resident owner told me she saw mold on the ceiling tiles in the west lobby and as soon as the manager heard about the problem, she had the mold cleaned up. I’m not sure if the tile was washed off or replaced but what about the source of moisture that invariably will recreate the mold in a visible place? Clearly the source of the problem has to be addressed by our Board of Directors to fix the long-term problem but what recommendations did our manager present to the Board for how to deal with the mold issue? I don’t know but so far I haven’t heard anything in monthly board meetings to believe that our manager has been thinking about how to resolve water, moisture, and mold problems. Anyone who has owned a single family dwelling for a long period time will be able to tell you that the longer a problem is left untreated, the more expensive the fix will be. Long-term neglect can also go beyond the possibility of economical repair and mean demolition and reconstruction.
Also let me address the recently failed service we experienced with a security guard serving as doorman. Among the tasks the doorman was suppose to perform included keeping the driveway clear of parked vehicles, assisting people with packages as needed, and being a visible security presence. Many residents, including me, were unhappy with the performance of those providing this service. Our current manager, tasked with managing the security services contract, failed to be proactive and call Securitas (the company we currently employ for security personnel) and tell them to replace the guards who were not performing as expected. While some might blame this on the Board for failing to tell our manager what to do, the question that comes to my mind is what does it take to have smart management?
PROFESSIONAL MANAGEMENT & SAVING MONEY
What does L & N bring to the table that in-house management supervised by our Board of Directors would not offer? It brings years of experience, a network of resources that mean economical advantages, and an objective point of view backed up by a wide and experienced community. Let me say clearly that we are already reaping the financial benefit of possibly hiring L & N. They told our Board that we were paying utility taxes that we should not be paying. Our President announced at the meeting that we would be receiving a refund of $89,000 (this goes back three years), which covers most of the cost in the first year of hiring L & N. Going with a professional management company means the ECA does not have to re-invent the wheel. If we have water pouring into walls in our building, L & N has a vetted list of contractors to evaluate the problem as well as an archive of experience accrued from managing other buildings.
Now back to the problem of ECA members not understanding what a professional management company does versus what our Board does or would do. The main questions that came up in the May 21 meeting is who is responsible for hiring and firing staff who are or would be managing our building? The Board President has explained that the Board has the final word on personnel. L & N would make their recommendations and the Board would consider those recommendations.
One other thing I wanted to bring up is that some ECA members tried to say that L & N has not done a good job in some of neighboring condominiums such as 4620 North Park Avenue. The word I have heard on the street from people who live in 4620 is that they love the management provided by L & N. One 4620 resident I spoke to also owns commercial property here at the Elizabeth and she is completely fed up with the lack of services here at the Elizabeth where garbage smells waft into the arcade and dogs urinate on the walls.
No one knows what the future will bring and I am not so naïve to think that just hiring L & N will immediately bring the Elizabeth back to its former status of a luxury high-rise building. Who is hired to be our site manager will make a significant difference. Getting 21st century services such a website where we can order usual repairs like fixing a leaking faucet won’t happen in the first year’s contract. The thing is before the building falls down, hiring a professional management company such as Legum and Norman is a big step in the right direction. Let’s hear it for spending our money wisely, maintaining our property values, and saving us from paying unnecessary expenditures!
Why do I bring up this question when the Elizabeth Condominium Association (ECA) just had an informational briefing May 21, 2009, on professional management by Legum & Norman, the firm that is under serious consideration to become the supplier of building management services? The reason is that most of the questions asked by ECA members attending the meeting indicated that despite the clearly explained details and handouts from Legum & Norman principals John Rhodes (President) and Brenda Harrington (executive Vice President, Operations), ECA members for the most part do not understand the responsibilities of those who provide management services (no matter whether the services are by a in-house manager or a professional management company’s employee who serves as the ECA manager) versus the responsibilities of our elected Board of Directors.
THE PLAN: SITE AND COMMUNITY MANAGERS
Let me recap briefly the organizational structure Legum & Norman (L & N) have been discussing with our Board members. L & N would put in place a site manager (this is what we know as our in-house manager) and a community manager. Why? Let me first offer this example from those who oppose professional management: some people have said (I will paraphrase here), including our current Board Treasurer, that our current manager has too much to do and that’s why we don’t get proper maintenance of the building. The thought was that our manager should be concentrating on contracts while her assistant should be attending to the daily issues. The belief is for those who support in-house management that our manager should act as a community liaison while the assistant manager should be the site manager.
Now here is what L & N lists as the responsibilities of the community manager:
• Supervise the site manager.
• Visit the property at least once a week.
• Approve all payments on behalf of the property.
• Inspect the property monthly and prepare inspection report.
• Prepare and present monthly management and financial reports.
• Attend Board of Director meetings.
• Coordinate and attend the annual meeting of owners.
• Communicate frequently with the Board’s liaison.
• Develop specifications for service contracts and bid those contracts.
• Analyze contract proposals and make recommendations to the Board.
• Implement and supervise contracts.
• Purchase equipment and supplies in accordance with the budget and an approved purchase order system.
• Administer community covenants and rule enforcement procedures.
• Investigate and follow up resident complaints.
• File insurance claims and supervise restoration of property as appropriate.
THE ARGUMENTS FOR IN-HOUSE MANAGEMENT
To be fair to those supporting in-house management, I have heard a number of these proponents say that they advocate restructuring our staff. This means that our current manager and assistant manage would be replaced by new hires. Those of us who have been in our manager’s office know that the way her office looks (cluttered, unorganized, and unclean) stands as a metaphor for the service we get and the way the building is deteriorating.
Although there are those that say all they have to do is go tell our current manager about a problem and the problem will be addressed, I find that most of the fixes are cosmetic and do not treat the source of the problem. For example, one resident owner told me she saw mold on the ceiling tiles in the west lobby and as soon as the manager heard about the problem, she had the mold cleaned up. I’m not sure if the tile was washed off or replaced but what about the source of moisture that invariably will recreate the mold in a visible place? Clearly the source of the problem has to be addressed by our Board of Directors to fix the long-term problem but what recommendations did our manager present to the Board for how to deal with the mold issue? I don’t know but so far I haven’t heard anything in monthly board meetings to believe that our manager has been thinking about how to resolve water, moisture, and mold problems. Anyone who has owned a single family dwelling for a long period time will be able to tell you that the longer a problem is left untreated, the more expensive the fix will be. Long-term neglect can also go beyond the possibility of economical repair and mean demolition and reconstruction.
Also let me address the recently failed service we experienced with a security guard serving as doorman. Among the tasks the doorman was suppose to perform included keeping the driveway clear of parked vehicles, assisting people with packages as needed, and being a visible security presence. Many residents, including me, were unhappy with the performance of those providing this service. Our current manager, tasked with managing the security services contract, failed to be proactive and call Securitas (the company we currently employ for security personnel) and tell them to replace the guards who were not performing as expected. While some might blame this on the Board for failing to tell our manager what to do, the question that comes to my mind is what does it take to have smart management?
PROFESSIONAL MANAGEMENT & SAVING MONEY
What does L & N bring to the table that in-house management supervised by our Board of Directors would not offer? It brings years of experience, a network of resources that mean economical advantages, and an objective point of view backed up by a wide and experienced community. Let me say clearly that we are already reaping the financial benefit of possibly hiring L & N. They told our Board that we were paying utility taxes that we should not be paying. Our President announced at the meeting that we would be receiving a refund of $89,000 (this goes back three years), which covers most of the cost in the first year of hiring L & N. Going with a professional management company means the ECA does not have to re-invent the wheel. If we have water pouring into walls in our building, L & N has a vetted list of contractors to evaluate the problem as well as an archive of experience accrued from managing other buildings.
Now back to the problem of ECA members not understanding what a professional management company does versus what our Board does or would do. The main questions that came up in the May 21 meeting is who is responsible for hiring and firing staff who are or would be managing our building? The Board President has explained that the Board has the final word on personnel. L & N would make their recommendations and the Board would consider those recommendations.
One other thing I wanted to bring up is that some ECA members tried to say that L & N has not done a good job in some of neighboring condominiums such as 4620 North Park Avenue. The word I have heard on the street from people who live in 4620 is that they love the management provided by L & N. One 4620 resident I spoke to also owns commercial property here at the Elizabeth and she is completely fed up with the lack of services here at the Elizabeth where garbage smells waft into the arcade and dogs urinate on the walls.
No one knows what the future will bring and I am not so naïve to think that just hiring L & N will immediately bring the Elizabeth back to its former status of a luxury high-rise building. Who is hired to be our site manager will make a significant difference. Getting 21st century services such a website where we can order usual repairs like fixing a leaking faucet won’t happen in the first year’s contract. The thing is before the building falls down, hiring a professional management company such as Legum and Norman is a big step in the right direction. Let’s hear it for spending our money wisely, maintaining our property values, and saving us from paying unnecessary expenditures!
Saturday, May 23, 2009
Comments on Professonal Management
COMMENTS ON PROFESSIONAL MANAGEMENT
Because of my teaching schedule, I am unable to attend the May 20, Legum & Norman presentation and discussion. I am convinced that our condominium needs to retain professional management and that Legum & Norman is the right firm for that purpose. In my absence, I am submitting a brief summary of the compelling reasons why we should retain Legum & Norman.
First, it bears emphasis that our building’s physical structure is no longer new or even close to new. For example, our pipes leak and have even spewed filth into apartments, the latter being a failure on our part until now to know that our pipes need to be cleaned. Our structure leaks, sometimes to a dangerous extent. Our equipment is aging. While we have excellent personnel running and overseeing our finances, our system is antiquated. We do not have the breath and depth of support that Legum & Norman can provide. In short, we need professional management’s knowledge and support.
It’s been said that professional management is costly, both due to one-time costs of the transfer and continuing costs. While there are costs associated with the preservation and enhancement in the value of our property that professional management furthers, savings are available as well: Legum & Norman can operate our financial systems in a more modern manner that actually costs less than our present system. There are savings due to their ability to negotiate contracts using their very considerable bargaining power. In a testament to Legum & Norman’s integrity as well as a fine example of the virtues of professional management, Legum & Norman has already, without compensation, pointed us to a very substantial savings: We have needlessly been paying sales tax on costs such as electricity and gas. The gas and electric utilities have already agreed to stop billing us for these taxes (estimated to save over $40 thousand this year alone--and for years to come) and will process at least partial refund requests for past payments.
During the past year, the Board has not been living in the past or tied to systems in place 20 years ago, having finally obtained a decades overdue outside reserve study, and commenced a much needed (just look around you, from floor to ceiling) renovation, this is no substitute for professional management. We need to accept the virtue of delegating day-to-day management (with Board oversight) to professionals rather than seeking to maintain the dead hand of control over a haphazard, poorly organized and insufficiently functioning support operation. Past Boards have had plenty of time to match the advantages of professional management; they did not! It’s a fantasy to think that our current deterioration, compared to other condominiums in our neighborhood, will change without professional management. We have many fine employees; professional management will enable us to maximize their efforts for all our benefit.
The fear of this change that is implanted in some of our owners warrants comment. It is doubly unfortunate that much misinformation has been spread sending some owners into a veritable frenzy of panicky opposition. I urge you to think for yourself. If you do, I have little doubt but that objective consideration of the facts, including the examples recited above, will lead to your support for moving our condominium to professional management.
Jeffrey Axelrad
Because of my teaching schedule, I am unable to attend the May 20, Legum & Norman presentation and discussion. I am convinced that our condominium needs to retain professional management and that Legum & Norman is the right firm for that purpose. In my absence, I am submitting a brief summary of the compelling reasons why we should retain Legum & Norman.
First, it bears emphasis that our building’s physical structure is no longer new or even close to new. For example, our pipes leak and have even spewed filth into apartments, the latter being a failure on our part until now to know that our pipes need to be cleaned. Our structure leaks, sometimes to a dangerous extent. Our equipment is aging. While we have excellent personnel running and overseeing our finances, our system is antiquated. We do not have the breath and depth of support that Legum & Norman can provide. In short, we need professional management’s knowledge and support.
It’s been said that professional management is costly, both due to one-time costs of the transfer and continuing costs. While there are costs associated with the preservation and enhancement in the value of our property that professional management furthers, savings are available as well: Legum & Norman can operate our financial systems in a more modern manner that actually costs less than our present system. There are savings due to their ability to negotiate contracts using their very considerable bargaining power. In a testament to Legum & Norman’s integrity as well as a fine example of the virtues of professional management, Legum & Norman has already, without compensation, pointed us to a very substantial savings: We have needlessly been paying sales tax on costs such as electricity and gas. The gas and electric utilities have already agreed to stop billing us for these taxes (estimated to save over $40 thousand this year alone--and for years to come) and will process at least partial refund requests for past payments.
During the past year, the Board has not been living in the past or tied to systems in place 20 years ago, having finally obtained a decades overdue outside reserve study, and commenced a much needed (just look around you, from floor to ceiling) renovation, this is no substitute for professional management. We need to accept the virtue of delegating day-to-day management (with Board oversight) to professionals rather than seeking to maintain the dead hand of control over a haphazard, poorly organized and insufficiently functioning support operation. Past Boards have had plenty of time to match the advantages of professional management; they did not! It’s a fantasy to think that our current deterioration, compared to other condominiums in our neighborhood, will change without professional management. We have many fine employees; professional management will enable us to maximize their efforts for all our benefit.
The fear of this change that is implanted in some of our owners warrants comment. It is doubly unfortunate that much misinformation has been spread sending some owners into a veritable frenzy of panicky opposition. I urge you to think for yourself. If you do, I have little doubt but that objective consideration of the facts, including the examples recited above, will lead to your support for moving our condominium to professional management.
Jeffrey Axelrad
Wednesday, May 20, 2009
Refurbishment Committee Launches
May 19, 2009, the two branches of the ECA Refurbishment Committee met to begin the process of serving the greater community. By two branches, I mean there is the lead committee of co-chairs Judy Barth & Judy Gann as well as Alexandra Kielty and then there is the "citizen" committee serving as advisors to the lead committee. The lead committee will be interacting with the Hartman Design Group lead by Phyllis Hartman.
Shortly I will receive written notes from the lead committee and these will be posted here at the The Elizabeth Blog.
Briefly, I want to say I was impressed with the first meeting and how the exchange went between all the members of the joint committee. And there was a lot of excitement about ideas coming from Ms. Hartman who began working here with her people on April 7. Stay tuned for more news.
Shortly I will receive written notes from the lead committee and these will be posted here at the The Elizabeth Blog.
Briefly, I want to say I was impressed with the first meeting and how the exchange went between all the members of the joint committee. And there was a lot of excitement about ideas coming from Ms. Hartman who began working here with her people on April 7. Stay tuned for more news.
Sunday, May 17, 2009
THE ELIZABETH VOTING PROCESS
As both a member of the Nominating Committee and as a Judge/Counter of votes, I had the opportunity to view the voting procedures from the “inside” over the past several weeks.
In those capacities I recognized opportunities to strengthen the procedures and give more certainty to the legitimacy of the voting process and the outcome.
First, it is important that the Nominating Committee responsibility be expanded beyond the token task of recruiting candidates. The Nominating Committee should be given authority and time to authenticate the credentials and the claims of candidates. In today’s Internet world, information is readily available. Furthermore, we currently offer candidates an open forum to broadcast claims and charges via the distribution of biographies and placement on the display board in the lobby. This channel must be censored for TRUTH.
It is my suggestion that any discrepancies unearthed by the Nominating Committee and concurred upon by a majority of the Committee, be brought to the attention of the offending candidate. That candidate would then have the opportunity to amend his/her bio before publication. Should the candidate choose NOT to do so, it would be the duty of the Nominating Committee to author a document addressing the offending issue(s) and include it in the voting packet and post it as well on the display board in the lobby. Said statement would also be published on the Elizabeth blog.
Additionally, any electioneering materials addressed to residents and distributed to apartment boxes must pass the same tests. Distribution of campaign materials by means of hand delivery under doors should be disallowed and considered an invasion of personal privacy.
The handling of proxy votes is, to say the least, a very vulnerable area for error, unintended or not.
Currently the proxy form is included within each owner’s voting packet. Resident owners receive these packets via the their apartment boxes. Owners choosing to vote by proxy have no prescribed procedure for returning the voted proxy other than to give it to the assigned proxy holder. Or it can be handed to the receptionist in a sealed or unsealed envelope, folded or unfolded, mailed to the Elizabeth or given to the building manage, assistant manager or bookkeeper.
Non-resident owners may do the same but usually mail it to the Elizabeth where it is then held for the proxy assignee who then transposes the vote to the ballot on voting night.
Arcade owners presumably are mailed their voting packets. There is no clarity on this procedure. At least one Arcade owner stated that he was handed his proxy by a candidate.
The proxy process begs for rigid, definitive, overseen structure. Sans such Board legislation, the legitimacy of future vote outcomes will continue to bear the stigma of doubt.
The raucous, unwieldy, last minute harangue of receiving and recording proxy votes at 7:30pm on voting night without any authentification is an exercise in bedlam and seriously damages the integrity of the process. A new method designed to protect the surety of each proxy vote is imperative.
The process of transferring proxy votes to ballots is hectic and absolutely invites opportunities for errors and veiled discrepancies. To do this correctly and without undo pressure, proxies should be counted prior to election night and held under lock and key until election night. It would be the responsibility of the Judges to see that proxies are distributed to assignees and returned in time for counting. A fax copy of each proxy would be made and retained by the Judges and compared with the returned copy to be certain they comply with the owner’s direction.
Should there be a discrepancy, the Judges would have the time to verify
the change or otherwise. If it could not be confirmed, the original proxy vote of the owner would be counted. Each proxy would require the initials of at least two judges. Keep in mind that by this method there is no need to transfer votes to ballots, voting is recorded directly from the proxy and the proxy itself is retained for record. In those cases where the proxy owner invests the proxy holder with his/her voting discretion, that proxy would be counted and the blank fax copy attached.
It seems to me that the ballot counting process offers opportunity for error. It is done at the end of the night; under extreme time pressure and the only control is moderate spot checking. I suggest that the three counters CHANGE computer recorders and do a full recount of each other’s ballots and proxies.
Finally, I have concern about the integrity of Arcade owner voting. NO CANDIDATE should have access to these proxies unless the proxy owner designates the candidate as his/her proxy holder. To insure that such an infraction does not occur, all Arcade and non-resident owner voting packets should be sent via Registered Mail with return receipt requested.
Likely there are better methods for instilling a higher measure of confidence in the integrity of our voting process. That said, I think the well being of the Elizabeth Association and the value of our individual property investment demands that an up dated, more transparent and accurately audited procedure be deployed.
It may be more tedious and time consuming, but the confidence of the owners in the veracity of this current process is seriously in doubt. I think it behooves the Board to form a committee to pursue that objective…not into infinity.
G.M. Feldman, 1819
In those capacities I recognized opportunities to strengthen the procedures and give more certainty to the legitimacy of the voting process and the outcome.
First, it is important that the Nominating Committee responsibility be expanded beyond the token task of recruiting candidates. The Nominating Committee should be given authority and time to authenticate the credentials and the claims of candidates. In today’s Internet world, information is readily available. Furthermore, we currently offer candidates an open forum to broadcast claims and charges via the distribution of biographies and placement on the display board in the lobby. This channel must be censored for TRUTH.
It is my suggestion that any discrepancies unearthed by the Nominating Committee and concurred upon by a majority of the Committee, be brought to the attention of the offending candidate. That candidate would then have the opportunity to amend his/her bio before publication. Should the candidate choose NOT to do so, it would be the duty of the Nominating Committee to author a document addressing the offending issue(s) and include it in the voting packet and post it as well on the display board in the lobby. Said statement would also be published on the Elizabeth blog.
Additionally, any electioneering materials addressed to residents and distributed to apartment boxes must pass the same tests. Distribution of campaign materials by means of hand delivery under doors should be disallowed and considered an invasion of personal privacy.
The handling of proxy votes is, to say the least, a very vulnerable area for error, unintended or not.
Currently the proxy form is included within each owner’s voting packet. Resident owners receive these packets via the their apartment boxes. Owners choosing to vote by proxy have no prescribed procedure for returning the voted proxy other than to give it to the assigned proxy holder. Or it can be handed to the receptionist in a sealed or unsealed envelope, folded or unfolded, mailed to the Elizabeth or given to the building manage, assistant manager or bookkeeper.
Non-resident owners may do the same but usually mail it to the Elizabeth where it is then held for the proxy assignee who then transposes the vote to the ballot on voting night.
Arcade owners presumably are mailed their voting packets. There is no clarity on this procedure. At least one Arcade owner stated that he was handed his proxy by a candidate.
The proxy process begs for rigid, definitive, overseen structure. Sans such Board legislation, the legitimacy of future vote outcomes will continue to bear the stigma of doubt.
The raucous, unwieldy, last minute harangue of receiving and recording proxy votes at 7:30pm on voting night without any authentification is an exercise in bedlam and seriously damages the integrity of the process. A new method designed to protect the surety of each proxy vote is imperative.
The process of transferring proxy votes to ballots is hectic and absolutely invites opportunities for errors and veiled discrepancies. To do this correctly and without undo pressure, proxies should be counted prior to election night and held under lock and key until election night. It would be the responsibility of the Judges to see that proxies are distributed to assignees and returned in time for counting. A fax copy of each proxy would be made and retained by the Judges and compared with the returned copy to be certain they comply with the owner’s direction.
Should there be a discrepancy, the Judges would have the time to verify
the change or otherwise. If it could not be confirmed, the original proxy vote of the owner would be counted. Each proxy would require the initials of at least two judges. Keep in mind that by this method there is no need to transfer votes to ballots, voting is recorded directly from the proxy and the proxy itself is retained for record. In those cases where the proxy owner invests the proxy holder with his/her voting discretion, that proxy would be counted and the blank fax copy attached.
It seems to me that the ballot counting process offers opportunity for error. It is done at the end of the night; under extreme time pressure and the only control is moderate spot checking. I suggest that the three counters CHANGE computer recorders and do a full recount of each other’s ballots and proxies.
Finally, I have concern about the integrity of Arcade owner voting. NO CANDIDATE should have access to these proxies unless the proxy owner designates the candidate as his/her proxy holder. To insure that such an infraction does not occur, all Arcade and non-resident owner voting packets should be sent via Registered Mail with return receipt requested.
Likely there are better methods for instilling a higher measure of confidence in the integrity of our voting process. That said, I think the well being of the Elizabeth Association and the value of our individual property investment demands that an up dated, more transparent and accurately audited procedure be deployed.
It may be more tedious and time consuming, but the confidence of the owners in the veracity of this current process is seriously in doubt. I think it behooves the Board to form a committee to pursue that objective…not into infinity.
G.M. Feldman, 1819
Thursday, May 14, 2009
Summary of May 2009 Elizabeth Condo Board Meeting
The May meeting of Elizabeth Condo Board focused on such items as the upcoming contract for professional management with Legum & Norman, cessation of paying utility taxes, significant contracts that may be replaced with new companies, building security, and a long list of problems in the building. Here is a thumbnail list of what took place.
President Woody Cunningham began meeting by referring to the annual meeting and the motion to remove him. He said of the votes cast for his removal, there were only 13 votes or 3.4% of the association membership to remove him.
Residents need to be vigilant for water problems in their units. Pinhole leaks are now to happening more frequently as the pipes age.
The meeting on professional management will be a presentation May 20 by Legum and Norman. They will address their proposed management plan for the Elizabeth. The agenda will consist of a presentation by key officers of Legum and Norman, followed by an opportunity for owners to ask questions related to external management. After that meeting, owners are encouraged to provide comments to the Board. An open Board meeting will take place May 26 where the Board will meet in open session to discuss and vote on a proposed contract with Legum and Norman. Prior to that meeting, owners will be provided the Board's estimated one-time costs as well as the annual costs for professional management.
Charles Bressler expressed concern about security during moves when the garage door is open for extended periods of time. He suggested that when there is a move into or out of the building, that the driver be required to leave his license at the front desk, and that it not be returned until after the move is completed. At that time, the front desk should signal the engineers to unlock the elevator and close the garage door.
Contract status:
Building Insurance policy (John Manougian Insurance/Fireman's Fund) - approved $161,028.
Trash Away, Inc - $2671 per month approved.
Complete Building Services - $2791 per month approved.
Structural Preservation Contract for G-3 - $30,000 additional to cover extend contract and cover new work required - approved.
Structural Preservation Systems Contract for water penetration in building - $6000 - approved to install drain pan in apartment 06.
AcquaFit contract was not renewed. Asked for competing bids. (Complaints about lifeguard who was not attentive because he focused on his PDA and laptop rather than swimmers.)
Clean Inc was not approved. Board is to get more bids.
Landscaping Maintenance contract was not approved. Board is to get more bids. Judi Barth expressed concern that there has been controversy about the design of the landscaping in front of the building. And, as long as we were going to take bids on the maintenance contract, Judi asked that landscape design be addressed as well.
Jerry Feldman gave Board comments about election process and need for reform.
Maurice Trebach reported that he believes that we can utilize the energy tax credits, that is, owners can claim them on their returns. He is getting the specific information to the Board, as well as the actual forms to make such claims.
Items needing attention as reported by Sharon Bobb & Karren Alenier:
a. Need for better data collection and a complete database on owners, renters, pets etc.
b. Number of renters reported is not accurate...our anecdotal data gathered during our campaigning is that it is much more.
c. Sample rent contract distributed by ECA is not in conformance with Montgomery County law. We need a new legally sound document, and suggest Jason be involved.
d. Some arcade owners reported that they have no fire horns in their units. They cannot hear our fire horns and we are not warned in the event of a fire in the Arcade units.
e. Board Meetings & Arcade Attendance: Some Arcade owners stated that they have been told by ECA management that only the person whose name appears on their legal ownership documents can come to Board meetings. However, renters can come to Board meetings and serve on the Board. Husbands and significant others living with owners can come to Board meetings. A notice needs to go to Arcade owners explaining that anyone working for their business can be designated to represent the business at Board meetings.
f. Arcade area is not kept clean and the smell from the trash area invades the Arcade during hot weather.
g. Dogs are urinating on Arcade walls and defecating in the Arcade area. This devalues our property and must be addressed beyond what the House Rules call for, because in order to invoke the House Rules, you must be able to identify the offending dog/dog owner, and this is often impossible to do.
h. A certain number of the original toilets spontaneously break each year, causing floods in other apartments. Asked that the condominium put out a notice alerting residents to this problem. Also asked that management negotiate a bulk price for new toilets (as they did with duct cleaning by Americlean) and offer this as an incentive to owners to replace the original toilets.
i. Suggested we employ an exercise physiologist on contract for about 3 hours to survey our Exercise Room and equipment, recommend which equipment should be replaced and what new equipment to buy, as users of this facility usually favor one or two pieces of equipment. Also, this contractor should indicate where equipment should be placed in this facility for effective use. Those using this equipment to do circuit-weight training exercise muscle groups in a particular order. The Exercise Room is an important amenity that attracts new buyers to this building and improves our property values.
Controversy over dogs
East side residents said there is constantly dog urine and occasionally feces on the floors of the elevators. Residents called for the Board to address this issue squarely. There was discussion about how to define a small dog as our house rules currently say residents may have small dogs. Sharon Bobb suggested that we use the definition of small dog as stated by the American Kennel Association. Another owner suggested that we go back to requiring that dogs be carried into and out of the building to avoid dogs eliminating on our common area floors. Owners commenting on this issue included: Barbara Sandler, Helen Soderberg, Judy Gann, Jerry Feldman, Joan Rosenhbach, and Stephanie Olshan.
President Woody Cunningham began meeting by referring to the annual meeting and the motion to remove him. He said of the votes cast for his removal, there were only 13 votes or 3.4% of the association membership to remove him.
Residents need to be vigilant for water problems in their units. Pinhole leaks are now to happening more frequently as the pipes age.
The meeting on professional management will be a presentation May 20 by Legum and Norman. They will address their proposed management plan for the Elizabeth. The agenda will consist of a presentation by key officers of Legum and Norman, followed by an opportunity for owners to ask questions related to external management. After that meeting, owners are encouraged to provide comments to the Board. An open Board meeting will take place May 26 where the Board will meet in open session to discuss and vote on a proposed contract with Legum and Norman. Prior to that meeting, owners will be provided the Board's estimated one-time costs as well as the annual costs for professional management.
Charles Bressler expressed concern about security during moves when the garage door is open for extended periods of time. He suggested that when there is a move into or out of the building, that the driver be required to leave his license at the front desk, and that it not be returned until after the move is completed. At that time, the front desk should signal the engineers to unlock the elevator and close the garage door.
Contract status:
Building Insurance policy (John Manougian Insurance/Fireman's Fund) - approved $161,028.
Trash Away, Inc - $2671 per month approved.
Complete Building Services - $2791 per month approved.
Structural Preservation Contract for G-3 - $30,000 additional to cover extend contract and cover new work required - approved.
Structural Preservation Systems Contract for water penetration in building - $6000 - approved to install drain pan in apartment 06.
AcquaFit contract was not renewed. Asked for competing bids. (Complaints about lifeguard who was not attentive because he focused on his PDA and laptop rather than swimmers.)
Clean Inc was not approved. Board is to get more bids.
Landscaping Maintenance contract was not approved. Board is to get more bids. Judi Barth expressed concern that there has been controversy about the design of the landscaping in front of the building. And, as long as we were going to take bids on the maintenance contract, Judi asked that landscape design be addressed as well.
Jerry Feldman gave Board comments about election process and need for reform.
Maurice Trebach reported that he believes that we can utilize the energy tax credits, that is, owners can claim them on their returns. He is getting the specific information to the Board, as well as the actual forms to make such claims.
Items needing attention as reported by Sharon Bobb & Karren Alenier:
a. Need for better data collection and a complete database on owners, renters, pets etc.
b. Number of renters reported is not accurate...our anecdotal data gathered during our campaigning is that it is much more.
c. Sample rent contract distributed by ECA is not in conformance with Montgomery County law. We need a new legally sound document, and suggest Jason be involved.
d. Some arcade owners reported that they have no fire horns in their units. They cannot hear our fire horns and we are not warned in the event of a fire in the Arcade units.
e. Board Meetings & Arcade Attendance: Some Arcade owners stated that they have been told by ECA management that only the person whose name appears on their legal ownership documents can come to Board meetings. However, renters can come to Board meetings and serve on the Board. Husbands and significant others living with owners can come to Board meetings. A notice needs to go to Arcade owners explaining that anyone working for their business can be designated to represent the business at Board meetings.
f. Arcade area is not kept clean and the smell from the trash area invades the Arcade during hot weather.
g. Dogs are urinating on Arcade walls and defecating in the Arcade area. This devalues our property and must be addressed beyond what the House Rules call for, because in order to invoke the House Rules, you must be able to identify the offending dog/dog owner, and this is often impossible to do.
h. A certain number of the original toilets spontaneously break each year, causing floods in other apartments. Asked that the condominium put out a notice alerting residents to this problem. Also asked that management negotiate a bulk price for new toilets (as they did with duct cleaning by Americlean) and offer this as an incentive to owners to replace the original toilets.
i. Suggested we employ an exercise physiologist on contract for about 3 hours to survey our Exercise Room and equipment, recommend which equipment should be replaced and what new equipment to buy, as users of this facility usually favor one or two pieces of equipment. Also, this contractor should indicate where equipment should be placed in this facility for effective use. Those using this equipment to do circuit-weight training exercise muscle groups in a particular order. The Exercise Room is an important amenity that attracts new buyers to this building and improves our property values.
Controversy over dogs
East side residents said there is constantly dog urine and occasionally feces on the floors of the elevators. Residents called for the Board to address this issue squarely. There was discussion about how to define a small dog as our house rules currently say residents may have small dogs. Sharon Bobb suggested that we use the definition of small dog as stated by the American Kennel Association. Another owner suggested that we go back to requiring that dogs be carried into and out of the building to avoid dogs eliminating on our common area floors. Owners commenting on this issue included: Barbara Sandler, Helen Soderberg, Judy Gann, Jerry Feldman, Joan Rosenhbach, and Stephanie Olshan.
April 2009 MInutes of ECA Board Meeting
MINUTES OF REGULAR MEETING OF THE BOARD OF DIRECTORS
OF THE ELIZABETH CONDOMINIUM ASSOCIATION, INC.
MINUTES of a Regular Meeting of the Board of Directors of the Elizabeth
Condominium Association, Inc. (“Association”), held on April 21, 2009 in the
Party Room of the Condominium pursuant to notice in accordance with the
Bylaws. Present were: George “Woody” Cunningham, Jeffrey Axelrad, Judith
Gann, Monique Fridell, Alexandra Kielty, Judith Barth and Alfred Muller.
The President called the meeting to order at 7:35 p.m.
MINUTES:
A motion to accept the minutes of the Regular Meeting conducted on March 17,
2009 was made by Dr. Muller with a second by Ms. Kielty. The minutes were
approved unanimously.
PRESIDENT’S REPORT:
Mr. Cunningham thanked the Nominating Committee comprised of Pat Peyser, Gerald Feldman and Peg Downey for its efforts. April 23rd will be the “Meet the Candidates” night and pursuant to the By Laws, the Annual Meeting and Election will take place on May 6th. The next Regular Board Meeting will be on May 19, 2009.
A draft management contract with Legum & Norman is currently being
negotiated. Once approved, a public meeting will be held for informational purposes.
A request by Jim Lawson to bring the issue of outside management to a vote by all residents was discussed with Jason Fisher, Counsel for the Elizabeth. On advice of Counsel, there will be no printed ballot on this issue nor will this issue on the agenda at the Annual Meeting.
Work is continuing in the garage and, due to unexpected developments, will likely take longer than expected. Repairs and resurfacing by Structural Preservation Systems in continuing on G-3 and due to an unexpectedly higher degree of spalling, the contract will need to use a cement that does not dry as quickly but is less expensive. As a result of the increased repairs that are needed, the cost of the contract will increase. Management is not sure of the increased time nor increased cost yet. The Board will be informed as soon as this is known so that it can make a decision on the amount of work to be done.
The leak in Unit 06 has been discussed with the contractor, Structual Preservation Systems, and our consulting engineer, WJE, and the work will begin shortly. The work is expected to be completed by May 8, 2009.
The President has appointed a Refurbishment Committee comprised of Judy Gann, Judith Barth and Alexandra Kielty. The contract with Hartman Design Group has been signed. Principals of the firm have been in the building taking measurements and generally reviewing common elements in preparation for design work.
The President complimented The Energy Committee on a job well done. In the coming year, the President would like the Committee to refocus on other specific areas. Those areas have not been determined as of this date.
Legum & Norman has advised the President that ECA may not be required to pay sales tax on our utilities. This could be a material amount of money, possibly $4,000 monthly. Management is seeking redress/reimbursement from our utility vendors. The question remains if this law applies to The Elizabeth in light of its commercial billing status.
TREASURER’S REPORT:
Asset Allocation
As of 3/31 we had slightly over $2.7 MM in cash and investments, 11 % higher
YOY. We have $2.1 million in reserves, 12% higher balances YOY.
Monthly Performance
In March we had a net loss of almost $2K versus projected net income of $46K. Printing was over budget due to printing of House Rules. Personnel was over budget due to annual payment into employees’ SEP plan. Utilities were over
due to high usage of natural gas and electricity. In March, we transferred almost $44K to reserves but had no reserve expenses this month.
FY 2009 Year to Date (YTD) Results
For the nine months ending 3/31, we are running a loss of about $9K, versus net income of $73K this time last year. Interest income for operating and reserve funds is down 25% and 35%, respectively, due to the low interest rate environment in which we are investing. Most expense categories are running approximately 3-4% higher than last year, or approximately the rate of inflation, with the exception of Utilities and Association activities, which are 8.5% and 53% higher than last year’s comparable period, respectively. I am particularly concerned about trend in growth rates for utilities expense, which continues to significantly exceed inflation. I urge the Board to execute some of the suggestions in the Energy Audit to mitigate this unsustainable growth.
We have transferred $393K to reserves this year to date and spent $208K, or 62% less than last year, mostly on façade repairs, fire horn installation and correction of electrical system deficiencies.
MANAGEMENT REPORT:
A copy of the Management Report, dated April 21, 2009 is attached hereto.
OLD BUSINESS:
The President reiterated that negotiations are in progress with Legum & Norman.
NEW BUSINESS:
Committee Reports:
Energy Committee: Mr. Drazin, acting Chair, reported that the Committee has prepared a report on the Energy Study for the Board. Mr. Drazin (#1611) noted that there are many areas of the energy study, which require the feedback and analysis of a qualified engineer. He thanked those Committee members who assisted in the preparation of the report.
Mr. Trebach, #1407, reported that he has met (on his own) with Titan Windows regarding replacement windows for the units. He will have more information in May, but believes we can save money by doing the work now since money can be borrowed at a lower interest rate and contractors are looking for work.
Dr. Muller drew attention to the discrepancy between the cost figures for window replacement cited in the reserve and energy studies. He also noted that we have six sample high efficiency fixtures in the garage. Ms. Farrell indicated that they are in the area of parking space #135 on G-2, and residents should see how they like them.
Ms. Fridell noted that the Energy study was labeled “preliminary” and asked if we would receive a final definitive version. Ms. Farrell said that the “preliminary” would be changed to a final energy audit when the Board gave its aproval to American Renovators. Ms. Fridell also asked if the Board planned to review the conclusions and recommendations outlined therein. Ms. Fridell reiterated Dr. Muller’s concern on the different cost estimates and said that additional due diligence is necessary.
Mr. Axelrad stated that since Titan Windows sells and installs windows, any quotes on cost and/or savings from Titan are biased, and the Board should commission a neutral party for a cost savings study.
Mr. Cunningham stated that we must consider energy savings and finite lifetime of the windows.
Ms. Bobb, #911, asked if we were eligible for cost offsets such as a Federal Energy Tax credit and the Montgomery $10,000 credit applicable to individual homeowners. She suggested that the Board ask Counsel for advice.
Exercise Committee: Ms. Kielty presented a Committee report, which is attached and which requests that $18,000 be included in FY 2010 budget to purchase exercise equipment. Discussion followed. Ms. Fridell noted that the Exercise Room/Equipment is an important factor in the marketability of ECA condominium units per her feedback session with three professional realtors in Fall 2008. Ms. Fridell stated that in preparing the 2010 budget, the Board included approximately $3000 to purchase two pieces of equipment. She said that the remainder of the requested amount could be considered a reserve expense if it were done in conjunction with the refurbishing project and suggested that the Board consider this individual request within the context of its review of all the projects in the Five-Year Plan.
Dr. Muller noted that management companies and design firms both indicated the importance of having an updated exercise facility.
Dr. Muller made a motion to authorize an amount not to exceed $18,000 for exercise room equipment in FY 2010 from Reserve Funds. Mr. Axelrad seconded the motion.
Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann and Dr. Muller voted in favor of the motion. Mr. Cunningham and Ms. Fridell opposed the motion. The motion passed.
Ms. Fridell is concerned that reserve expense decisions are being taken piecemeal, and that all expenses in the Five-Year Plan need to be reviewed as a whole. Ms. Barth stated that purchases for the Exercise Room should be delayed until we receive a report from the designer. Mr. Axelrad noted that by voting, we have moved forward with the purchase of equipment. Ms. Kielty also noted the advisability of investing in equipment within the context of a refurbishment of the Exercise Room that is scheduled for FY 2011 (in the Reserve Study) and with input from the Hartman Design Group.
Ms. Fridell stated that expenditures for the five-year plan would be discussed at a specific meeting in June. Mr. Axelrad stated the vote tonight was an exception.
Nominating Committee: Mr. Feldman, #1819, said that the Candidates’ Board is in the Lobby. He reiterated that the “Meet the Candidates” Night would be held on April 23.
Refurbishment Committee: Ms. Gann reported that the contract has been signed and Hartman Design Group has been here for two days performing preliminary work and determining demolition plans. Ms. Esler, #1206, asked if the marble flooring would remain and Ms. Gann responded affirmatively.
Ms. Barth said she spoke with Ms. Hartman and that some furnishings may be salvageable.
Mr. Bason, #110, asked what “demolition” meant. Ms. Gann informed him that we would not know until the designer submits design plans. She said no walls are anticipated to come down.
Mr. Trebach, #1407, reiterated that some walls are not aligned correctly and may require work.
Security: Dr. Muller had no report.
Social Committee: Ms. Barth reported that a social gathering is planning the beginning of June. She noted that the TV remote is available for any resident wishing to use it and can be checked out at the front desk.
Contracts:
John Manougian Insurance/Firemen’s Fund has given us a contract for $160,985 for next year, which would provide the same level of coverage. This price represents an approximately 1% increase from last year. It was suggested that the vote be deferred in order to get one or two additional bids. Also, there is a possibility that Legum & Norman could provide a cost savings quote.
Ms. Gann asked if a contract, once signed, could be pro rated, with the policy going to another insurance company. Dr. Muller asked that the issue be discussed with Mr. Fisher.
Mr. Axelrad made a motion to authorize an expenditure not to exceed $161,000 to purchase adequate insurance for our existing needs through John Manougian Insurance. Ms. Kielty seconded the motion. The motion passed unanimously.
Ms. Farrell presented proposals from Mr. Fauss as follows: Oil tank replacement from JB Tank, LLC for $19,061.67 and Robert Fauss Consultants for $52,570 for Electrical Room and generator design and the programming and connections of Otis Elevator for the new generator at a cost of $52,570.
Mr. Axelrad made a motion to approve the proposal from JB Tank, LLC for $19,061.67 and Robert Fauss Consultants for $52,570. Ms. Gann seconded the motion. Mr. Cunningham, Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann, Ms. Fridell and Dr. Muller voted in favor of the motion. The motion passed unanimously.
A contract from Structural Preservation Systems was presented for ratification. Due to the emergency nature of the work, Mr. Cunningham had signed the contract on April 16, 2009. The contract is the result of leaks in Unit 06 and will require replacing the concrete roof on the west side. Ms. Gann made a motion to ratify the contract for $9,516. Dr. Muller seconded the motion. Mr. Cunningham, Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann, Ms. Fridell and Dr. Muller voted in favor of the motion. The motion passed unanimously.
Ms. Farrell noted that the contractor, Structural Preservation Systems has recommended use of a different mix of concrete to repair the floor of the garage. This will require a longer period of time to set and therefore, will delay completion of the project and increase costs.
Mr. Fauss has spoken with Holt Electric about replacing the switch for the electric generator. Since it would involve shutting down power to ECA and neighboring buildings for several hours, Ms. Farrell will check with PEPCO to determine how this can be accomplished.
COMMENTS FROM THE FLOOR:
Ms. Gann noted that upon exiting the elevator on the West side yesterday, a resident had left dog excrement on the floor, notwithstanding multiple letters from management to dog owners reminding them to pick up after their pets. Cleaning staff was removing it although this was above and beyond their duties. She noted that if residents see pets that are not appropriately managed by their owners, they should report the owners to management immediately. Dr. Muller asked that the security cameras be checked to possibly identify the culprit(s) and their negligent owner(s).
Ms. Sandler, #211, noted that this should apply to owners whose pets are frightening or intimidating to residents, etc.
Ms. Bobb, #911, drew attention to Legum & Norman’s suggestion that the Elizabeth might not be required to pay taxes on utilities. She noted that even before they had begun to work for ECA, the firm is saving us money. She asked what the amount of savings might be. Mr. Cunningham replied that it could be $4,000 a month.
Ms. Gann asked if the accounting firm should have been aware of this tax situation.
Ms. Farrell noted that it is not clear at this time if this applies to condominiums wit commercial billing as the Elizabeth. She is investigating the situation.
Ms. Sparks, #420, asked if plantings could be improved along the East side walkway/patio.
Ms. Sandler, #211, asked if landscape work could be done on the West side entering the garage.
Ms. Esler, #1206, stated that the new landscaping in the front of the building was very attractive.
Mr. Rosenbach, #1517, is concerned about energy usage. He stated that even though the Elizabeth has not spent less on energy, our KW hours and therms per hour have decreased compared with last year. His conclusion is that residents are conserving energy.
Ms. Alenier, #301, asked whether the spalling in the garage is caused by oil/chemicals leaking from cars in the garage. Ms. Farrell said the cracking is caused by water damage.
Another resident complained about an unpleasant smell in the garage. Ms. Farrell explained that two drains were backed up at the bottom of the garage and that the engineers have resolved the problem.
Mr. Bressler, #1806, asked why there would be no extra printed ballot at the Annual Meeting and was told by Mr. Cunningham that on the advice of Counsel, there would not be a specific ballot on this issue but blank ballots will be available as is customary.
In response to Ms. Gann’s question and the Board’s decision from the March Board Meeting to ask residents to take care of junk cars, expired tags, etc. in the garage; Ms. Farrell explained that only three owners have not responded to the written request. She is working to get this problem resolved. At Mr. Trebach’s request, Ms. Farrell will send a note to the individual, who idles his car for long periods of time in the garage, since it is spewing noxious fumes into the garage space.
Ms. Rosenbach, #1517, noted that there were strong vapors when the elevators were being cleaned and asked if there was another product that could be used. Management said that this was metal lacquer being sprayed on the bronze, and it was not known if there were replacement products.
Ms. Kielty asked what street work was being done in the Village. Mr. Trebach said that the crosswalks are being paved with red pavers to avoid having to repaint crosswalk signage. The project required a certain temperature and non-rain conditions to be done and should be completed within the next few weeks.
Mr. Trebach, #1407, said the Friendship Heights Council is running again, unopposed, with the election on May 11th. He urged residents to vote.
The meeting was adjourned at 9:10 p.m.
Submitted by Judith Gann Secretary (until May 6, 2009)
OF THE ELIZABETH CONDOMINIUM ASSOCIATION, INC.
MINUTES of a Regular Meeting of the Board of Directors of the Elizabeth
Condominium Association, Inc. (“Association”), held on April 21, 2009 in the
Party Room of the Condominium pursuant to notice in accordance with the
Bylaws. Present were: George “Woody” Cunningham, Jeffrey Axelrad, Judith
Gann, Monique Fridell, Alexandra Kielty, Judith Barth and Alfred Muller.
The President called the meeting to order at 7:35 p.m.
MINUTES:
A motion to accept the minutes of the Regular Meeting conducted on March 17,
2009 was made by Dr. Muller with a second by Ms. Kielty. The minutes were
approved unanimously.
PRESIDENT’S REPORT:
Mr. Cunningham thanked the Nominating Committee comprised of Pat Peyser, Gerald Feldman and Peg Downey for its efforts. April 23rd will be the “Meet the Candidates” night and pursuant to the By Laws, the Annual Meeting and Election will take place on May 6th. The next Regular Board Meeting will be on May 19, 2009.
A draft management contract with Legum & Norman is currently being
negotiated. Once approved, a public meeting will be held for informational purposes.
A request by Jim Lawson to bring the issue of outside management to a vote by all residents was discussed with Jason Fisher, Counsel for the Elizabeth. On advice of Counsel, there will be no printed ballot on this issue nor will this issue on the agenda at the Annual Meeting.
Work is continuing in the garage and, due to unexpected developments, will likely take longer than expected. Repairs and resurfacing by Structural Preservation Systems in continuing on G-3 and due to an unexpectedly higher degree of spalling, the contract will need to use a cement that does not dry as quickly but is less expensive. As a result of the increased repairs that are needed, the cost of the contract will increase. Management is not sure of the increased time nor increased cost yet. The Board will be informed as soon as this is known so that it can make a decision on the amount of work to be done.
The leak in Unit 06 has been discussed with the contractor, Structual Preservation Systems, and our consulting engineer, WJE, and the work will begin shortly. The work is expected to be completed by May 8, 2009.
The President has appointed a Refurbishment Committee comprised of Judy Gann, Judith Barth and Alexandra Kielty. The contract with Hartman Design Group has been signed. Principals of the firm have been in the building taking measurements and generally reviewing common elements in preparation for design work.
The President complimented The Energy Committee on a job well done. In the coming year, the President would like the Committee to refocus on other specific areas. Those areas have not been determined as of this date.
Legum & Norman has advised the President that ECA may not be required to pay sales tax on our utilities. This could be a material amount of money, possibly $4,000 monthly. Management is seeking redress/reimbursement from our utility vendors. The question remains if this law applies to The Elizabeth in light of its commercial billing status.
TREASURER’S REPORT:
Asset Allocation
As of 3/31 we had slightly over $2.7 MM in cash and investments, 11 % higher
YOY. We have $2.1 million in reserves, 12% higher balances YOY.
Monthly Performance
In March we had a net loss of almost $2K versus projected net income of $46K. Printing was over budget due to printing of House Rules. Personnel was over budget due to annual payment into employees’ SEP plan. Utilities were over
due to high usage of natural gas and electricity. In March, we transferred almost $44K to reserves but had no reserve expenses this month.
FY 2009 Year to Date (YTD) Results
For the nine months ending 3/31, we are running a loss of about $9K, versus net income of $73K this time last year. Interest income for operating and reserve funds is down 25% and 35%, respectively, due to the low interest rate environment in which we are investing. Most expense categories are running approximately 3-4% higher than last year, or approximately the rate of inflation, with the exception of Utilities and Association activities, which are 8.5% and 53% higher than last year’s comparable period, respectively. I am particularly concerned about trend in growth rates for utilities expense, which continues to significantly exceed inflation. I urge the Board to execute some of the suggestions in the Energy Audit to mitigate this unsustainable growth.
We have transferred $393K to reserves this year to date and spent $208K, or 62% less than last year, mostly on façade repairs, fire horn installation and correction of electrical system deficiencies.
MANAGEMENT REPORT:
A copy of the Management Report, dated April 21, 2009 is attached hereto.
OLD BUSINESS:
The President reiterated that negotiations are in progress with Legum & Norman.
NEW BUSINESS:
Committee Reports:
Energy Committee: Mr. Drazin, acting Chair, reported that the Committee has prepared a report on the Energy Study for the Board. Mr. Drazin (#1611) noted that there are many areas of the energy study, which require the feedback and analysis of a qualified engineer. He thanked those Committee members who assisted in the preparation of the report.
Mr. Trebach, #1407, reported that he has met (on his own) with Titan Windows regarding replacement windows for the units. He will have more information in May, but believes we can save money by doing the work now since money can be borrowed at a lower interest rate and contractors are looking for work.
Dr. Muller drew attention to the discrepancy between the cost figures for window replacement cited in the reserve and energy studies. He also noted that we have six sample high efficiency fixtures in the garage. Ms. Farrell indicated that they are in the area of parking space #135 on G-2, and residents should see how they like them.
Ms. Fridell noted that the Energy study was labeled “preliminary” and asked if we would receive a final definitive version. Ms. Farrell said that the “preliminary” would be changed to a final energy audit when the Board gave its aproval to American Renovators. Ms. Fridell also asked if the Board planned to review the conclusions and recommendations outlined therein. Ms. Fridell reiterated Dr. Muller’s concern on the different cost estimates and said that additional due diligence is necessary.
Mr. Axelrad stated that since Titan Windows sells and installs windows, any quotes on cost and/or savings from Titan are biased, and the Board should commission a neutral party for a cost savings study.
Mr. Cunningham stated that we must consider energy savings and finite lifetime of the windows.
Ms. Bobb, #911, asked if we were eligible for cost offsets such as a Federal Energy Tax credit and the Montgomery $10,000 credit applicable to individual homeowners. She suggested that the Board ask Counsel for advice.
Exercise Committee: Ms. Kielty presented a Committee report, which is attached and which requests that $18,000 be included in FY 2010 budget to purchase exercise equipment. Discussion followed. Ms. Fridell noted that the Exercise Room/Equipment is an important factor in the marketability of ECA condominium units per her feedback session with three professional realtors in Fall 2008. Ms. Fridell stated that in preparing the 2010 budget, the Board included approximately $3000 to purchase two pieces of equipment. She said that the remainder of the requested amount could be considered a reserve expense if it were done in conjunction with the refurbishing project and suggested that the Board consider this individual request within the context of its review of all the projects in the Five-Year Plan.
Dr. Muller noted that management companies and design firms both indicated the importance of having an updated exercise facility.
Dr. Muller made a motion to authorize an amount not to exceed $18,000 for exercise room equipment in FY 2010 from Reserve Funds. Mr. Axelrad seconded the motion.
Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann and Dr. Muller voted in favor of the motion. Mr. Cunningham and Ms. Fridell opposed the motion. The motion passed.
Ms. Fridell is concerned that reserve expense decisions are being taken piecemeal, and that all expenses in the Five-Year Plan need to be reviewed as a whole. Ms. Barth stated that purchases for the Exercise Room should be delayed until we receive a report from the designer. Mr. Axelrad noted that by voting, we have moved forward with the purchase of equipment. Ms. Kielty also noted the advisability of investing in equipment within the context of a refurbishment of the Exercise Room that is scheduled for FY 2011 (in the Reserve Study) and with input from the Hartman Design Group.
Ms. Fridell stated that expenditures for the five-year plan would be discussed at a specific meeting in June. Mr. Axelrad stated the vote tonight was an exception.
Nominating Committee: Mr. Feldman, #1819, said that the Candidates’ Board is in the Lobby. He reiterated that the “Meet the Candidates” Night would be held on April 23.
Refurbishment Committee: Ms. Gann reported that the contract has been signed and Hartman Design Group has been here for two days performing preliminary work and determining demolition plans. Ms. Esler, #1206, asked if the marble flooring would remain and Ms. Gann responded affirmatively.
Ms. Barth said she spoke with Ms. Hartman and that some furnishings may be salvageable.
Mr. Bason, #110, asked what “demolition” meant. Ms. Gann informed him that we would not know until the designer submits design plans. She said no walls are anticipated to come down.
Mr. Trebach, #1407, reiterated that some walls are not aligned correctly and may require work.
Security: Dr. Muller had no report.
Social Committee: Ms. Barth reported that a social gathering is planning the beginning of June. She noted that the TV remote is available for any resident wishing to use it and can be checked out at the front desk.
Contracts:
John Manougian Insurance/Firemen’s Fund has given us a contract for $160,985 for next year, which would provide the same level of coverage. This price represents an approximately 1% increase from last year. It was suggested that the vote be deferred in order to get one or two additional bids. Also, there is a possibility that Legum & Norman could provide a cost savings quote.
Ms. Gann asked if a contract, once signed, could be pro rated, with the policy going to another insurance company. Dr. Muller asked that the issue be discussed with Mr. Fisher.
Mr. Axelrad made a motion to authorize an expenditure not to exceed $161,000 to purchase adequate insurance for our existing needs through John Manougian Insurance. Ms. Kielty seconded the motion. The motion passed unanimously.
Ms. Farrell presented proposals from Mr. Fauss as follows: Oil tank replacement from JB Tank, LLC for $19,061.67 and Robert Fauss Consultants for $52,570 for Electrical Room and generator design and the programming and connections of Otis Elevator for the new generator at a cost of $52,570.
Mr. Axelrad made a motion to approve the proposal from JB Tank, LLC for $19,061.67 and Robert Fauss Consultants for $52,570. Ms. Gann seconded the motion. Mr. Cunningham, Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann, Ms. Fridell and Dr. Muller voted in favor of the motion. The motion passed unanimously.
A contract from Structural Preservation Systems was presented for ratification. Due to the emergency nature of the work, Mr. Cunningham had signed the contract on April 16, 2009. The contract is the result of leaks in Unit 06 and will require replacing the concrete roof on the west side. Ms. Gann made a motion to ratify the contract for $9,516. Dr. Muller seconded the motion. Mr. Cunningham, Mr. Axelrad, Ms. Kielty, Ms. Barth, Ms. Gann, Ms. Fridell and Dr. Muller voted in favor of the motion. The motion passed unanimously.
Ms. Farrell noted that the contractor, Structural Preservation Systems has recommended use of a different mix of concrete to repair the floor of the garage. This will require a longer period of time to set and therefore, will delay completion of the project and increase costs.
Mr. Fauss has spoken with Holt Electric about replacing the switch for the electric generator. Since it would involve shutting down power to ECA and neighboring buildings for several hours, Ms. Farrell will check with PEPCO to determine how this can be accomplished.
COMMENTS FROM THE FLOOR:
Ms. Gann noted that upon exiting the elevator on the West side yesterday, a resident had left dog excrement on the floor, notwithstanding multiple letters from management to dog owners reminding them to pick up after their pets. Cleaning staff was removing it although this was above and beyond their duties. She noted that if residents see pets that are not appropriately managed by their owners, they should report the owners to management immediately. Dr. Muller asked that the security cameras be checked to possibly identify the culprit(s) and their negligent owner(s).
Ms. Sandler, #211, noted that this should apply to owners whose pets are frightening or intimidating to residents, etc.
Ms. Bobb, #911, drew attention to Legum & Norman’s suggestion that the Elizabeth might not be required to pay taxes on utilities. She noted that even before they had begun to work for ECA, the firm is saving us money. She asked what the amount of savings might be. Mr. Cunningham replied that it could be $4,000 a month.
Ms. Gann asked if the accounting firm should have been aware of this tax situation.
Ms. Farrell noted that it is not clear at this time if this applies to condominiums wit commercial billing as the Elizabeth. She is investigating the situation.
Ms. Sparks, #420, asked if plantings could be improved along the East side walkway/patio.
Ms. Sandler, #211, asked if landscape work could be done on the West side entering the garage.
Ms. Esler, #1206, stated that the new landscaping in the front of the building was very attractive.
Mr. Rosenbach, #1517, is concerned about energy usage. He stated that even though the Elizabeth has not spent less on energy, our KW hours and therms per hour have decreased compared with last year. His conclusion is that residents are conserving energy.
Ms. Alenier, #301, asked whether the spalling in the garage is caused by oil/chemicals leaking from cars in the garage. Ms. Farrell said the cracking is caused by water damage.
Another resident complained about an unpleasant smell in the garage. Ms. Farrell explained that two drains were backed up at the bottom of the garage and that the engineers have resolved the problem.
Mr. Bressler, #1806, asked why there would be no extra printed ballot at the Annual Meeting and was told by Mr. Cunningham that on the advice of Counsel, there would not be a specific ballot on this issue but blank ballots will be available as is customary.
In response to Ms. Gann’s question and the Board’s decision from the March Board Meeting to ask residents to take care of junk cars, expired tags, etc. in the garage; Ms. Farrell explained that only three owners have not responded to the written request. She is working to get this problem resolved. At Mr. Trebach’s request, Ms. Farrell will send a note to the individual, who idles his car for long periods of time in the garage, since it is spewing noxious fumes into the garage space.
Ms. Rosenbach, #1517, noted that there were strong vapors when the elevators were being cleaned and asked if there was another product that could be used. Management said that this was metal lacquer being sprayed on the bronze, and it was not known if there were replacement products.
Ms. Kielty asked what street work was being done in the Village. Mr. Trebach said that the crosswalks are being paved with red pavers to avoid having to repaint crosswalk signage. The project required a certain temperature and non-rain conditions to be done and should be completed within the next few weeks.
Mr. Trebach, #1407, said the Friendship Heights Council is running again, unopposed, with the election on May 11th. He urged residents to vote.
The meeting was adjourned at 9:10 p.m.
Submitted by Judith Gann Secretary (until May 6, 2009)
Wednesday, May 6, 2009
Sunday, May 3, 2009
The representation of my position regarding topics discussed at "Meet the Candidates" is inaccurate. Please contact me at 301-961-5850 or moniquefridell@yahoo.com if you would like a better understanding of my views.