THE ELIZABETH CONDOMINIUM ASSOCIATION
4601 North Park Avenue
Chevy Chase, MD 20815
Minutes of Board of Directors Meeting July 21, 2009
Board Present:
Woody Cunningham ....................President
Alexandria Kielty .........................Vice President
Monique Fridell ...........................Treasurer
Judith Barth ................................Assistant Treasurer
Jeffrey Axelrad ............................Secretary
Charles Bressler ...........................Director
Dr. Alfred Muller .........................Director
Also present:
John Rhodes ............President, Legum & Norman
John Algner ............Community Manager, Legum & Norman
Mike Horan .............Property Manager, Legum & Norman
Gail Anderson .........Recording Secretary, On the Record
Call to Order: Mr. Cunningham called the meeting to order at 7:38 pm. President Cunningham noted that although a meeting of the Board was not scheduled for August, several major issues require resolution and it was decided that a meeting was necessary.
Approval of Minutes
MOTION:
Mr. Axelrad moved to approve the minutes of the July 21, 2009, Board of Directors’ meeting as corrected. Ms. Barth seconded the motion. The motion carried unanimously.
President’s Report
Mr. Cunningham noted that a significant number of complaints have been received about the failure of some owners to accept responsibility for the behavior of their dogs. Mr. Cunningham appointed a residents’ committee to investigate the issue and make recommendations on what to do excluding any revisions in bylaws or house rules. The members of the committee are Ms. Eisler, Ms. Soderburg, and Ms. Alenier.
Before yielding the floor for the Treasurer’s Report, Mr. Cunningham stated that the financials for fiscal year 2009 are not yet complete.
Treasurer’s Report
Ms. Fridell stated that the Fiscal Year, which ended June 30, 2009, is in the process of being closed out. She explained that L&N has not been able to prepare July financial statements due to the fact that L&N needs final 6/30/09 figures from ECA in order to prepare the July statements.
Ms. Fridell reported that she is disappointed with the performance of Legum & Norman in the short time the association has been a client of the firm. She cited a demonstrated lack of responsibility, lack of “follow-up,” and a slow rate of response to requests and resolving pending transition issues. She noted that the association manages its reserves differently than other similar organizations, requiring more administrative activity, at least until the association consolidates its investments into its Wachovia CDARS account. She requested clarification on the following three points, which have been pending response for several weeks from L&N:
1. Who are the contacts at Legum & Norman,who will execute investment decisions; provide names, phone numbers and emails?
2. Who will prepare/update the Cash Management Report?
3. What is the procedure for execution of investment decisions by L&N staff?
Mr. Rhodes responded that Legum & Norman will strive to improve the situation. He expressed surprise that there was a question regarding the investment procedures as, prior to the signing of the contract, the issue was discussed at length. He noted that Legum & Norman makes investments by telephone or via the internet, and that it was his understanding that Ms. Fridell would be responsible for investing the funds as the Board directed. Ms Fridell’s perception was that Legum & Norman would complete the paperwork for all investments. Further discussions will be held to determine the contact person with whom Ms. Fridell will work.
Mr. Rhodes and Mr. Algner reported that most of their clients use brokerage houses to manage their investments. In most cases, the clients report less work, higher reserves, and reduced costs by using brokerage firms. The gentlemen did not recommend any specific firm. Ms. Fridell noted that the Association already has a brokered (zero cost) CD account at Wachovia and that even if the Association takes such an action, it will not be immediate; several Certificates of Deposit must reach their terms, and until those dates, an association representative must execute the investments.
New Business
Lobby Pipes
Jimmy Keating and Mike Horan met with Mr. Heath to discuss the renovation of the piping in the lobby. Clarification of the scope of the project and what is included in the proposal is required. The building engineer pointed out that some pipes marked for replacement in the proposal have already been replaced. Mr. Cunningham pointed out that some of the pipes are cast iron and have a long life expectancy. The condition of those pipes should be determined and a decision on whether to replace the pipes should be made based on projected longevity. When the work and redecoration are complete, it is desirable that no more replacement be necessary for approximately 25 years. An inspection will be performed to determine which pipes do not require replacement. Mr. Heath will be asked to determine the condition of the cast iron pipes.
Mr. Cunningham explained that a template cover contract is being prepared and asked if there were any objections to the provisions. There were no objections. The contract will be prepared and signed next week. The Board will hold a pre-mobilization meeting before the project begins.
The estimate for completion of the “store-front” area (at the Arcade) is $500,000. Mr. Cunningham proposes delaying work on the horizontal pipes in the arcade area where fire would cause less damage than in other portions of the building.
Ms. Kielty inquired about the process for reviewing contracts, and asked if all contracts still need to be reviewed by legal counsel. Based on a recommendation from Management, Mr. Cunningham suggested adding a contractor injury clause to the standard contract. Mr. Axelrad pointed out that the newly amended Maryland Open Meeting section of the condo law provides for discussion pertaining to legal counsel in executive session. Dr. Muller stated his opinion that the law referred to specific legal advice and not to a general discussion about consulting an attorney. Mr. Rhodes indicated that completion of the work will take approximately four (4) months. A start date has not been discussed. The work will start in the West Lobby and be completed in phases so that it does not interfere with decorating. It is likely that decorating will begin in January 2010.
Before pipe work can commence, concerns about insurance and indemnification for the community and Legum & Norman need to be resolved. It will be necessary to learn from Mr. Heath the amount of time that will be required to determine which specific pipes will not be replaced and the amounts that will be deducted from the estimate as a result.
Increased communication with the building engineer was encouraged. His input, based on his intimate knowledge of the building’s systems, can expedite the improvement process.
Five-Year Plan
Mr. Cunningham stated that the proposed Five-Year Plan was prepared based on projects that are ongoing or that are known to be necessary. Based on relevant conditions and changing priorities, the Plan and project schedules can be amended. It was noted that the building engineers manage excellent maintenance programs and inspections and are able to predict quite accurately the lifetime of equipment. Therefore, a “run-to-failure” policy is a reasonable approach to system replacements, rather than the approach assumed in the Reserve Study of ongoing maintenance to extend useful lives. If the consequences of a system failure are not significant, replacement of many systems can be delayed until failure occurs, thereby saving the owners money. The Plan, as proposed by Mr. Cunningham, spreads the cost of maintenance and allows flexibility to accommodate unexpected failures.
The Fiscal Year 2010 Plan includes amendments from the Fiscal Year 2009 Plan. These include:
• Reduction of estimate for lobby piping from $700,000 to $500,000
• Completion of emergency generator repairs - $300-350,000
• Deletion of $42,700 for tear-down of chiller. Work completed in FY 2009
• Defer the $57,600 allocated for G1 work over more than one year
• Defer the $70,000 G1 work for about three years to avoid re-mobilization costs
Mr. Axelrad commented that the Board had given its word that the total amount for the refurbishment project would not exceed $1.2 million and had made a commitment to complete the work for that amount and should not contemplate an increase. In discussion, other Board members commented that no bids have been received, no votes have been taken on spending, and no commitments have been made to vendors. The amount reflected in the Plan was higher than the $1.2 million, but based on actual estimates from Hartman Design Group. Rest Rooms, the Party Room, and other areas to be worked on are listed separately and can be voted on separately.
The FY 2011 Plan may include potential repairs associated with the canopies, ceilings, exterior light fixtures, and walls, ceramic tile, and masonry in the arcade. Lacking sufficient architectural and engineering studies, several items have been deferred including $139,000 for the repair of the riser section, and a one-year deferral of work on the horizontal pipes in G1. Mr. Horan will meet with Culp for a second bid on lighting fixtures. The item may be ready for consideration in September.
MOTION:
Dr. Muller moved that the changes be accepted for the purpose of discussion. The motion was held in abeyance to allow discussion of additional questions.
Ms. Fridell expressed her respect for Mr. Axelrad’s commitment to the honor of the Board, but noted that the $1.2 million figure for renovations was an arbitrary figure arrived at before conversations with designers and contractors. Considering the amount of work that is required, the total of $1.5 million reflected in the proposed Five Year Plan is not unreasonable.
Mr. Axelrad expressed concern over the amount of reserve funds projected in the Five-Year Plan. Based on the age of the building and other considerations he suggested that it would be prudent to maintain a reserve fund of $1.5 million at all times. Dr. Muller noted that Ms. Fridell has been authorized to negotiate a $1.0 million line of credit to be used for emergencies. Additionally, according to Ms. Fridell there is approximately $300,000 in the operating budget that could be diverted if necessary, although Ms. Fridell noted that it is more prudent to reserve those funds for other unforeseen costs which could arise.
Ms. Fridell asked the Legum & Norman representatives what the industry standard is for a minimum level of Reserve Funds. Mr. Rhodes responded that there is no industry standard; however, it is generally held that a Reserve fund should be maintained at a level equal to the highest individual capital expense projected in the Five Year Plan. While there is no single accepted standard for operating funds, some auditors may recommend a specific percentage of the condominium fees, while others suggest a minimum of three (3) months of condo fees. Ms. Fridell noted that this was the amount she had been targeting over the last fiscal year.
There was also discussion on the method of calculation of proposed increases in contributions to the fund and increases in condo fees.
MOTION:
Dr. Muller extended his motion to accept the president’s recommendations for changes, including contribution amounts.
In the discussion that followed, Ms. Kielty noted that 3 percent contributions began July 1, 2009, but that by spring when the Board will need to determine the percentage increase in condo fees, that perspective may have changed. It was noted by Mr. Cunningham that a Five-Year Plan is required for completion of the audit. Condominium fees will be set at a later date in the spring.
Mr. Axelrad pointed out that the contingency operating fund is below the level suggested by the experts cited by Mr. Rhodes. Ms. Fridell stated that she was comfortable with a minimum reserve figure that is generally in line with the average total annual expenditure projected in the Five Year Plan. In the association’s case, that figure equals $956,000, or approximately $1 million. She suggested annual increases in contributions to the Reserve of 5%/10%/5%/5% for each respective year of the proposed Five Year Plan.
There was no second for Dr. Muller’s motion and it was withdrawn.
MOTION:
Mr. Bressler moved that the Board adopt Ms. Fridell’s proposed contribution figures, or 5% for FY 2011, 10% for FY 2012, 5% for FY 2012, and 5% for FY 2013. The motion was seconded by Mr. Axelrad. After further discussion, the motion carried. (6-1, all Board Members voting in favor except for Dr. Muller)
Window-Cleaning Contract
Mr. Horan presented a bid from Extra Clean, the company that cleaned the windows last year. For cleaning of the exterior windows only, the bid increased by only $65 for a total of $4060. The addition of the canopy, three glass dome skylights in the arcade area, the pool, and the bulk trash area brought the total to $5300. Ms. Barth suggested the addition of the garage entry to the work order. Mr. Horan will discuss the addition of the garage window/skylight with Extra Clean. He estimates that the revised total will be $5700-6000.
MOTION Ms. Barth moved that the cleaning of the windows proceed, at an amount not to exceed $6000. Mr. Bressler seconded the motion. The motion carried unanimously.
Floor-Cleaning Machine
Mr. Horan reported that the Tennant floor-cleaning machine is in need of replacement or repair. Replacement would cost approximately $30,000. Repair would be approximately $3000.
MOTION:
Mr. Bressler moved to approve the repair of the floor-cleaning machine. The motion was seconded by Dr. Muller and carried unanimously.
When the machine is operable, it was suggested that G4 be cleaned.
Comments from the Floor
• A resident reported that she has received complaints about the cleanliness of the door knobs to the trash room. Mr. Horan will request that the cleaning staff maintain the door knobs.
• Ms. Barth noted that the appearance of the brass hardware on all apartment doors would benefit from polishing. Mr. Horan will inquire into the cost of having the work done by the company that refurbished the elevator doors.
• A resident pointed out that redecoration of the corridors, estimated at $611,000 will increase the total for redecoration over $1.5 million.
• A resident thanked the President for having made the association’s management contract with L&N available to her. She asked to whom she should direct questions regarding the Management Contract with L&N. Mr. Cunningham suggested that she submit her questions in written form and he will direct her to the appropriate party for answers.
• Another resident suggested that windows in the pool area may have failed, making expenditure for cleaning them unnecessary. Mr. Horan responded that upon completion of their work, Extra Clean will inform him of the condition of all windows cleaned.
• Mr. Bressler updated the Board on the status of the landscaping maintenance contract with Valley Crest. The contract is signed and the company performed their first day of work on August 11, 2009.
Adjournment
There being no further business brought before the Board, the President adjourned the meeting at 9:26 p.m.
The initial draft of the minutes, upon which these minutes are partially based, was prepared by Gail Anderson of On the Record.
Respectfully submitted,
Jeffrey Axelrad, Board Secretary
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