February 23, 2011 Minutes of ECA Board Meeting

THE ELIZABETH CONDOMINIUM ASSOCIATION
4601 North Park Avenue
Chevy Chase, MD 20815

Minutes of Board of Directors Meeting February 23, 2011

Board Present:
Alexandria Kielty .........................President
Dr. Alfred Muller .........................Vice President
Monique Fridell ...........................Treasurer
Molly Frantz ...............................Assistant Treasurer
Charles Bressler ...........................Secretary
Judith Barth ................................Director
Seth Levine .................................Director

Others Present:
Scott Murdoch ...............Community Manager, Legum & Norman
James M. Santos ...........ECA General Manager
Jason Fisher .................Counsel, Lerch Early & Brewer
Jana Bowcut .................Recording Secretary, On the Record

Call to Order: Ms. Kielty called the meeting to order at 7:32 p.m.

Jason Fisher, Lerch, Early & Brewer: Based on his reading of the Association’s governing documents, Mr. Fisher provided guidance on some upcoming projects, such as McQuay units, windows and doors and their financing. Mr. Fisher stated that under the Association’s governing documents, building unit items can be classified in one of three ways: items of the unit, general common elements, and limited common elements. General and limited common elements are covered as part of the Association’s maintenance assessments, the maintenance repair obligations or through the assessment budget. Any item that is part of the unit is generally paid for by the owner for maintenance, repair or replacement. Mr. Fisher repeated verbally the Opinion of Counsel which he had provided twice previously in writing to the Board to the effect that the McQuay units are not the responsibility of the Association, but rather are the responsibility of each unit owner. In the governing documents, the McQuay unit is classified as an item of the unit. Also, in Article VIII, Section 3 of the by-laws, under “Duty to Maintain,” it states that the obligation for maintenance, repair and replacement of the heating and air conditioning unit is that of the unit owner.

At prior meetings, some Board members had inquired whether the Association can take on the obligation to replace the McQuay units as an Association managed project. Under the existing by-laws, the Board does not have that authority. Mr. Fisher had previously provided two Opinions of Counsel confirming this responsibility (these Opinions of Counsel are available from the Management Office). Any amendment to the by-laws would require a 66 and 2/3 supermajority vote by all owners. Citing the following language: “The corporation from time to time through its by-laws may accept the obligation to make certain repairs or perform maintenance services to facilities owned by the individual co-owners…” Some members of the Board questioned why the Association could not voluntarily assume common element responsibility for McQuay replacement as part of the Association’s capital expenditure plan. Mr. Fisher clarified that according to this language, only repairs or maintenance services may be undertaken, not replacement.

Mr. Fisher addressed a question previously raised by Ms. Fridell about financing programs and tax savings that may apply to certain energy replacements. Mr. Fisher stated that there are some highly beneficial financing programs that could apply to corporations and associations for bulk projects for energy saving initiatives. Windows are considered to be part of the limited common element aspect of the units. Because windows are an interior and exterior component of the unit, their replacement not only benefits individual units, but the overall structure of the building as well. There are energy savings initiatives through Montgomery County or general loans that may be obtained for this project.

Ms. Frantz inquired if Mr. Fisher could provide this opinion in writing. Mr. Fisher stated that his previous two Opinions of Counsel already addressed these issues, but if the Board needed additional clarification, he will provide another Opinion of Counsel. Ms. Frantz asked if he could address Article VIII, Section 1 (Management) which states that the cost of supplies is left “in the discretion of the Board of Directors shall be necessary or proper for the operation of the general common elements.” Mr. Fisher responded that this provision refers to general common elements, whereas McQuay units are unit elements. The discretionary language must be read it in context of the entire set of by-laws. Article VIII Section 3, which is more specific to heating and air conditioning, and which prohibits the Board from moving forward with McQuay unit replacement.

Mr. Fisher clarified additional sections of the by-laws and verified that there is nothing in the by-laws that would override Article VIII, Section 3. He stressed that the Board must have additional authority to carry out this project. Ms. Frantz suggested that putting this opinion in writing would be valuable, but Mr. Fisher said he would wait for direction from the Board.
Mr. Fisher added that the Board does have the authority to replace a specific McQuay unit if the Board determined that replacement were necessary because the owner breached his/her maintenance and repair duty under the by-laws. The Board could force replacement of the unit and then charge the owner, after due process to confirm the owner’s negligence.

Mr. Fisher stated that if the by-laws are not amended, another option for the Association is to negotiate a bulk rate with a contractor and encourage owners to undertake replacement work voluntarily on the presumption of a cost that would be lower than that which they might be able to find on their own. Owners could contract directly with the contractor, and would be expected to sign a release understanding that the Association has negotiated the bulk pricing, but is not guaranteeing the work of the contractor. Ms. Frantz stated that when the McQuay units are replaced, it would require access to common element pipes, which would require opening up owners’ walls. She asked if this would have any legal implications, to which Mr. Fisher responded, “No.”

Dr. Muller inquired if there are advantages or disadvantages to replacing all the units at once, rather than allowing the owners to replace them at will. Mr. Santos stated that there are over 700 McQuay units in the building and it would be most cost-effective to replace them simultaneously. There are logistical considerations involving water shut off, air conditioning and heating which would need to be coordinated. Ms. Barth reminded the Board that the Mendoza Report suggested that replacement of Mcquay units be done in tiers and that the units are 37-years-old and are failing.

Dr. Muller asked Mr. Santos and Mr. Fisher about the best way to replace the windows. Mr. Santos stated that windows can be changed from either the outside and inside, but in order to minimize inconvenience to owners, inside would be best because a crew will already be there to do painting, trim work, caulking, etc. Mr. Fisher stated that this is a practical issue and he has no opinion on how to execute this project.

Ms. Kielty asked Mr. Fisher for guidance on seeking out a loan for this project. Mr. Fisher stated that there are three ways to fund a project: assessments can be increased to improve budget resources, a special assessment can be levied through owner supermajority vote, or secure financing through banks or lending institutions to finance projects over a long period of time. Debt financing has become more viable over the last 10 to 15 years as banks have recognized that condominium associations need for major renovations. He had previously provided a list to Ms. Fridell of some banks that are willing to extend credit to condominium associations. Generally banks will require that an association pledge its current/future monthly assessments as collateral for a loan. If an association were to default on the loan, the bank could offset the default with monthly assessments receivable from owners.

A resident inquired if the Board could authorize paying for repair of the McQuay units, with the owners paying the difference of the replacement. Mr. Fisher responded that the Board has the authority to take on maintenance and repair only; characterizing a payment for repair when in actuality the payment would be towards replacement would be highly inappropriate. . Amending the by-laws or getting a bulk rate and managing it as a joint project are the best options.
The resident also inquired if it is feasible to create a legal arrangement where owners could donate money to a specific project. Mr. Fisher responded that there would be some legal issues to consider such as managing the funds effectively in trust and the Association’s liability thereon.

A resident inquired if there is a limit to how much the Board can raise condominium fees. Mr. Fisher stated that if the Board establishes a budget, there is no limit to how much the fees are raised to meet the operating expenses. The only exception to this is stated in the Maryland Condominium Act. If an association’s board needs to increase the assessments more than 15 percent mid-way through a budget year, that board is required to obtain a vote from the owners.

Approval of Previous Meeting Minutes:
MOTION Dr. Muller moved, Mr. Bressler seconded, to approve the January 19, 2011 regular meeting minutes as amended. Mr. Santos stated that there were some recent changes inserted by Ms. Frantz to the minutes that the Board may want to still consider. Ms. Kielty decided that Ms. Frantz’s comments should be considered, and that the minutes should be finalized and voted upon at the next meeting.

Ms. Fridell requested that there be a definitive declaration of the final minutes before the Board meeting. Mr. Santos stated that he has tried to do that. Dr. Muller stated that it is the Board Secretary’s responsibility to assimilate all changes and declare the final draft. Mr. Santos stated that he will incorporate Ms. Frantz’s recommended changes within the next couple of days.

President’s Report: Ms. Kielty stated that it is a pleasure to be in the newly refurbished lobby and to have the furniture, fixtures and accessories in place. She noted that more residents are using the space and it is the end product of four years work by residents, management and design and construction experts. She has heard from many residents about how pleased they are with the space and understands that some are not. All board members were involved in the project, and there were many opportunities for owner input. Ms. Kielty requested that the Association move on from this project to other major issues that have been neglected for many years. The refurbishment was projected to cost $1.5 million and ultimately cost less, including the party room and bathroom.

There will be three open Board positions in the upcoming election. Ms. Kielty encouraged residents to run for election. She emphasized that all board members are concerned about fiscal responsibility in this building, and used the best judgment possible within the budget. With the completion of the lobby refurbishment, it is now in the hands of residents, owners, management and the cleaning staff to care for the building Treasurer’s Report: Ms. Fridell stated that on February, 16, 2011, she held a review session of the FY 2010 audited financial statements for the residents. The session also included a trend analysis of financial performance and expenses over the past five years.

Ms. Fridell stated that she had contacted all of the banks recommended by Lerch Early for a possible project loan. She stated that it is an option that should be considered, but that the condo fees would be held as security and that payments for interest and principal would not be available for other discretionary reserve expenses. She stressed that entering into this type of obligation requires serious consideration and great prudence.

The following FY 2011 expense categories are over-budget: payroll, repair and maintenance and utilities. Ms. Fridell stated that the Board should focus on expense control. She added that in addition to major project management, Management also oversees the day-to-day operations of the building and the front desk operations, and needs to be given the time to focus on these. Delinquencies decreased by $20,000 over the past month and Ms. Fridell applauded management’s efforts in improving collections.

Old Business:
Project Updates: Mr. Murdoch stated that there are some expense issues to review regarding the renovation project. The design fees for the project are currently around $275,000, exceeding the $250,000 budgeted amount, and there will be another $2,200 that Hartman Design Group (HDG) will still bill for February. Total fees include $4,000 for lighting consulting; $4,000 for reimbursable expenses; and $2,500 for presentations to the Board. Dr. Muller inquired what were the results of the discussion between the designers and the lighting expert. Ms. Kielty responded that it involved discussions of lighting positioning, where electricity is available, and energy efficient lighting. Ms. Barth stated that there would be more lighting than in the past, but less energy will be used because of the type of lighting.

Ms. Fridell expressed concern that when a specific project budget is exceeded, this will appear in the footnotes of the Association’s financial statements, which will be viewed by current and prospective owners and potential lenders. Ms. Fridell stated that when a budget is set and exceeded, albeit even for legitimate reasons, by re-raising the budget, the Board is hiding the fact that the original budget was exceeded. Ms. Kielty stated that perhaps the $250,000 design expense budget should never have been set because the contract with HDG was based on hourly rates. She added that it is helpful to have a limit for discussion purposes, but ultimately, flexibility is needed to complete a project. Ms. Fridell stressed that the purpose of setting a limit on the design fees was because the Board, Lerch Early and Legum & Norman were unable to negotiate any expense limits with HDG at the time the design contract was approved, and that she had opposed approval of the HDG contract for precisely that reason. She believed that design expenses should have been controlled by being prudent with time and cost control. Dr. Muller reminded the Board that there were a number of instances in which HDG’s design reduced cost, for example, by not using marble as the back-drop behind the front desk.

Mr. Murdoch stated that the original project budget was for $1.6 million and was then reduced to $1.2 million. Over the course of the project, there were sub-projects such as replacing window framing and improving front door access that were outside of the original scope, but made good sense to undertake. Ultimately, $1,470,000 was spent on the project, still below the original budget of $1.6 million.

Ms. Fridell raised the issue that the Board previously made a motion for a budget and this was not adhered to. She questioned what was the true meaning of the Board’s word if the Board did not adhere to its stated/voted objectives. Mr. Murdoch stated that the Board discussed and agreed upon the changes along the way, which are reflected in past meeting minutes. Dr. Muller stated that the budget is a guideline and should be followed in good faith, but should be flexible. Mr. Murdoch suggested that in the future, certain aspects of projects should be more tightly defined, and designers be given a limit about what the Association can afford to spend.

The Board agreed to postpone a vote to adjust the design budget until the final tally of payments to HDG can be calculated.

Ms. Kielty stated that the Association’s auditor, Deleon & Stang recommended that the Board needed to retroactively vote for approval of the acquisition of a piano. Ms. Fridell had consulted the auditor on how to proceed because she did not feel comfortable signing off on a request to reimburse Dr. Muller $19,500 for payment of the piano because the expenditure had not been authorized by the Board and it had been made on Dr. Muller’s personal credit card. Ms. Fridell stated that there was some controversy exchanged among Board members as to whether the piano could be considered a piece of furniture, and as such, whether the expenditure was part of the overall furniture budget.

Dr. Muller, who led the efforts on the piano purchase, provided the statement : an appendix to these February 23, 2011 minutes.

Ms. Frantz inquired that if the piano was purchased on December 18, 2011, and there have been two board meetings since that time, why the purchase was not discussed. She stated that few individuals knew about the purchase, and the Board knew that this was a controversial topic among owners. In the October 2010 Board meeting, a resident asked about the decision to acquire a piano, and the Board President responded that a decision had not yet been made. Dr. Muller responded that HDG assured him in early December 2010 that the furniture budget would be sufficient and that furniture expenditures would not exceed $326,000 without the piano. The audio visual equipment was never part of the furniture budget. Ms. Kielty stated that the piano was also not discussed at the prior two Board meetings because she preferred that all items be discussed at one time after the furnishings arrived and the project was completed. Also, Ms. Kielty was not going to be present at the December 2010 Board meeting and she believed it would have been inappropriate to raise the topic. Dr. Muller stated that he had been prepared to mention the piano at the January 2010 Board meeting, but the piano had not yet arrived.

Ms. Kielty added that she felt that it was important for residents to see the piano and there was no opportunity to return it. She had hoped that when residents saw the piano in the space, they would accept it. In retrospect, she feels that it was not the best way to handle the purchase, and apologized to the Board for the way the purchase was handled. Her rationale for approving the purchase of the piano was that it fit within the furniture budget line and she did not believe that buying a less expensive piano would be a worthwhile investment. She added that the piano will be in place for generations and is an amenity for those who do not use other amenities, such as the pool or exercise room. The Association spends $44,000 a year on the pool for a small number of people, in contrast to the one-time cost of a piano to use at parties and gatherings. Ms. Kielty added that there is still money in the budget for fitness room equipment and the Board can soon move ahead on that purchase. She stated that there were no votes on specific furnishings, but rather an overall budget for the furniture.

Mr. Bressler read the attached statement : an appendix to these February 23, 2011 minutes.

MOTION Mr. Bressler moved that the Board of Directors of the Elizabeth Condominium has not, will not, and should not vote to purchase, nor reimburse, the cost of a piano bought without the Board’s approval. Board members were unclear on the wording of the motion, and there was not a second for this motion. Mr. Bressler later retracted this motion so that Ms. Fridell could propose another motion with more precise wording to reflect Deleon & Stang’s recommendation.

Mr. Fisher opined that the wording of Mr. Bressler’s motion was not appropriate and that the Board should consider the issue in two parts: 1) Was the purchase of the piano authorized? 2) Does the Board authorize the reimbursement of the piano to Dr. Muller? The Treasurer was not comfortable with approving the purchase and has brought the retroactive approval and reimbursement request to the Board.

In response to Mr. Bressler’s statement, Dr. Muller asserted that he purchased the TV on sale, and that the Board was never under any obligation to reimburse him; he would have kept the TV if the Board opted not to buy it for the lobby. Dr. Muller stressed that he did not make a unilateral decision, and at the request of the Refurbishment Committee, he researched pianos over a three-month period. There was no opportunity to discuss the piano purchase with the Board on a Saturday afternoon.

Ms. Fridell expressed that it is not clear to everyone that a piano could be considered a piece of furniture, and stated that in her opinion it is a discretionary item. She added that given the price of $19,053 and the fact that not everyone would assume it was covered under the furniture budget, she believed it merited being discussed specifically by the Board in the context of the refurbishment and reserve expenditure priorities. Since the piano was not purchased through a third party invoice, and because it is not universally categorized as a piece of furniture, she sought Deleon & Stang’s advice and the auditor recommended that the Board vote retroactively to authorize the purchase so that there would be a record of the decision in the Minutes.

MOTION Ms. Fridell moved, Ms. Barth seconded, to retroactively approve the purchase of the piano for $19,053, as requested by DeLeon and Stang. The motion failed with three approvals (Dr. Muller, Ms. Barth and Ms. Kielty) and four disapprovals (Mr. Bressler, Ms. Frantz, Ms. Fridell and Ms. Kielty).

Dr. Muller noted that the disapproval of the piano purchase could set a precedent for future Board decisions regarding every new item that residents dislike and that the process should be clarified in the next phase of the refurbishment. He emphasized that the purchase was not done any differently from any other article of furniture purchased under the furniture budget. The purchase was executed in good faith, over a few months, and was done at the request of a committee to be helpful.

Ms. Barth stated that at the first meeting with the HDG on May 29, 2009, the design concept was presented, which included a baby grand piano. The Refurbishment Committee discussed this with the resident Advisory Committee, which also liked the idea. In June 2009, the Board saw and approved this design (with the exception of Ms. Frantz and Mr. Levine who were not on the Board at that time). The committee delayed purchasing the piano in order to see whether there were funds left in the furniture budget after purchase of furniture and accessories. Ms. Barth affirmed that Dr. Muller led the search for the piano because of his specific knowledge and that the piano had always been considered to be part of the furnishings of the lobby. Ms. Barth also noted that she has seen the piano being used on four occasions after 10:00 p.m. in the last week, and that it was purchased for the enjoyment of the residents.

Dr. Muller asked Mr. Fisher if he could provide a legal opinion about a reimbursement request to a Board member for a purchase that was executed in good faith. Ms. Fisher responded that he could not provide an ad hoc opinion at the meeting. Dr. Muller asked Ms. Frantz ,who had voted against the motion to authorize the purchase, to reconsider her vote, and stated that he believed the issue is exacerbating personal differences.

There was some confusion about whether the Board could vote to reimburse Dr. Muller even though it had voted against the purchase of the piano. Mr. Fisher stated that the Board could not authorize the reimbursement to Dr. Muller if it did not approve the underlying purchase.

MOTION Ms. Frantz moved, Mr. Bressler seconded, that $3,276, which were the proceeds from the sale of the old lobby furniture, be moved from the Operating to the Reserve fund, as requested by the auditor. Ms. Barth stated that this had already been done in August 2010 based on a previous Board motion. Ms. Frantz explained that the amount had been discussed with the auditors in November 2010. The amount had been credited to the refurbishing budget, but the actual cash proceeds had not been transferred to the Reserve Fund. The motion passed with one abstention by Dr. Muller (5-0-1).

Ms. Kielty expressed frustration about the decision making process of the Board; in her opinion it is inefficient and issues are over-analyzed. She added that hostile feelings among residents about how decisions are made have created an unpleasant environment. The community should be thrilled about the completion of the project, and that she made the decision to authorize the purchase of the piano because she believed it to be in the best interest of the community.

[Ms. Kielty left the meeting at 10:02 p.m. to use the restroom], Ms. Fridell questioned who was in charge of the Board meeting. Dr. Muller, as Vice President, assumed control of the meeting,]

New Business:
A brief discussion resulted in the conclusion that the expenditures for audio visual equipment should not be included in the furniture budget. Mr. Murdoch stated that the change would be reflected in the next report.

FY2012 Proposed Budget Schedule: Mr. Murdoch stated that a draft budget will be given to the Treasurer on Monday and that the Board will need to proceed with workshops to discuss the FY 2012 budget.

Annual Meeting Schedule/Elections Committee: Mr. Murdoch reported that the Election Committee met that afternoon. The Committee is appointed by the President and consists of: Linda Kontnier, Jim Rich, Mary McGuire, Diana Brosnon, and Jim & Evelyn Vuko. The call for candidates will go out in a letter from the Board President on February 25, 2011. The nomination deadline is March 27, 2011, and the official ballot and Annual Meeting notice will be mailed on April 11, 2011. The Annual Meeting will be held on May 4, 2011. The Election Committee elected to use the computerized ballot system from Legum & Norman which was used in the 2010 elections.

[Ms. Kielty returned at 10:11 p.m and reassumed control of the meeting.]

Mr. Santos stated that the key FOB distribution has been ongoing for more than a month. Notices were sent to residents that the Management office will be open on a Saturday and late hours for Mondays and Tuesdays to continue distributing key Fobs. The building is not completely secure until all external access doors are locked 24/7. Eventually residents will need to use their key fobs for any entry to the building and guests will have to call from the front entry in order to be admitted.

At the January 19, 2011, meeting, the Board approved the disposal of hazardous waste stored/accumulated around the building for $4,917.50. Between the time of the approval and the disposal, additional waste was discovered in other storage rooms, which increased the cost of disposal to $6,675.75.

MOTION Mr. Bressler moved, Ms. Fridell seconded, to approve the increase of $1,758.25 to pay Environmental Management Services, Inc. for the disposal of hazardous waste. The motion passed with one abstention by Dr. Muller (5-0-1).

Mr. Santos reported that there was a hard drive “crash” of the camera monitoring system and that the system was inoperable. Mr. Levine has been helping Mr. Santos to evaluate options; there will be an upcoming expense to replace the computer equipment and augment the capacity of the server. The cost will likely be around $6,000.

The garage floor sweeper machine is failing. Management and staff are trying to salvage it and replace the engine, which could possibly cost $6,000 to $7,000. The machine is about 15 years old, and a replacement would cost about $30,000.

Mr. Santos asked for Board approval of the winterization of the cooling tower in order to have heat and air conditioning accessible year-round. The winterization can be done any time of the year; however, in order t have both available in transition months such as April and May, the work would need to commence within 30 days. Mr. Santos obtained three proposals from Carrier, Densel and Noyes Air Conditioning and recommended the Board approve Densel. Densel’s comprehensive bid of $45,000represented the lowest cost.

Mr. Murdoch noted that this expenditure could be covered with the $50,000 allowance for mechanical work in the Five Year Plan for this fiscal year. Ms. Fridell pointed out that the Association would likely incur additional energy costs as a result of making both air conditioning and heating available during transitional months and asked if Management could estimate what the additional costs might be. Mr. Santos stated that it is impossible to measure the utility costs because of the individual temperature preferences of each resident. He added that once the work is completed, all of the heating and air conditioning equipment will constantly run. Ms. Barth noted that this could diminish the life expectancy of HVAC equipment. Dr. Muller stated that the decision to make available both air conditioning and heating at all times could be reversed at any time.

MOTION Dr. Muller moved, Ms. Barth seconded, to accept the proposal from Densel for $46,331. The motion passed unanimously (6-0-0).

MOTION Mr. Levine moved, Ms. Frantz seconded, to reconsider the previous motion which did not pass earlier in the meeting to approve the purchase of the piano for $19,053.00. Mr. Levine stated that if the Board does not reimburse Dr. Muller, it could cost the Association even more money in legal costs. The motion passed with objections from Ms. Fridell and Mr. Bressler (5-2-0).

Committee Reports:
Landscaping Committee: The committee is in the process of determining cost and arrangement of plantings in the front of the building. Ruppert Landscape is in the process of planning a design, and an open meeting will be held next week. The committee has formulated a list of objectives to share with residents and a questionnaire will be distributed to all residents to obtain their feedback. The meeting will be held on Thursday, March 3, 2011, at 7:30 p.m. in the west lobby and is open to all.

Floor Representatives Committee: The committee eulogized Ms. Helen Soderberg, who had recently died and had previously served on the committee and made many contributions to the Elizabeth. Management gave the committee information on new move-ins from January and February. A questionnaire was designed for floor representatives about how to enhance their efforts for welcoming new residents. Dr. Muller announced that the Board had approved the use of the West lobby area by the Soderberg family and friends on March 26, 2011 for a memorial service.

Comments from the Floor:
• A resident inquired about how a change can be made to the by-laws. Mr. Fisher stated that there are two ways: 1) A presentation can be made by the Board and communicated to the owners; or 2) owners, by petition, can submit something to the Board in writing to request approval. He recommends that an owner who would like a change to the by-laws, submit a request in writing to the Board for consideration. Ultimately, an amendment requires a supermajority approval of 66 and 2/3 of all owners.

• The same resident also inquired about whether the front glass doors were going to be replaced because they were too heavy, in her opinion. Ms. Kielty clarified that they were previously replaced during the refurbishment project because of structural issues, but that there are no plans to replace the current doors.

• A resident stated it is important that residents be active in voicing their opinions in the community. She suggested that another option to solve the piano issue would have been to sell the piano and the Association could have reimbursed Dr. Muller the difference. The resident stressed that all purchases should be transparent. She added that the Board’s second vote on the issue was motivated out of panic to reimburse Dr. Muller, and in her opinion did not reflect the truer issue. The resident felt that the purchase of the piano was egregious and that it could have been purchased at another time.

• A resident inquired why a Board member would use a credit card to make such a large purchase on behalf of the Association. Dr. Muller responded that the piano had to be purchased that day and he had credit available to affect the purchase.

• A resident repeated his previous observations about a corner in the hallway leading to the west elevators that is repeatedly damaged by passers by, and that a plastic corner should be applied to avoid repeat damage. Mr. Santos stated that this will be taken care of this week.

• A new owner who will be soon moving into the building expressed her opinion that the refurbishment lobby was impressive. She stated that she is looking forward to living in the community and hopes that the experience will be a positive one.

Adjournment:
The President adjourned the meeting at 10:49 p.m.

The initial draft of the minutes, upon which these minutes are based, was prepared by Jana Bowcut of On the Record.
Respectfully submitted,
__________________________________________________________________
Charles Bressler, Board Secretary


Appendix to February 23, 2011 Minutes from the Board of Directors’ Regular Monthly Board Meeting.

Charles Bressler’s summary regarding piano purchase:

The last time the Board approached the subject of the piano was at the October board meeting when the president said in answer to a question that “no decision has been taken.” The Board clearly decided then to postpone a decision on whether to get a piano or not, to sometime in the future. There were three board meetings on November 22, December 20, and January 19, with no mention of the piano.

On January 31, 2011, there was a special board meeting, chaired by Dr. Muller, to discuss financing future projects. Well, that was certainly not the ideal time to talk about a piano at a meeting schedule to discuss borrowing a few million dollars to finance the replacement of the exterior windows, the AWAC system, possibly the doors of each apartment, etc.
Then the piano lands in the lobby a day after the new furniture is delivered early February. Well, guess when this piano was purchased? It is hard to believe. The piano was purchased on December 19, 2010, by Dr. Muller and charged on his credit card two days before our December board meeting. At that meeting, the purchase of a $19,000 piano purchased and charged on his personal credit card still fresh in his mind, but no mention of the piano.
No mention on the January 19th meeting, no mention on the January 31st meeting, but when the piano lands into the west lobby, an invoice is presented to Mr. Santos. This invoice is dated December 18, 2010, in the amount of $19,053 for a Boston piano with matching bench. I assume that Ms. Kielty, our president, approved it since it bears her initials, on the 29th of January, more than a month later. It was then presented to the treasurer, Monique Fridell, who did not approve of this expenditure and refused to sign the check.

Thank God Monique has an excellent memory. She knew very well, as most of us on the Board and in the audience, that we never did vote to purchase a piano. She also knew that the Board would not under the circumstances purchase a $19,000 piano when we have so many expensive projects that are indispensable to the building.

I have already expressed to the Board via numerous e-mails, that I, for the reasons expressed here above, would vote “no” to purchase the piano, nor would I vote for Dr. Muller to be reimbursed for $19,053. I even suggested that Dr. Muller return the piano, but as of February 11th, he never approached Steinway piano gallery to even discuss the issue.

To help out, I asked Mr. Murdoch to contact Mr. Manougian, our insurance agent, to check if this could be considered an error by a board member and obtain a refund for the Elizabeth Condominium Association.

It is very clear to me as it should be to many, that Dr. Muller made a unilateral decision to withhold the facts that he purchased the piano back in December from at least four board members and the owners.

It is not the first time Dr. Muller comes to the Board to ask for a retroactive vote to reimburse him for something he purchased without prior vote by the Board. If you remember, some two and a half years ago, before I joined the Board, he asked the previous board to vote retroactively to authorize the purchase of a flat television on the wall of our then library. It had already been installed a few days before, which meant that it had been ordered and paid before, again on a credit card.

Now, having the facts, I urge the Board to vote no for the purchase of the piano and therefore no to the request for reimbursement.

You and I have a fiduciary duty to the Elizabeth Condominium and its owners, not to Dr. Muller who has acted irresponsibly and with total disregard toward the Board and most


Appendix to February 23, 2011 Minutes from the Board of Directors’ Regular Monthly Board Meeting.

Dr. Muller’s summary regarding piano purchase:

The Board President has asked that I present a comprehensive, factual report concerning the acquisition of the Boston piano which was installed in the west lobby last month. I am happy to do so. To the best of my knowledge and memory, the facts are as follows:
By way of background and to refresh our collective memory: the original Hartman design , including a parlor grand piano in the west lobby, was presented to the Refurbishment Committee in May, 2009. The design, including the piano, was presented to the Board in June, 2009. It was presented to the Elizabeth membership by Hartman Design Group (HDG) at a public meeting on 3/9/2010. The plan, including the piano, was pictorially displayed in our main entrance lobby from then until late August, 2010, when work started on the project. Hartman's estimated price for such an instrument was $15,000. Hartman agreed to advise the Committee but left the final selection to them, just as they left the final selection of the TVs to the Committee or their designee, Management.

Members of the Refurbishment Committee visited many piano stores during 2010 without arriving at a decision, mainly because it was not clear what amount of money would be available in the furniture budget for a piano after all other furnishings had been selected.
I was never a member of the Refurbishment Committee, but because I had been a concert pianist many years ago (in college and medical school), committee members asked for my assistance in late October, 2010. Specifically, they asked me to evaluate the musical quality of various pianos and recommend one for purchase.

My recommendation would be based on three criteria:
1. The Hartman design for a grand piano, polished black approximately 5'3" in length, large enough for full tones but intimate in size for the lobby space;
2. The Committee desire for a structurally sound instrument which would endure for the lifetime of The Elizabeth, with the warranty of a reliable firm;
3. The Board's desire to remain within their budgetary furniture line item, ($350,000) last discussed and voted in public session, July 2010.

With these limiting criteria, a number of possibilities were immediately eliminated. Used pianos in private ownership, either within the surrounding community or the larger Internet community, would not provide the desired warranty or company backing. In addition, some of these pianos (such as one offered by the Community Center) would have required extensive, expensive refurbishment. The Refurbishment Committee also noted that older, cheaper models were less likely to be as durable and would not have as lengthy a lifespan.

The "gold standard" for excellence in pianos is, of course, a Steinway. But a new Steinway of the preferred size would cost between $40,000- $50,000, and even a used/refurbished Steinway of this size would be between $25,000 and $30,000, clearly not in our budget.

With these facts in mind, I visited four different locations for a piano. First, sometime in November I accompanied a member of the Refurbishment Committee to Jordan Kitt Pianos in Rockville. They were displaying new Yamaha pianos and recently used ones that had been loaned to Georgetown University. The prices were in the $15,000 range. The musical quality of the pianos was excellent and this information was reported back to other members of the committee. However, since it was still not clear what the final cost of remaining furniture would be, no decision was made.

A second visit was made later that month to The Piano Company in White Flint Mall, to evaluate Kawai pianos, the "Toyota" to Yamaha's "Honda," both excellent companies headquartered in the same Japanese city. Both Japanese pianos have a "brighter" tone than the more "mellow" Steinway, and are preferred by many because of their excellent workmanship but more modest price. Here again, I found at least one piano in the $15,000 range and reported such to the committee members. Again, there was no decision because of the uncertain furniture costs yet remaining.

In early December I visited Rick Jones Pianos in Beltsville. His establishment has an excellent reputation established over many years selling refurbished Yamahas and Steinway pianos. There were at least two such Yamaha pianos that were in the $12-15,000 price range, which I again reported back to the committee as candidates for purchase. However, the fact that they were 10-20 years old, even though refurbished with a 10 year warranty, made the committee members reluctant to pursue purchase.

Over this same time period, in an attempt to elicit fresh input, I also spoke to two members of the Board who had not been on the Board when the original presentation was made by HDG.

One of these members wished assurance that the piano would actually be used and not merely serve as decoration. While no survey could predict an accurate measure of such use, I did approach a number of people whom I know play the piano. Four of them, representative of ages from 9 to 90, wrote back notes of support whose copies I share with the Board.

Finally, in mid-December, I spoke again with HDG, who assured me that their final furniture costs would be roughly $326,000, leaving about $24,000 in the furniture line item. At about this same time, Steinway pianos announced their annual, one day public sale of pianos which they had loaned to the Kennedy Center for a year. I obtained an invitation to inspect these pianos on the Saturday immediately prior to the public offering, and invited Ms. Marianne Cook, our resident master pianist to accompany me and provide me with her expert, independent judgment concerning the pianos' comparative tone and touch. Together, we spent the afternoon evaluating and playing the various Kennedy Center pianos, at the end of which time we both judged the 2009 Boston Performance Edition piano to be superlative in quality. This piano would sell new for about $22,000, but because it had been played professionally for about a year, Steinway was asking $19,000. I negotiated the price down to $17,500 and then phoned the Board President to report the situation. She inquired whether the piano could be "held" with a refundable down payment, but this was not acceptable to Steinway, since all the pianos were expected to be sold the following day during the public offering.

The Board President asked my advice and I summarized the situation by repeating my original three criteria, all of which I believe had been met:
1. A polished ebony parlor grand, measuring 5'1.5" met the Hartman Design proposal
2. A 10 year Steinway warranty met the Committee's concern for a highest quality piano and
3. The cost was close to the original $15,000 estimate and within the furniture budget voted by the Board.

Since this was the best "fit" of all the pianos that I had seen and/or researched, and since there was not, in my opinion, the likelihood of a better option in the foreseeable future, I strongly recommended the purchase. This would be an amenity that could be enjoyed by generations of Elizabeth residents and visitors, since a piano's life-time would easily span 50 years or more.

The cost to each condominium unit would be approximately $1/week for a year, not even presuming amortization. The first tune-up at six months would be half-price from Steinway, and annual costs thereafter would only include a tune-up, whose cost would be between $100-200 depending on the tuner of our choice. The 10-year warranty from Steinway would protect the structural integrity of the piano.

The Board President agreed and the purchase was made. Following the usual procedure, the credit card charge was presented to Management for reimbursement when it arrived in January, and this in turn was presented to the Board Treasurer for her review, just as all other furniture bills had been processed.