Memo from Jim Jones on Board Meeting of Dec. 20, 2010

MEMORANDUM

Date: December 21, 2010

To: Owners and members of the Elizabeth Condominium Association

From: James C. Jones

Concerning: Board meeting of Dec. 20, 2010

During the open session of the Board meeting yesterday evening, meanness mingled with great ignorance, in yet another sad spectacle of democracy as we know it in The Elizabeth.

Let me begin by noting that my intent last night was to suggest that a little sound reasoning leads to the minimal conclusion that we’re dancing on the edge of a financial cliff with regard to our spending. And with such dancing comes the risk of toppling over and into the abyss (where everything is dark, and where “dwelleth clowns and fools”). I certainly agree that refurbishment is a need everywhere in our aging building. But I’m also aware of the cost of repairing and replacing basic quality-of-life infrastructure. The Board’s challenge is to balance this out, with a bias as regards infrastructure. And that balance also requires the allocation of refurbishment resources rationally between all areas of the building.

There are at least two dimensions of the Board’s fiduciary responsibility as it pursues this balance. First, it must keep condo fees within a range tolerable for those of us—myself included—with less income. Many of our owners live on a fixed low income. And with the recent economic debacle, whose effects will resonate for years to come, those residents have reason to be concerned. And second, the Board must keep one eye cocked on property value.

As an economist and an owner, I question whether either the current or the previous Board have balanced this well. This is what the circulating petition is all about. Each owner, of course, must ask this question. And in so doing, I would encourage him or her to obtain a copy of the contract signed by the Board with the Hartman Group, and the addendum that goes with it. (I obtained both electronically, with Board permission and the kindness of Scott Murdoch.) Please look carefully at the costs. And note in the contract addendum that the Board commits to the Hartman Group for work on the floors—18 floors in each tower, for a total of 36 floors. I see a reckless lavishness—I’m not here arguing aesthetics—in these costs, one that we can ill afford. Do we wish to continue in this lavish vein as we refurbish the floors? Can we? What are the risks?

In trying to learn how designers operate, I consulted five or six of them in the D.C. area. True, not all of them do condos, sometimes because of the conflicts involved. But I did learn that there is no industry standard for design fees, which can be calculated in several ways. One is to bill by time spent. Another is by taking a commission on items procured. And a third is a combination of the two, which is what Hartman does. If you read the Hartman contract, you see an hourly fee structure, and also see that Hartman takes a 30 percent “procurement cost” on each item furnished. And the client pays shipping and handling, storage, and insurance costs separately. There is no economic incentive for Hartman to keep costs down, and every incentive to keep them high.

According to cost-track data provided by management, the design fee already disbursed to Hartman is $256,714.00. Adding the 30 percent procurement fee cost (30 % of $189,392, the figure from the contract cost proposal) yields $313,500. Something less than this amount qualifies as “profit” as that term is normally understood. And if the total construction cost is $1.3 million, then the profit is something less than 24 percent. Did we get our money’s worth?

Let me say more about the petition. The nub of it (the Third Point) calls for a restructuring of the Refurbishment Committee in order to create a mechanism to control costs and help the Board achieve the balance that I speak of above. The petition asks for a Committee with at least seven persons, including three petition signers. I did learn in talking with design firms that they prefer to deal with a minimum number of individuals in order to facilitate consensus. This is why I proposed last night that a new three-person Refurbishment Committee be formed, with a new advisory group. And the new Committee should consist of those who sign the petition.

Why did I say last night that I wanted more signatures in order to have some “legal” clout? It's quite simple. We currently have 67 signatures from 57 units. And those units represent 14.8 percent of total ownership. (This figure is not insignificant if one recalls that no candidate received more than this percent of ownership in the last three Board elections. If the petition, like voting, is an expression of community preference, then it ranks above those we have elected.) According to our Bylaws, a petition representing 25 percent of total ownership value obliges the Board President to call a special meeting. This is the “legal” clout to which I refer. A special meeting, should one be called, would address expenditures, especially as regards those for refurbishment. I would still ask owners to sign the petition. And please let me emphasize that you have nothing to fear: your names would be used only for the purpose that I just described—indeed, could not be used for any other conceivable purpose.

I conclude by noting that I grew up in a Scotch-Irish community. Composure is a delicate and near-uncontrollable thing among the Scotch-Irish, and I all but lost mine last night by sallying forth in full battle regalia. But let's be clear about one thing: I make no apologies for the combative role that I’m playing as regards the petition.

Jim Jones response to Alexandra Kielty's letter to owners of Nov. 29, 2010

In a letter dated November 29, 2010, President of the Board of Directors of the Elizabeth condominium, Ms. Alexandra Kielty, used her power of access to official channels to circulate a rebuttal to an owner petition now in circulation. I and other owners have no such power of access, and must respond using other than official channels. As one representing those who have already signed the petition, or who may yet wish to sign it, I here respond to Ms. Kielty's letter.

Ms. Kielty (on behalf of the Board) calls the petition "an attack on the integrity of the Board of Directors." Rather, I would call it a challenge to the Board's judgement and its crass cronyism.

Despite Ms. Kielty's defensive efforts to portray the Board as transparent and acting on the best interest of the community, the reality hints otherwise. In brief, I would note the following:

• The Board should post in a public place the contract it has with The Hartman Group. In addition, the Board should post a breakdown of all incurred costs of the refurbishment done to date. This breakdown should be detailed, and should include the following in user-friendly format:

1. The contract between The Elizabeth and Hartman Group, with addendums.
2. The cost of each item purchased or installed under the contract, including artwork and furniture. The cost of artwork and furniture should be detailed by piece.
3. The fee paid to Hartman Group for their design and refurbishment work.
4. Any fees paid to the management firm Legum and Norman for transacting something like $1.3 million in the context of the refurbishment.

As owners, we have a right to know what we're buying and its cost. Moreover, the Maryland Condominium Act requires that owners have access to this information [Section 11-116, c. (ii)].

• Ms. Kielty further refers to a three-person Refurbishment Committee and a four-person Advisory Committee, all appointed under the tenure of past Board president Woody Cunningham. A major thrust of the present petition argues for new blood. Ms. Kielty and the current Board continued with the same small coterie as always rather than try to bring in new blood and new ideas, notwithstanding the concerns of many owners. The petition thus asks that the Refurbishment Commnittee be increased to seven persons, at least three of which should include persons signing the circulating petition. Ms. Kielty's letter fails to address this key issue.

President Kielty's highly defensive rebuttal is short on relevant specifics and in no way vitiates the essence of the circulating petition, which remains available to all who wish to sign. You can call me, Jim Jones, at (301) 657-1604, or e-mail me at jonesjcz@prodigy.net, for a copy of the petition. Or you can drop a note in my box (unit #307) at the reception desk.

Refurbishment Issues Raised by Jim Jones

Several members of the Elizabeth Condominium Association realize with growing dismay that the Association faces a dire financial situation that will affect every Association menmber. In the belief that the lack of appropriate attention to a large proportion of members' concerns will continue unabated if we do not speak out, we are united in our appeal to the Board for consideration of the critical financial issues this petition addresses. We are circulating a petition (in synthesis below) to the Board that details our concerns. You may obtain a copy gor signing by sending an e-mail to Jim Jones (jonesjcz@prodigy.net), or otherwise notifying him by leaving a note in his box (Unit #307).

Beyond the more than $1.3 million already spent on "refurbishing" and making partial structural changes in the lobby, an additional large sum will apparently be required for furniture and artwork. In addition, the recent engineering evaluation report (Mendoza Report) introduced in the open meeting of the Board on October 18 and available for study on the Elizabeth website, estimates that more than $900,000-exclusive of labor-is required to replace all equipment required to ensure the health and safety of residents. The report advises that about half of this amount should be invested in the immediate term to replace equipment. The total amount required for essential maintenance and completion of the lobby appurtenances does not include other measures proposed at the meeting: insulation of windows, other vital maintenance suggested by the engineering consultant, any work on unit doors, or, indeed, any other enhancements of interior appearance wished for by the Decorating Committee. Clearly, when the costs of necessary infrastructure work are added to the cost of additional decoration, condominium fees will have to be raised substantially yet again, or a crippling assessment will have to be paid by Association members in the difficult financial conditions anticipated for the near future. Therefore,

1. We urge strongly that all future work of decorating, including any work to be done on floors one through eighteen, be carefully and knowledgeably coordinated for economic viability with the costly and far more necessary work required to maintain the building's infrastructure. Fully detailed information about the projected cost and plan for payment of any undertaking that affects the appearance or the structural integrity of the building should be provided to all Association members well in advance of the signing of any future contracts, not only by means of oral presentation by Board members in open meetings, but also in hard copy as well as electronic text.

2. Although the Board's enthusiasm for the Hartman design firm is not widely enough shared by Association members, the Board has already signed an agreement with that company to provide the design for floors one through eighteen. In consideration of the high cost of the work already done on the lobby and the very great need for structural maintenance, we urge that no work on the upper floors be undertaken until a plan that coordinates the expense of all work on necessary infrastructure repair and decoration is completed and shared with Association members for their input.

3. We ask that the number of those on the Decorating Co0mmittee be increased from the current three members reported by the committee chair in the public meeting of the Board on October 18, to at least seven, and that the individuals added to the committee consist of at least three Association members who have signed this petition. The responsibilities of the expanded Decorating Committee should include monitoring cost/work to stay within a tight budget and ensuring that Association members are kept informed in a timely way that allows them to make a precise analysis of details and costs that will enable them to present their reactions appropriately to the Board.

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.

Summary of March 2009 Elizabeth Condo Board Meeting

The March meeting of Elizabeth Condo Board highlighted such items as the annual audit, professional management, and the contract with Phyllis Hartman of the Harman Design Group related to the building refurbishment. Here is a thumbnail list of what took place.

A representative from DeLeon & Stang provided a quick overview of the late annual audit report (held up by the Board in favor of completing the Reserve Study first). Finances appear to be in good shape and under sound auditing principals. A question from the floor regarding whether window replacement would provide a tax break to either the building or owners yielded a positive response.

Among the items reported by treasurer Monique Fridell was that while delinquencies doubled in January and February, they went down 2.09% in this period. One case has gone to litigation but other cases have been resolved.

A considerable amount of time was spent discussing and voting on the contract with Phyllis Hartman relative to the building refurbishment. Jeffrey Alexrad wanted the contract to state that the ECA total budget limitation is $1.2 million. This limitation includes Hartman’s design work, materials and other contracted work. Monique Fridell wanted the Board to agree on a spending cap for Hartman’s design work.

The Board is closing in on details regarding how professional management will be handled. Once a contract is signed, there will be an information meeting (as early as April) including a presentation by Legum & Norman to discuss the details.

The nominating committee for election of three new Board members will be Peg Downey, Jerry Feldman, and Pat Peyser. They will accept candidate resumes until April 15. There will be a Meet the Candidates evening on April 23. [Current Board members whose tenure is up include Monique Fridell, Judy Gann, and Alexandra Kielty.]

A contract was agreed upon by the Board to begin maintenance work on the G-3 level of the parking garage. The work, which includes quick setting concrete, periodic jack hammering and concrete dust, will go on for two months. Plastic is available at the front desk to cover cars in the construction area.

Arcade owners asked for placement of planters and benches to spruce up the arcade. The Board authorized use of existing planters. Also it was mentioned that the new arcade sign was paid for by the arcade owners.

The Social Committee will organize use of the new West Lobby television. Residents wishing to use the TV will be able to sign up on a list available at the desk.

Comments from the floor included concerns about replacement of exercise equipment, having front desk staff answer the phone (and not make the caller go through the automated attendant), cars that leak oil destroying the membrane, residents running car engines for extended periods of time that cause toxic fumes throughout the garage, and cars that have no current tags on them.

Summary of February 2009 Elizabeth Condo Board Meeting

The February meeting of Elizabeth Condo Board highlighted such items as the annual audit, the energy audit, financial issues, security services, house rules, and the contract with Phyllis Hartman related to the building refurbishment. Here is a thumbnail list of what took place.

While the December Board meeting minutes were approved unanimously (they have been posted to this blog), Jeffery Axelrad took exception to the minutes of the special January meeting of the ECA Board that were prepared by Monique Fridell in the lieu of Judy Gann, the ECA Board secretary. See his statement and the January minutes, which are posted separately.

President Woody Cunningham stated that the annual audit would be completed in the next two weeks. From the floor, Pam Dillon (a former Board president criticized the Board that annual audit had not been done on schedule and by the requirements of law because she said providing the audit so late in the cycle means a useless report.)

The preliminary energy audit was delivered and was schedule for review by the energy committee February 12. No details of the report were offered in this board meeting.

Among the items reported by treasurer Monique Fridell was that delinquencies doubled in January and February and some cases may have to go to our legal council. (I understand this to be non-payment of condo fees.)

Two committees are being formed to work with Phyllis Hartman on the building refurbishment. One committee will be board members and the other formed from people who worked on the committee in the past. First step is to get the contract signed.

New issues about security services arose with a request from our in-house manager for an additional security guard on the weekend. No action was taken until more information is collected.

House Rules -- 12 sets of comments were received and some were incorporated into the new house rules. One issue involving noise concerned allowing live music in the party room.

Look for an offer to get your heat & a/c ducts cleaned. There will be a price break if enough residents purchase this service. Info will be distributed soon.

Decision to procure a new emergency generator was tabled to collect additional bids.

Some important upcoming dates are March—Nominating Committee meeting, April—Meet the Candidates night, May—Annual Meeting. Also in February, there will be a seminar on reverse mortgages.

Comments from the floor included concerns about replacing windows and doors because our windows conduct heat and cold but new windows with thermal break technology would not. Uniformly updating windows now will give the ECA price break advantages and will increase the value of our property as well as make a significant energy savings. A call for public display showing a map of how the refurbishment will proceed was made. Request made to ensure the audit report is delivered in October of every year. Request to limit live music in the party room to avoid bothering residents who live near and above the party room. Request made to have a referendum on hiring an outside management company. Cautioned stated about ensuring that the reverse mortgage seminar is not a commercially pitched event but just informational.