2017 Annual Meeting & New Board Members

The Elizabeth Condominium Associated elected three new board members with  59.32% quorum of Association voters. Here is the breakdown of voting percentages. The top three are the new board members:

29.22%          Zlatan Becca

28.93%          Monique Fridell

22.11%          Alfred Muller, MD

21.66%          Peg Downey

20.59%          Molly Frantz

20.36%          Rhonda Taller

15.87%          Christiana Theoharris

12.66%          Charles Bressler

As you can see by the numbers, the voting was close for the top 6 candidates. I wish the new board success in running timely, peaceful, and productive meetings.

Two items of interest from the Annual Meeting that tell the story of the outgoing board’s accomplishments are the President’s Report and the Treasurer’s Report.

President’s Report

Annual Meeting – May 3, 2017

As is the tradition, it is my pleasure this evening to provide a summary of the highlights of the past year.

This year has been an important transition year.  We have a new management company which began at the end of FY 2016, a new General Manager, and a new Chief Engineer.

1.   From both a financial management and a facilities management standpoint, significant progress has been made toward placing the Association on better financial footing.

a.  Beginning in FY 2016 and continuing through the current FY, our new management company, Gates Hudson, resolved a long-standing liability with Washington Gas. That bill had grown from approximately a quarter of a million dollars in 2012 to almost half a million dollars in 2016 due to accrued interest and penalties. 

Thanks to the efforts of Jeremy Tucker, our counsel, and Larry Hirschman and Carty Massey of Gates Hudson, the dispute was resolved, all interest and penalties were reversed, and the outstanding liability was paid in full.

b.  Additionally, in the first months of her employment, General Manager MaryAnn Hall identified over $500,000 of unpaid overdue invoices.  All outstanding bills were paid, and we are now in good standing with contractors.

c.  Ms. Hall also negotiated new maintenance contracts for us, most of which lock in rates for two and three years, saving the Association approximately $100,000 annually. The new cleaning contract alone saves the Association over $70,000 annually.

d.  Ms. Hall saved another $20,000 by negotiating a more cost-effective contract for the renovation of apartment 10, a unit owned by the Elizabeth that the Association had maintained as a rental unit. 

2.   We Established an Operating Contingency Fund.  Mark Day, our Assistant Treasurer, has done a great deal of research into our funding patterns, and his research confirms that in 6 of the past 10 years, the Operating Fund ended the year in a deficit.  In hindsight, these budgets apparently were not realistic, and worse, there was no contingency fund to fall back on. 

Industry standards recommend that Associations maintain an Operating Contingency Fund of at least 10% of annual assessments (condo fees) to provide funding for unforeseen expenses, and to protect against the use of the Reserve Fund for normal operating expenditures. 

Accordingly, beginning in FY 2016 and again this coming fiscal year, an Operating Contingency Fund is being established as a normal business practice.  This fund will help protect the Association by providing a cushion for the Operating Fund, so that we never end another year in a deficit position.

3.   This past year, the Board contracted with the Goldklang Group for the FY 2016 audit.  As has been discussed previously, the Goldklang Group is considered the gold standard in this arena.

In the report summary, the audit credited the Association for taking a series of actions during the previous 2016 fiscal year to improve the Association’s financial position.  Additionally, it highlighted the Association’s transparency in distributing information to the membership relative to the results of the audit.  Specifically, the Board requested a supplemental report for our owners.  This is in addition to the normal reports made by the auditor to management and the Board of Directors. 

Further, the firm noted that the Board arranged for a briefing of the findings and recommendations at an open Board meeting, and invited the membership to ask questions following the presentation.  In addressing the owners, Jeremy Powell, our auditor, said that this process provided a level of transparency not seen in their 2200 client organizations.

4.   The Board also commissioned a comprehensive Reserve Study to provide guidance to the Board of Directors for future major repairs and replacements.  This study, which was approved at the February meeting, recommends $7.4 M of repairs/replacements through 2021. 

Following the elections this evening, the newly seated Board will review the recommendations of the Reserve Study and make decisions about which capital projects to fund in the next year and how to fund them.

5.   Insurance and the ePipe Project.  Where are we?  I am pleased to report that the ePipe project which began July 1, 2016 will be completed approximately six weeks ahead of schedule. 

As you know, last year Greater New York elected not to renew our Master Policy because they paid out approximately $650,000 in claims against $590,000 in paid premiums.  That is a loss ratio of 110%, and they are in the business to make money – not lose it.  However, the speed with which the ePipe project has been completed has boded well for our insurance program which renews May 15. 

Many associations linger in the excess and surplus lines market for 3-5 years following cancellation.  However, the fact that the Association took seriously the health of our pipes and re-prioritized the ePipe program originally scheduled for 2021, demonstrated to insurance companies the seriousness with which the Board and management have handled the health of the pipes at The Elizabeth.  Consequently,

·      This year, we no longer have layered coverage; rather all insurance coverages will be back under a single Master Policy.
  

·      Water-related losses will be subject to a $50,000 deductible (a marked improvement over the current $100,000 deductible)

·      The total savings to the condominium with this new policy is approximately $39,000 over last year, AND

·      If there are no water-related losses in the coming year, we may be able to have a further reduction in the water deductible next year.

In her April 25, 2017 letter to the Board, Robin Manougian wrote, “I concluded last year’s report to the Board on a somber note, and at that point, the Association faced a great challenge in undertaking a significant maintenance project.  The Association met that challenge with professionalism and strong leadership to achieve results in near-record time.  I commend you for a job well done.  Your efforts, without a doubt, have allowed us to obtain much better premiums and terms for the upcoming year and you are to be congratulated.”

6.   We Have a New Chief Engineer.  In August, we hired Ricardo Castro as our new resident Chief Engineer.  A licensed third class engineer, he brings current procedures and techniques to the Elizabeth and 30 years’ experience in luxury high-rise buildings.  Once the ePipe project is concluded, he can devote more time to implementing best practices at the Elizabeth and making additional improvements in the engineering and maintenance arena.

7.   We Have an Expanded Preventive Maintenance Program.  MaryAnn and Ricardo have developed a new, more comprehensive and more cost-effective preventive maintenance program.  It includes clearing of the condensate lines as a continual maintenance item, and at a considerable savings, as it will be done by our in-house staff.  Last year, we paid $108,000 for O’Connor Plumbing to perform this function on a one-time basis.

8.   We Upgraded Our Heating and Air Conditioning Electronic Monitoring System.  Since at least 2014, there have been problems with the heat and air conditioning in the building, particularly when the seasons change.  Various consultants have been brought in through the years, but the problem was never corrected. 

MaryAnn Hall worked with contractors and determined that the emergency control system for the heat and air conditioning failed, and as a result, the equipment did not adjust to seasonal temperature changes.  Attempts to make manual adjustments were overridden by the system.

Therefore, the Electronic Monitoring System has been upgraded, and, thanks to MaryAnn’s negotiating skill, the $44,000+ cost to do so is being spread over a two-year period, lessening the impact on our cash flow. 

10  Assistant General Manager and Assistant Engineer.  In the next few months, we look forward to the hiring of an Assistant General Manager and a live-on Assistant Engineer, continued review and improvement of our financial situation, and improvements in our infrastructure needs and quality of life.

At this time, I also want to acknowledge the contributions of the committee chairs who worked throughout the year on our behalf. 

·      Pat Peyser, Chair of the Budget and Finance Committee who is stepping down this year after serving the Association in this capacity for the past 5 years,

·      Stephanie Olshan, Chair of the Library Committee

·      Peg Downey, Chair of the Design Committee

·      Jackie Lapidus, Newsletter

·      Pat Batey, Website & Social Committees

·      Jerry Feldman – Chair of the Nominating Committee

·      Cliff Cohen – Chair, Fitness Committee

Yes, last year was a busy year, a transition year, and a year marked by many accomplishments.  We look forward now to a new Board, new ideas, fresh perspectives, and hopefully much more participation by everyone.

Treasurer’s Report

I’d like to put a strategic frame on my comments, talking about what the financial strategy was and where we are in implementation as we near the end of the first year of change.

When I was elected to the Board, it was on a platform of financial turnaround. The Elizabeth needed one badly after years of operating losses as well as failing to save through reserves for needed capital projects. I said three things needed to be put in place. In fact, there are four: the first is putting the basic financial safety nets in place, the second is reducing expenses, the third is raising revenue, and the fourth is having the guts and resolve to make the tough choices, even if they are unpopular.

I am pleased with the progress we have made in all four areas:

1—    We have put the financial safety net in place with two actions:  (1)  by providing a  $100,000 set aside for the insurance deductible, and (2) by establishing a  10% Operating Contingency Fund. The need for these safety net items is clear: we have exceeded the $100,000 set aside for  water damage not covered by insurance, and will have used an estimated most if not all of the $491,465 budgeted by the end of the year.

 —   Expenses have been reduced by eliminating an unneeded position in the management office and bringing health insurance into line with current practice. As a result of the ePipe project and other actions, we now have somewhat reduced insurance premiums and lower deductibles for water damage although we still are not out of the secondary market . In addition, Mary Ann Hall has already implemented over $100,000 in savings through contract changes we will see in the coming year.

3—    We have raised revenue, principally by increasing condo fees to necessary levels, but now can look at other ways to increase revenue such as those outlined by the Budget and Finance Committee.

4—    And we have shown the grit and resolve to make the unpopular but necessary decisions: raising condo fees, downsizing the management office and bringing insurance practices into line with those of other businesses and condominiums, replacing the General Manager when it became clear change was needed if financial and contract management were to improve. 

But while we have made progress, we have not yet fully turned the corner. While our bottom line will be better than past years, it still may show some operating loss. We may not have been able to fully fund reserves by the end of the year. And there have been expense variances caused by mechanical and related building expenses that need to be brought under control, if possible next year.

In the coming year, which in year two of the multi-year financial turnaround plan, we need to build on our progress:

1—     The Operating Budget keeps the financial safety net basics in place including the $100,000 insurance deductible set-aside, and the 10% operating contingency, for unanticipated expenses, such as unexpected building repairs and replacements.

2—    We can evaluate the potential for further cost savings using the feedback you have given us with regard to possible change. 

3—    The same is true of revenue increases, using your feedback on the B and F memo to help evaluate changes.

——We now have to have the courage to evaluate and adopt a financing plan that will help us implement capital improvements, with needs identified in the Reserve Study.

I am confident that if we as a community and the Board engage in the adult, constructive conversations of which we are capable, we can in time accomplish the financial turnaround, and move this building back to its rightful place among residential buildings in this area.  

Summary of ECA Board Meeting April 25, 2017

Board Present: Sharon Bobb, Patricia Batey, Mark Day, Connie Row

Board Absent: Cliff Cohen, Peg Downey

Others Present: ECA General Manager MaryAnn Hall, Gates Hudson Portfolio Manager Larry Hirschman, Jeremy Tucker (ECA legal counsel, Lerch Early & Brewer, Chtd.)

Typical of the April Board meeting, this was a short meeting with no decisions being made since the new Board will be seated May3 when the annual meeting takes place.  Be sure to attend the meeting or leave your proxy. A discussion of the Meet the Candidates program can be seen below.

Highlights of the Meeting

President Bobb thanked MaryAnn Hall for the extra hours she has spent recently to cover for our chief engineer Ricardo Castro who was on vacation. During the period of Mr. Castro’s absence, the Elizabeth suffered a breakdown of the air-conditioning system the weekend of Easter Sunday. It should be noted that during this period, the son of Ms. Hall was in a work-related accident that has put an additional strain on Ms. Hall who must care for him and her special needs granddaughter.

During the comments from the floor, one resident persisted in attacking Ms. Hall by insisting that the Elizabeth requires a 3^rd class engineer at all times and that Ms. Hall was not a satisfactory substitute. The resident was also calling into question the management of the situation by Ms. Hall, Gates Hudson, and the Board.

Here are the facts:

1.     The State of Maryland does NOT require our building to employ licensed third-class engineers. The reason is that we do not have high pressure boilers.  Our boilers operate at 8-10 psi; a third-class license is required when you have boilers at 15 psi.

2.     We had two outstanding engineers last year, Barry Blanton (1^st class engineer’s license) and Martin Serrano (ready to sit for the third-class license).  They both walked off the job unexpectedly the first week in June.  Mr. Blanton’s resignation email stated as the reason that the residents here are “rude and have no manners!”

3.     Ms. Hall and Mr. Castro recently offered jobs twice to 3^rd class engineer candidates.  Both refused, saying that they were aware of the badly behaved residents here. 

Other items of interest:

Epipe work is about 2 weeks away from completion. This is six weeks ahead of schedule.

Delinquencies continue to be reduced with the continuing help from Ms. Hall.

The draft operating budget has been sent out for a 30-day review by owners. The budget will be voted on at the May 23 meeting.

2017 Meet the Candidates for the Elizabeth Board

On April 20, 2017, the Elizabeth Condominium Association held a program to allow candidates running for the Elizabeth Condominium Board of Directors to present themselves to the ECA community. The event was organized by the nominating committee, headed this year by Jerry Feldman.

Eight candidates are running. All are resident owners living in The Elizabeth except Monique Fridell. Five were present at the Meet-the-Candidates program. Two of the three absentees sent opening and closing statements.

The candidates are:

Zlatan Beca

Charles Bressler

Peg Downey—absent, opening & closing statements presented

Molly Frantz—absent, opening & closing statements presented

Monique Fridell

Alfred Muller

Rhonda Taller

Christina Theoharis—absent, no statements provided

First I would like to thank the candidates for running because being on the ECA Board requires a great deal of time and effort. I can attest to this demand on time and energy having just served as an interim Board member when Jim Jones resigned to focus on a new job with international travel.

As a long-time owner (since 1978), I think it is helpful to understand whether a candidate has previously served on an Elizabeth Condo Association Board. To prepare my thoughts on the overall set of candidates, I asked that they email me their closing statements. I received closing statements from: Zlatan Beca, Peg Downey, Molly Frantz, Monique Fridell, and Rhonda Taller.

New to the ECA Board:

Zlatan Beca

Rhonda Taller

Christina Theoharis

Sitting Board Member:

Peg Downey

Former Board Member:

Charles Bressler

Molly Frantz

Monique Fridell

Alfred Muller

THOUGHTS ON THE NEWCOMERS

Newcomers to the Board of Directors can be a good influence on a board, bringing in new ideas and different ways of working together. The emphasis here is showing up to do the work.

Zlatan Beca, Rhonda Taller, and Christina Theoharis all have substantial business experience as borne out by their candidate biographies included in the ECA annual meeting documents. Both Beca and Taller have expressed a willingness to work on behalf of our community to improve and strengthen our community.

Beca said in his closing remarks:

“The issues facing our condominium are clear; we need to improve the infrastructure, our finances and culture. The only way to achieve this is by working together, carefully assessing the issues, evaluating recommendations from qualified experts, listening to our neighbors and staff, and for all Directors to work as an effective team with the General Manager. … I hope you will give me the opportunity to work hard on your behalf, to protect our interests, champion improvements, move our condominium forward in the 21^st century, and bring a culture of cooperation and respect to our community.”

Taller said in her closing statement:

“My priorities are improving the financial position of The Elizabeth and changing the tone of communications in the building to one of a more cohesive neighborhood all working toward the same goals. I will work hard if chosen for a board seat to represent all the owners’ interests in every scenario. I believe as owners we have a mutual goal of living in a great building with a ‘healthy’ financial position moving forward.”

Theoharis did not appear for the Meet-the-Candidates program and failed to send opening and closing remarks for that event when she determined she was unable to attend. She wrote in her Statement of Candidacy that she has lived in the Elizabeth for 12 years but: “I have not been an active participant when it comes to committees or social functions…”

THE SITTING BOARD MEMBERS

For candidates who are seeking re-election, we have a clear and current record of their statements and votes. This year, we have one sitting board member seeking re-election.

Peg Downey has been a constant, attending board meetings either in person or by teleconference. Her voting record supports her thoughtful approach to group decision-making on behalf of the Elizabeth community. In her closing remarks, she wrote: “I believe the primary function of the Board of Directors is to handle the business of the Association in a professional manner that will preserve—or even enhance—property values by maintaining the hard structure of the building. But, also this ideal Board should seek to nourish a healthy relationship amongst all the building’s residents. …I am committed to preserving the value of your investment in The Elizabeth. I am also committed to doing so while seeking respectful communication within our home—thus bolstering our property values and our reputation while preserving the feel of a real home.”

RECKONING FORMER BOARD MEMBERS AND THEIR RECORDS

In the recent past, when some of the Association members started lobbying for the replacement of windows and balcony doors and we were told in 2008 and 2009 by the Board president “run to failure” (meaning the Board was not going to fix anything until it was too broken to function), Board members included:

Monique Fridell (2007-2010),

Al Muller (2007-2011, 2013-2014),

Charles Bressler (2009-2012), and

Molly Frantz (2010-2011).

Of great concern today is having enough Association money to pay our bills and our loan as well as keep enough money in our reserve fund to ensure we are solvent, because insolvency is a deal breaker to potential buyers and lenders. Over the years, our boards were not savvy enough to build up our savings so that we could comfortably manage our capital improvements for such projects as window and balcony door replacement, elevator refurbishment, heating and cooling upgrades, etc. How we build our reserve fund has largely relied on increasing the condominium fee since we have no provision in our bylaws for implementing a special assessment except by a 75% positive vote of all owners.

In 2008, the Board which included Fridell as treasurer and Muller as an at-large director, voted for no increase in the condo fees based on the unrealistic possibility that residents would save enough energy so that the Association would realize a 10% drop in energy costs. Muller made the motion for the zero percent increase and Fridell explained it. The energy savings did not occur and, in 2009, the Board which included Fridell as treasurer and Muller and Bressler as at-large directors passed a 10% increase in condo fees.

In Bressler’s Statement of Candidacy, he writes “HARMONY – TRANSPARENCY” as his principle platform as he moves on in this statement to attack the sitting Board and president by saying they are using the ECA legal counsel to represent themselves and not the Association. This kind of unfounded accusation was part of the discourse written into the three installments of misinformation by the “Radio Free Elizabeth” group which included Bressler and Muller. While Bressler said during the Meet-the-Candidates program that he was sorry for his role in supporting the Radio Free Elizabeth group, his candidacy statement isn’t consistent with his apology or his “Harmony” platform.

Among the things Muller said were:

—The Association got nothing for its $5 million loan. (This is the loan that paid for leaking windows and balcony doors. Muller made this claim that the Association got nothing for the $5 million more than once during the Meet-the-Candidate program.) Also, it should be noted that the signing of the loan note was October 15, 2013, and Muller served on the Board responsible for acquiring that loan.

—He disagrees with people who want to run The Elizabeth Condo Association as a business. He prefers to run the Association as a community. For the record, the Elizabeth is a $5 million business.

—He prefers a “pay as you go” plan.

—He said that the $22,000 spent on the grand piano that sits in the lobby was “small potatoes.” For the record, Muller purchased the piano with his credit card and then caused a big fight among Board and Association members when he demanded reimbursement. The Board never gave him advance permission for this purchase.

Also consider this—if you pay $1000 per month in condo fees, it would take two years to pay for that piano, if all the money was going toward that expenditure only. In my financial accounting, $22,000 is a large sum of money for an item we did not need since we had an upright piano that had been donated by an owner.

In Muller’s Statement of Candidacy, he writes that he wants “to help restore financial stability so we prioritize urgent repairs and maintenance without excessive condo fees…”  An Association member asked Muller how he would do this and he provided no details. All of Muller’s statements taken together raise many questions about his grasp of financial issues that confront an Association of over 350 unit owners.

Claiming an issue of transparency, in his opening statement, Muller attacked the sitting Board regarding a visit from a developer who will be building next door to The Elizabeth. He characterized this as an illegal meeting. What Muller said was typical of the misinformation written into the news from “Radio Free Elizabeth” group and which, Muller as a signatory, endorsed. Luckily, the ECA General Manager MaryAnn Hall provided a clarification of what happened during that visit to the Executive Session of the ECA Board, a visit similarly made to the other condominiums of Friendship Heights, and how when the developer veered into material that should be presented to the entire Association, our legal counsel shut down the developer’s presentation and invited the developer to attend an open Board meeting if they wished to make a presentation to the community.

Unfortunately, Frantz’s opening statement provided erroneous information about ECA finances, showing a lack of understanding about basic accounting. Recently and similarly, Frantz had written a letter asking questions and making erroneous assumptions about the current financial picture and that letter was answered by the auditors of GoldKlang Group and posted this past week on our BuildingLink System.  Because Frantz prides herself on her “ability to develop and analyze numbers and spreadsheets” (as stated in her closing remarks), her recent misunderstandings about the ECA financial picture is troubling. Also, please keep in mind that Frantz served as assistant treasurer and treasurer during her 2010-2011 tenure on the Board.

Additionally, on August 15, 2011, Frantz resigned from the Board in protest saying, “Instead of focusing on and working towards what best serves the Elizabeth, I experience a Board that is replete with personal ill-will, petulance behavior, hidden agendas, and a penchant for taking offense at the slightest opportunity.” At the time of Frantz’s resignation, Bressler was president and shortly after her resignation, Bressler was forced to resign by a group of Association members concerned about Bressler’s questionable financial practices. However, by October 24, 2011, Bressler, at his request, was re-instated and took the office of vice-president. Frantz also asked to be re-instated but by the time of her request, her position as Board treasurer had been filled.

QUESTIONS TO CONSIDER IN CHOOSING YOUR NEXT SET OF BOARD MEMBERS

Do you want a Board member:

—who declared candidacy but failed to attend the Meet-the-Candidates program and didn’t send either an opening or closing statement?

—who does not live in the building?

— whose policy has been frequently presented as a run to failure—wait to repair building infrastructure only when it fails?

—who has a history of attacking a sitting Board and its president?

—who lacks a realistic understanding of business and/or accounting practices?

— who has contributed to dis-harmony and misinformation by writing and signing the “Radio-Free” under-the-door memos. 

Finally, do you want a board that will work together on behalf of everyone in the Association? That only leaves the question about what we can do as a group to encourage polite and civil behavior among attending Association members who seem to forget that serving on The Elizabeth Condominium Board is a voluntary position.

Check BuildingLink for additional information such as the recent GoldKlang letter to Molly Frantz and various minutes of the ECA Board. This blog also has additional information.