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.