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.
