Published: Autumn 2008
BUDGET TIME AGAIN
It is time for Boards and Finance Committees to sit down to prepare their budgets for 2009. This annual ritual comes in a time of great uncertainty. Not only must the board try to predict costs in the coming year, they also need to consider how they will cope with the possibility of some neighbors who fall upon hard times and become unable to meet their financial obligations. Are reserves sufficient to provide a cushion in these cases? Can the budget sustain the addition of a line to bolster these reserves? No one ever wants to impose a large increase, but a responsible board must do its best to set a budget that meets the operating needs of their cooperative or condominium. As the new budget is presented to shareholders and unit owners, their cooperation can be sought to join the board's efforts to save by controlling operating costs. Fuel, electricity and water costs can be mitigated by conservation measures in which all residents can share.
LABOR increases for Union members hold no surprises this year, for we are at a contract midpoint. Benefit increases begin on January 1 and wage increase on April 20th and October 20th. Careful control of overtime may be a positive influence on your labor budget.
PROPERTY TAXES are discussed in Tax Action.
FUEL costs hit unprecedented highs in 2008 and began fluctuating in the autumn. Preferring predictability to uncertainty in their fuel costs, many buildings lock in a fuel rate for the full heating season. The timing of this lock has been crucial this year. But equally crucial will be measures to reduce fuel use. Ask residents to eliminate drafts by covering air conditioners and caulking window frames. Remind them to close windows and put on a warmer sweater rather than complaining of lack of heat. Instruct building staff to maintain a reasonable building temperature, but not to overheat this winter. Motivate them with small Ôrewards' (movie passes, pizza delivered at end of shift) as thanks for using less fuel than in prior years while still keeping residents comfortable.
ELECTRICITY -- increases in electric rates coupled with fuel surcharges have resulted in large -- and somewhat unpredictable jumps in electrical costs. This budget line will have to be increased. Conservation measures may help reduce your electric bill.
Technological advances in the last decade have produced lighting devices that are very economical of energy. Install compact fluorescent bulbs in all fixtures in public areas and encourage residents to take similar steps inside their homes. Invite them to become more energy conscious -- turn off lights when leaving a room; unplug appliances when they are not in use, run large appliances (dishwashers, washing machines) late at night or in the middle of the afternoon (non-peak use times).
Additional savings may be hiding in plain sight in your cooperative or condominium: sometimes utility bills erroneously apply the commercial sales tax rate rather than the residential rate -- a differential of several percentage points. If this is the case in your cooperative or condominium, you can seek a retroactive refund of the differential going back for months or even years. Often consultants will take on this research for a contingency fee.
WATER & SEWER -- these fees are based on water use, measured either by a water meter, or calculated by a Ôfrontage formula'. New York City buildings that have failed to install a water meter now pay a stiff surcharge on their frontage rate. If this is your situation, installing and registering a water meter will eliminate this surcharge, bringing significant savings in water costs. You do not need to switch immediately from the frontage formula. It was to be phased out by July 1, 2009, but an extension is under consideration.
Each building's water use profile is different. Review yours if you are still on frontage to determine whether metered water would cost you less. The Department of Environmental Protection's Bureau of Water Resource has charts to help you make this determination. Once you make the decision to switch to metered billing, you cannot go back to frontage.
Each spring the Water Board sets rates for water and sewer fees. The funds collected in these rates must cover all the costs of maintaining New York City's extensive water system, which includes upstate reservoirs, transportation tunnels and piping, debt service on bonds that financed major water projects. Current covenants also mandate substantial payments to the City's General Funds To meet these responsibilities, the Water Board has had to impose double digit rate increases in the last two years 11.4% in 2007 and 14.6% in 2008 and is likely to do so again for July billings.
CNYC and many other organizations are pushing to eliminate the growing required contribution to the City's General Fund. It is our contention that ratepayers' water & sewer payments should not be diverted from that resource. If successful, this should lead to a more modest water rate increase for July 2009.
Water conservation efforts will also save money for your building. Check the building for possible water leaks and cure them promptly, Encourage residents to be conscious of water costs, to report dripping faucets (the Super can install a washer at the cost of a few minutes of time and save dollars of water costs) to use low flow showerheads, and to curtail excessive water use.
New York City's Department of Finance reassesses all properties in the city each year. The law requires that cooperatives and condominiums be assessed as if they were comparable rental properties, a stipulation that lends impressive challenges to the assessment process.
Each year the new assessment rolls are opened on January 15th, and, at the same time, notices are sent to all properties with their tentative assessment for the ensuing fiscal year, which begins on July 1st. This opens a window of opportunity for the tax payer to protest this assessment. Tax certiorari attorneys specialize in these protests. Most larger buildings file their protests through these professionals, but individuals can file on behalf of their cooperatives on forms obtainable on the Department of Finance website (www.nyc.gov/finance) or at the borough offices of the Department. Condominium unit owners receive separate tax bills, but it is common practice for condominiums boards to obtain powers of attorney from all unit owners to enable the board to file one tax protest on behalf of all unit owners.
Assessments follow market conditions to a certain degree (remember, that they look at rental rates, not at sales prices), but there is generally a time lag involved. Additionally, the fact that assessment increases are phased in over a five year period (for each year's increase, so it does get complicated!) means that the assessment figures we see in January may or may not decrease to reflect the current downturn in sales prices.
CNYC reminds all members to review their property tax assessments carefully in January and to file a protest by March 1st if you believe that your assessment is higher than that of comparable buildings.
At CNYC's 28th annual Housing Conference on Sunday, November 16th certiorari attorney Eric Weiss will be speaking in the midday workshop on Property Tax Fairness. The Conference brochure is inserted opposite page 8 of this Newsletter. Mr. Weiss will also review the trends in assessments for fiscal 2009 at the February 5th meeting of the Action Committee for Reasonable Real Estate Taxes (see page 10).
COMPARATIVE STUDY OF 2007 OPERATING COSTS
The Comparative Study of 2006 Operating Costs was sent last winter to all CNYC members and Professional subscribers. This annual study provides a framework for deciding how well one's building is operating. CNYC is currently preparing the 2007 Study which, like its predecessor, will contain statistics on more than 900 cooperatives and condominiums.
The Comparative Study addresses operating costs in seven categories of buildings: 1) East Side cooperatives 2) West Side cooperatives, 3) small cooperatives (fewer than 100 rooms) in Manhattan, 4) small cooperatives outside of Manhattan (virtually all those participating are in Brooklyn), 5) large cooperatives outside of Manhattan, 6) Lofts, and 7) Condominiums. Except in the case of lofts, all data is analyzed on a per room basis, beginning with the current assessment and mortgage figures and maintenance charges. The Study then lists amounts spent per room in the year 2007 on labor, fuel, utilities, repairs and maintenance, insurance, management, administrative costs, water & sewer fees, property tax and debt service. When these statistics are provided by the accountant, elevator maintenance, and legal and accounting services are each listed separately. Loft data is presented per 250 square feet, for easy comparison with per room data in the other categories. An introductory narrative explains what is included in each category and attempts to provide answers to the questions that readers will ask.
The Study goes on to present a ten year recap of summary statistics, calculating the averages and medians for each item and the average portion of total operating budget devoted to each category.
Each member cooperative and condominium will receive its own copy of the Comparative Study of 2007 Operating Costs as soon as it is completed as will all Professional Subscribers. Those whose data is included in the Study will learn their code numbers from the covering letter.
CNYC members are welcome to copy pages of the Comparative Study of Operating Costs to share information among board members and with shareholders or unit owners. Additional copies can be purchased from CNYC for $25.
MULTIPLE BENEFITS OF
AN ENERGY AUDIT
An energy audit is a comprehensive look at a building and its various systems to determine areas where energy saving measures can be effective. Virtually every building can benefit from the recommendations of an energy professional, to optimize the efficiency of building systems, and improve the quality of life for residents. An audit provides a cooperative or a condominium with a benchmark of the building's energy profile today; it recommends projects that could improve this profile and will prioritize these measure.
Incentives exist for performing an energy audit and implementing its recommendations. The New York State Energy Research and Development Authority (NYSERDA) disburses funds to help defray the cost of many energy conservation improvements in multiple dwellings. To qualify, a building must first have an audit performed by a company that has been designated as a NYSERDA partner (the list can be found on the NYSERDA website at www.NYSERDA.org).
When an audit identifies projects that qualify for NYSERDA funding, the partner company will take responsibility for preparing necessary request forms.
Energy audits are also useful in meeting PlaNYC's goal of reducing the carbon footprint of NYC buildings.