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Council of New York Cooperatives & Condominiums
Current Articles
On the Money
ON THE MONEY

Published: Autumn 2004

TIGHT BUDGETS
As cooperatives and condominiums plan their budgets for the year 2005, prudent treasurers are suggesting increases in many areas. Fuel costs are a challenge: the price of crude oil has skyrocketed, with strong implications for the cost of gas and electricity as well, but the big unknown variable here is the weather factor. Each building is making its best effort to predict its energy costs for the coming year, and many buildings are taking a new look at energy conservation measures to produce savings in this area. Several workshops at CNYC’s 24th annual Housing Conference will help, including: #213 - NYSERDA Programs; #101- Beyond Submetering; and #215 - Most Building Costs Can be Controlled.

The new lead paint law is likely to increase the cost of maintaining building constructed prior to 1960 and to occasion training costs for building personnel. The purchase and installation of carbon monoxide detectors may also be a budget factor, as many buildings have applied for extensions of the November 1st requirement to have these devices in place. Local Law 7 permits a charge back to tenants of $25 per unit, but many cooperatives and condominiums opt instead to consider this a building operating cost and provide for it in the budget. The Conference workshop on this law (#6) will help your building understand its responsibilities.

Full service buildings must provide for a very significant increase in labor costs, where the recent commercial contract with members of Local 32B-32J of the Building Service Employees International Union imposes on all employers of 32B-32J members additional costs of $2470 per employee simply to keep the health plan afloat (see page 5). This takes the form of an increased health plan contribution of $38 per employee per week effective January 1, 2005 plus a one time health plan contribution of $494 for each employee by March 31, 2005. In addition, residential buildings continue to be bound by the contract negotiated in 2003, which grants an increase of $20 per week effective April 20, 2005.

There are two areas where there is some good news. After three years of precipitous increases in insurance costs, there seems to be a plateau in sight in 2005. Some buildings are even reporting lowered premiums as they renew their insurance. And the reduction in the property tax rate for Class 2 properties (see below) helps mitigate another large cost for New York City buildings, although this is only a certainty for the first half of the calendar year.

Finally, 2005 sees the opening of a new cycle of Local Law 10/11, requiring inspection of the facades of all New York City buildings higher than six stories (see pages 10 and 11). Reports must be filed by 2007 on the building condition, and all problem areas noted on the prior report must be corrected.
Careful budget planning will try to balance all these factors plus other special projects in your own building. No board wants to call for too large a maintenance increase, but if their estimates fall far short of actual needs, assessments may become necessary later in the year, or the building may have to invade its reserves to meet its operating costs. True, cooperatives have a relatively painless way to replenish the corporate treasury by establishing the assessment to coincide with the distribution to shareholders of the property tax abatements, so that maintenance bill remains roughly constant. For those cooperatives that have been using this strategy for some time, tighter budgeting or new alternatives become a necessity.

Several workshops at CNYC’s 24th annual Housing Conference are designed to help with budget planning and financial management. These include the two basic courses on financial aspects of cooperatives (#205) and condominiums (#10) offered respectively by Mark Shernicoff and Rick Montanye. Steven Beer’s seminar, “The Budget” (#216), Jerry Picaso and William Greenberg’s “Planning a Sound Future for Your Building” (#208), Abe Kleiman’s presentation on “Reserves” (#105), Norman Prisand on ‘Res–ponsibilities of Building Treasurers” (#5) and Charles Zucker’s ‘Internal Controls for Small Buildings” (#104). Consult the Conference Brochure inserted opposite page 8 of this Newsletter to choose those you wish to cover and to deploy your board members.

CLASS 2 TAX RATE
LOWERED FOR 2005

The property tax rates to be paid by the four classes of property in New York City was fixed by the City Council in October. The tax rate was increased for three property classes, but decreased modestly for Class 2 properties, which includes most cooperatives and condominiums. The Class 2 tax rate was lowered from 12.62% assessed last year to 12.216%. This rate affects all payments for fiscal 2005, which began on July 1, 2004. Clearly, it was enacted well after the tax payments for the first two quarters were due. This is a frequent occurrence in New York City, and there are established mechanisms to deal with it. Thus, July and October tax bills were calculated using assessments for fiscal 2005 but the 12.62% tax rate from last year. With the new rate now fixed, the Department of Finance will make appropriate adjustments to the bills for January and April payment In the case of Class 2 properties, this adjustment will be in the form of a credit for excess payment made in July and October. Notification of the adjustment will be sent to taxpayers in November. Cooperatives qualifying for the property tax abatement program will also receive notification from the Department of Finance of the precise dollar amount due to each apartment for various exemptions and abatements which are the responsibility of the cooperative to pass on to shareholders. (Note that the reduction in tax rate will bring a corresponding reduction to abatements).

COMPARATIVE STUDY
OF 2003 OPERATING COSTS

The Council of New York Cooperatives & Condominiums will soon publish its Comparative Study of 2003 Operating Costs and will distribute it to all current member cooperatives and condominiums and professional subscribers. This annual analysis provides a framework to help determine whether a building is operating economically and efficiently. It examines the various costs of operating a building in New York today. Code numbers are used to identify the participants, while preserving their anonymity. When the Study is sent to members whose financial information is included, they are advised of their code numbers, so that they can easily find their own statistics.

Participating buildings are listed in one (or more) of six categories: Manhattan cooperatives east of Fifth Avenue, Manhattan, cooperatives west of Fifth Avenue, small cooperatives (those with fewer than 100 rooms), larger cooperatives outside of Manhattan, condominiums and lofts. In the last three, years, the small building section has also separated Manhattan buildings from small buildings outside of Manhattan. All data is analyzed on a per-room basis, beginning with the property tax assessment and the building mortgage and the carrying charges (maintenance) paid by shareholders or unit owners. It goes on to list the amount spent per room in the year 2003 for labor, fuel, utilities, maintenance and repairs, insurance, management, administrative costs, water and sewer fees, property tax and debt service. When elevator maintenance and legal and accounting costs are identified in the financials, they are listed separately in the Comparative Study. On the page following this data for the year, CNYC presents a ten year summary of the ranges, medians and averages in each category and the average portion of total operating budget devoted to each.

Additional copies of the Study can be purchased from the CNYC office for $15. Send your check to CNYC at 250 West 57th Street, Suite 730, New York, NY 10107-0730. Be sure to include your mailing address.

 
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