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On the Money
ON THE MONEY

Published: Spring 2008

WATER RATES SOAR
The New York City Water Board is responsible for all of the City's complicated water system, including upstate reservoirs, water tunnels (maintaining two very old ones and building a third) , distribution systems and maintenance of water quality. All of these services must be funded from the water rates; in addition, since 2005, an escalating number of millions of dollars is transferred annually from the Water Board to the City's General Fund.

To keep pace with all these responsibilities, the Water Board has had to institute significant increases in water rates. On May 16, 2008, the Water Board voted an increase of 14.5% in water and sewer rates for New York City ratepayers. This comes on the heels of an 11.5% increase last year.
In December and again in May, the Finance and Environmental Protection Committees of the City Council held hearings on the water rates. The December hearing was in response to a request by the Water Board for a mid-year rate increase to compensate for the failure of many people to pay their water bills. Instead, the City Council authorized the sale of liens on buildings that were delinquent on their water bills. Although the first water bill lien sale did not take place until after the May hearing, the threat posed by the sale proved sufficient to bring a significant number of the delinquents to the table, if not to pay their bills in full, at least to establish a plan for payment.

At the City Council hearings, and again at the rate hearings conducted by the Water Board, Council members James Gennaro and David Weprin, who chair the Environmental Protection and Finance Committees respectively, both raised strong opposition to the City's insistence upon receiving Water fees into the General Fund. They deplored the fact that rate payers are charged based on their water use, but then have their payments diverted from the water system. Both Chairmen urged a more modest water rate increase, particularly in the light of the extraordinarily high increases in living and housing costs this year. CNYC presented testimony at the Water Board hearing and echoed these sentiments.

All to no avail. The 14.5% increase will be applied to all water bills commencing July 1, 2008. Sewer rent is calculated at 1.59% of water rates.
With the sale of the water liens at the end of May, and a system now in place for dealing more quickly and efficiently with delinquencies, we can dare to hope that increases of this order of magnitude will not be necessary in the future. A change in city policy to devote all payments from ratepayers to the already massive needs of the water system seems fair and appropriate and it would go a long way toward mitigating the need for large increases in water rates.

COMPARATIVE STUDY OF 2007 OPERATING COSTS
The Council of New York Cooperatives is working on the Comparative Study of 2007 Operating Costs. This annual Study helps boards determine how well they are operating their own buildings. While the Comparative Study will be useful to any cooperative or condominium, it is most helpful when your own data is included. Please quickly send your 2007 Financial Statement to CNYC along with a room count for the building if it has not previously been part of the Study.

CNYC conducted its first operating cost study in 1975 comparing costs in the thirty buildings on the West Side of Manhattan that then constituted its membership. By 1981, membership had grown to include buildings throughout Manhattan and beyond. Beginning in that year, with costs for 1980, CNYC has been compiling and publishing its Comparative Study of Operating Costs annually.

Over the years, the Study has grown, thanks in large part to several accounting firms, who prepare the Annual Financial Statements for many cooperatives and condominiums, and who share this financial information with CNYC. The 2006 Study analyzes operating costs in more than 900 housing cooperatives and condominiums, presented in seven databases. All the information is presented anonymously, with a code number assigned to each participant. Member cooperatives and condominiums are advised of their code number in the memo transmitting the Comparative Study to them.

The Study is divided into six categories: Condominiums, East Side (of Manhattan) Cooperatives, West Side (of Manhattan) Cooperatives; Lofts, Larger Cooperatives Outside Manhattan, and Small Cooperatives (with 100 rooms or fewer). In recent years, Small Cooperatives has been subdivided into Small Cooperatives in Manhattan and Small Cooperatives Outside Manhattan (in 2006 they are all in Brooklyn).

The Study analyzes on a per room basis the annual costs involved in operating a building. Whenever possible, the Study includes the assessment and mortgage balance for participating cooperatives.

The data for each building begins with the carrying charges (maintenance) per room for that year. It then breaks out the operating costs for labor, fuel, utilities, repairs and maintenance, insurance, management, administrative costs, water & sewer fees, property taxes and debt service. When it is possible to do so, the costs for elevator maintenance, and legal and accounting fees are presented separately (often elevator costs were simply included in repairs and maintenance and all professional services are presented collectively - in which instance, they are included in Administrative costs).

A second chart in each category presents summary statistics, capturing the range of costs for each item and calculating the average and median for each and the portion of operating costs typically devoted to that item. A 10-year recap of this data permits identification of trends.

The Comparative Study of 2007 Operating Costs will be published in November and a copy will be sent to each member cooperative and condominium and each professional subscriber. Copies of the 2006 Study were sent to members at the end of last year. Additional copies can be purchased from the CNYC office for $15.

4 YEAR CONTRACT FOR COMMERCIAL SECTOR
At the end of 2007, the contract for workers in commercial buildings throughout the City that are members of Local 32B-J of the Building Service Employees Union was renegotiated. As had occurred in the residential contract in 2006, the parties opted for a four year agreement, which will expire at the end of 2011. The residential contract continues in force until April 20, 2010.

It has long been the practice for the commercial sector to negotiate benefits increases, which are applicable to residential members of the Union as well. The residential negotiators in 2006 had set ceilings upon benefits increases, but in a changing economic atmosphere, increases were well below the ceiling. Employer contributions were increase by $4 per week for 2008 and $12 in each of the ensuing years. The pension plan contribution was increased by $12 per week for 2008 and $4 per week in each of the ensuing years. The health plan continues to be monitored carefully and is now again fully solvent, with adequate reserves, after being rescued from near disaster at the end of 2004 by infusions of employer contributions.

 
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