Preventive Measures: How a Co-Op Avoided a Gas Shutdown

Few issues strike more fear than the dreaded gas shutdown. Your building can wait till it fails pressure testing, or it can take some proactive measures to deal with this possibility. Either way, says A.J. Rexhepi, the CEO of Century Management, staying on top of your building’s gas line management is critical.

Biting the Gas Bullet

A few years ago, a prewar co-op on W. 86th St. managed by Rexhepi’s firm decided to put together a capital plan. In this plan, Rexhepi says, the board wanted to conduct a feasibility study of the gas lines in the building, including the ones that provided cooking gas. They hired an engineer, who “basically determined that their system was not only going to fail in the event of a pressure test, but none of the isolation valves actually worked,” Rexhepi says. This meant that even a simple gas leak would cause a building shutdown because the cooking lines couldn’t be isolated from the other gas lines.

Steps to Cure

The board was looking at projects from a 10-to-15-year perspective and knew that the Climate Mobilization Act would affect its decision. The question the board faced: Should it abandon gas now and upgrade to electric, or upgrade the gas lines? “They wanted to have all their ducks in a row before making a decision,” Rexhepi recalls. “The engineer’s report said if they were to upgrade their gas lines with a brand-new gas system for heating and cooking, the total cost would be between $650,000 and $700,000.” Going with electricity and abandoning gas was projected to be a $3 million upgrade, Rexhepi says: “Financially, it was a no-brainer.”

An additional benefit to being proactive, Rexhepi says, was the upgrade timeline: “We first did the basement infrastructure, then scheduled the apartments line by line over the course of a winter.” The project is on the same schedule as a normal shutdown, but without residents not having gas for six months. “And it was less expensive than what we would have paid in a shutdown,” he says, “because we could prepare, put a schedule in place and work with the engineer and contract without it being rushed.”

Why Being Preemptive Pays Off

Many boards are conflicted about doing preemptive projections, and one of the reasons is to protect the building’s financial statements from reflecting any liabilities these studies find. That scenario is changing now, Rexhepi says, because banks and other lenders are looking for anything that suggests deferred maintenance or noncompliance with local laws. “To me,” he says, “we’ve entered a stage where boards have to do preemptive studies — not only because of the Climate Mobilization Act but because of banking in general — and stop acting like their job is to just keep costs low.”

“There’s a lot of infrastructure that buildings haven’t been doing because of the costs,” Rexhepi says. If you look back, he notes, each decade carried a theme: “In the ’80s, it was to Band-Aid things and keep costs low. In the ’90s, money got cheaper,” so buildings could more easily do capital and aesthetic improvements. “The key then was transparency,” he says. “To me, for the next 15 or 20 years, it’s going to be about gaining knowledge. Boards have to make it their priority to do these studies, know what’s coming down the pike and prepare for 10 to 15 years out.”

Bottom line, he says, “they have to stop acting like, ‘Well, I’m only going to be in the building for five years.’”