Hi,

In my co-op, we give the STAR and Co-op abatement credits back to the shareholders. We also do not assess the credits. We had difficulties with assessing the credits as we were not treating all shareholders equally. In our case, shareholders receiving the credit and shareholders not receiving the credit were assessed unequally. We thought that this unintentionally created two classes of shareholders so we stopped this practice.

Not assessing the credit creates come cash flow issues during the heating season by collecting the least over the most expensive time of the year. We solved this by having $60k in working capital in the operating account by the end of the year to carry us through the ‘lean months’.

Management credits the shareholder bills when the information is received by the City. Some years, that is before January (so these amounts are credited over six months). This year, it is later. Also this year, the City sent a preliminary list pending verification of shareholder primary addresses.

Due to the way the City is verifying primary residence for shareholders, our management is splitting when the STAR Credit and the Co-op abatements are being recorded on the shareholder bills.

For us, the STAR credit is beginning in April and spread over three months (April, May and June).

Also for us, the Co-op abatement is being withheld until the City sends the final list to management. We are anticipating a onetime credit in June. It would be difficult to give the preliminary amount back only to be forced to retake the funds away from the shareholder. It is also less work on the management staff to do it only once.

I hope this helps and good luck!

Thank you for the answer.
I have not received any STAR credit for the last year yet? Is that normal?

Hi,

No - but the timing delay could be the fault of the NYS and NYC, not your co-op or co-op's management company.

I would suggest a neutral inquiry to your management company to see what is up is in order.

Steve

Unfortunately my coop assessed the coop/condo and star, for most of the years it was given, then for a few years my coop assessed all of the abatements including the Senior Housing and Veterans, etc which of course only a few people receive and is definitely unequal to practically all the shareholders;, but our board does not understand that - However you cannot just withhold the coop/condo because of the City's investigation all the other abatements besides the Coop/Condo, (and will now apply to residency) apply only to Owner/Occupied apartments and must be applied for stating that you reside in the apartment

I would question wether a coop can assess the shareholders based on what they got back in the abatement. I would think that legally, a coop needs to treat each shareholder equally, and can only have an assessment based on a per share basis, or for the actual cost of a repair or modernization project. For example, a coop can charge each shareholder the cost of upgrading windows, where a corner one BR apartment might pay more than a middle one BR apartment because it had more windows. Taking back more from a shareholder that gets a larger abatement because they are a senior or disabled may not be legal.

You definitely cannot assess shaeholders on what they get back- actually you cannot by law assess an abatement - ONLY OFFSET IT - however a lot of coop boards just see an amount that they decide they can get - without using it for any definite purpose - just taking the money because it is there - Of course I would say that these are bad boards, not serving their shareholders, but unfortunately how many are there

Stephanie - I have to disagree with your characterization of boards as being "bad" because they vote for an assessment which approximates the R/E tax and STAR abatements. I think most boards use the abasement/assessment transaction as a "painless" way of keeping monthly maintenance lower.

Most well-managed co-ops strive for a break-even budget where income is equal to or slightly greater than expenses. Without the assessment, monthly maintenance would have to be higher every month by the proportional assessment amount. The position these boards take is that it is better to keep maintenance lower each month than to have shareholders pay a higher amount and have only one month (when the abatements are distributed) with little or no maintenance payment. The assessment goes into either the operating or capital reserve accounts, both of which have very definite "real" purposes.

As has been stated here before, board members are also shareholders, and anything which affects maintenance levels affects them as well. It is definitely not a capricious decision.

If you are stuffing the money into the operating budget, you are not managing your building well. The assessment should be used for capitol projects only.

MTD - Real Estate taxes are budgeted and paid for out of the operating account, not the capital reserve. Boards have a choice of setting their monthly maintenance to X to cover the full amount of annual R/E tax due and not voting an assessment, or they can set it to X minus 1/12th of the average abatement and then approve an assessment to cover the decrease in revenue. The net result to the shareholders is negligible over the course of 12 months. It's been my experience that almost all shareholders would rather pay less maintenance per month than reap a windfall over a short one or two month period.

But I am curious. Why do you believe the scheme I described is indicative of a badly managed building, and why do you feel that an assessment to offset the real estate tax abatement should only be used for capital projects and not factored into the operating budget?

We started to assess shareholders for the approximate amount of the real estate tax rebate (NOT STAR) when increasing the energy budget was not covering the escalating costs. We have continued to have an "operating assessment" each year that coincides with the rebate. It is a painless (for most) way to get the funds for unplanned expenditures (a major plumbing repair?) and planned (decor) that improve the building and keep us form having to raise maintenance.

Hi Steve,

I need some verification on the Enhanced Star distribution.

It is my understanding that the E-Star runs from July 2013 through December 2014.

Our co-op is going to start distributing the Basic/Enhanced credits in February.

The shareholders who are entitled to the Enhanced Star were told they would receive a rebate for the 7 months they did not receive the Enhanced Star.
Now they are told they will only receive the amount of the E-Star from January through December and not receive the increase retroactive for the 7 months they were entitled to starting in July 2013.

Is this ethical?