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any cop can reduce it's budgetw ith concerted, effective effort. Ther e is no need to get into the bad habit of continually raise the maintenence. if you have a really GOOD Board, they will cut costs in leaking areas (yes, there are mainy) and balance the increases in areas such as taxes.
big buildings have lots and lots of leaks. insurance can be improved. always. water bills can be contested. etc. supplies. tax ceritoori. energy bulbs and better heating. overtime and better management of staff. there are leaks allover.
Just as in any small business, the budget is very carefully looked over to maximize the "bang" of every buck. Sometimes you only find a drip... not a leak. Once you plug that......
I'm a firm believer in finding new sources of income. Storage, fitness room, tag sales, calendar sales.... whatever it takes.
But even after all that, when the utilities go up in double digits, when the tax rates increase, when the insurance is consolidated with hundreds of other buildings to gain maximum coverage for minimum expense, when you've metered and submetered and monitored supplies and you've wrapped pipes, upgraded systems, etc........
sometimes the only thing left is to increase maintenance. Doesn't mean the Board is lazy, stupid, inefficient or anything else that's bad. Just responsible, as it should be.
In my view, broad generalities are not a suitable forum posting.
Our building (500 unit luxury building) has been practicing good management, fiscal responsibility and adhering to the tenets of fiduciary responsibilities for years.
So I will assert that in our building there are no more savings to be garnered from mundane day-to-day savings, e.g.; CFL bulbs, the newer LED bulbs, lowering building and lobby temperature (winter), raising hallway and lobby temperatures (summer), etc.
Deferring needed preventative maintenance or repairs is flirting with potential disasters and lack of services to residents.
Postponing capital improvements and the collection of capital reserves is not a viable option as one day the crescendo of required capital improvements will overwhelm our ability to pay.
So any well run co-op corporation has ready embarked on cost saving measures as a normal course of day-to-day business.
But, I will tell you that earlier this year we expended about $35,000 for an improved hot water monitoring and management system for our central site domestic and heating plant. In this case, the $35,000 is almost recouped in lesser natural gas costs and anything after this, is pure savings.
If we were to listen to others herein, we would not have had the funds to make the upgrade and to then recoup costs plus savings.
Our next venture, in the spring, is to install a new separate domestic hot water system that is about 95+% efficient. We will recoup costs by immediate savings and within three years we will have paid for the improvement and thereafter we will benefit with lesser natural gas cost usage which translates to more real dollar savings.
Without the funds today, e.g.: imbedded in our maintenance increases as well as our recurring yearly capital improvement assessment, we would be forced to delay the upgrade/replacement and thus forego savings.
Does anyone even think in this vein?
And, I must challenge other readers with this question? Have you ever designed a financial plan to pay off any underlying mortgage without ever refinancing the mortgage or taking out a larger sum? If yes, pat yourselves on the back. If no, then one must really do some serious introspection as to why you are squandering the shareholders monies to pay interest which is of no benefit to the shareholders and is only of benefit to the bank.
Yes, one may infer that we retired our twenty-five year old mortgage without ever succumbing to the easy way of refinancing and burdening future shareholders so current shareholders can obtain a free ride.
Our motto has been and always will be “pay as you go”.
And, to be clear, we compare our building with about six other nearby comparable properties and I will tell you, we with 500 units are the lowest cost (includes monthly maintenance, assessment and parking) building amongst six properties and 3,200 units. Our building’s shareholders have absolutely no mortgage looming over them while the average burden of the other six buildings and 3,200 units is $52,000 per unit in underling mortgage costs.
So tell me our plan has been wrong.
Oh, we have expended $16,000,000 in capital improvements since turning co-op twenty-seven years ago; all this while retiring the original debt of $8,000,000. And, as noted we are one of the lowest cost co-ops in the neighborhood.
Let me also mention that we raise maintenance every year. Our average increase maintenance and assessment)is 3.5% over all the years, and never have we had a double digit maintenance increase surprise or a mid-year adjustment or even hit folks with a mid-year bombshell assessment.
Yes, a subtle admonition to readers to think more wisely and more long term.
So who is lazy????
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A good Board cannot make revenue and operating costs appear and disappear as needed. Our small building operates on a very tight budget, we have no frills and no services beyond garbage handling and exterminator, and trust me, there is no where to get the extra 7% tax hike from. A good board must raise maintenance to cover monthly op costs, and we also charge a 13th month assessment each year to allow for contingencies. Where would you suggest we cut our expenses? I think you have to be realistic when you say a board has to find "leaks" in the budget and stop them.
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