posted Dec 13, 2012, 1:23 PM by Marc Donner
updated Dec 13, 2012, 1:26 PM
The Board, supported
by its accountant and management staff, has recently completed its financial
projections for year-end 2012 and has adopted an operating budget for 2013.
We are pleased to
report that 205 West End will finish this year with a small operating
surplus. Thanks to conservative financial management and some luck, we
have finished another year in good shape.
In 2012 we started a
major capital project, the modernization of our six aged elevators. This work started in October and is
projected to be finished at the beginning of next summer. We expect that once this project is
complete the elevators will be more reliable and will consume about a third of
the amount of electricity, saving the building about $20K per year going
forward at current electricity prices.
Variances between budgets and projected year-end actual expenditures
As you know, many of
the cooperative’s expenses are not under the board’s direct control.
Labor costs are set by union contracts, insurance rates are dictated by
carriers, energy prices by the market, and taxes by the city. That said,
we make every effort to control other costs. While 2012 final numbers
still have to be confirmed, and will be audited by our accountant and reviewed
by you at the time of our annual shareholders’ meeting in the spring, here is
how 2012 looks:
- Real Estate Taxes, budgeted for 2012
at a revised $ 4,319,800, are projected to end the year at $ 4,204,600, 2.7 %
under budget. In 2013 we expect to pay real estate taxes of about
$ 4,464,800, an increase of 3.4 %, moderate compared to recent history. If we are lucky, this may mark the end
of a period when our maintenance increases have been dominated by property
- Energy (electric, steam, and cogen gas),
were budgeted at a combined cost of $ 1,507,900 for 2012. While final
bills are still to be presented, the projected energy expenditures in these
categories are forecast to be approximately $ 1,321,300, about 12.4 % below
budget. This is the result of a
milder-than-usual winter last year and a significant drop in the price of
gas. Our projections for next year are for an aggregate spend of $
1,342,000, assuming a return to our long-term trend rate of consumption as well
as limited price inflation due to the depressed economy. As we have noted
in our last four annual reports, the 2013 budget continues to reflect the
savings from producing a significant portion of our electricity and steam needs
from our cogeneration plant.
Although we have submetered the co-operative, the budget for the condominium
must reflect the entire electrical payments to our suppliers so that our bills
get budgeted, paid, and booked properly. Due to submetering, only about
35% of the building’s electrical consumption (that which services the common
areas) is applied to our maintenance calculations. The remaining 65% of
our electrical usage is paid directly by tenants and shareholders according to
measured consumption, and does not affect maintenance charges.
- Insurance costs We are budgeting a
5.7 % increase for 2013 at $ 211,000.
Note that the 2012 forecast of $ 205,100 is slightly above the 2012
budget of $ 199,700.
- LTCA Dues will increase relative to
2012 budget of $ 625,900 to $ 632,300, an increase of about 1 %.
- Staff Payroll - wages,
benefits, workers compensation, and disability insurance – will be going from $
1,314,000 in 2012 to $ 1,333,700 in 2012, an increase of 1.5 % determined by
our union contractual obligations.
- Maintenance and Repairs remain
within reasonable expectations. Our anticipated expenditures in 2012,
budgeted at $ 486,200 will be coming in at $ 514,700, a moderate overrun.
Based on recommendations from our Resident Manager and AKAM, we are budgeting $
530,000 for 2013, an increase of 5.9 %.
Because the elevator modernization will continue for slightly over six
months of 2013 and because it is hard to separate the elevator operating budget
from the modernization capital budget during the project, we may realize some
saving in 2013.
- Water and Sewer were budgeted at $
341,700 for 2012 and are budgeted at $ 332,600 for 2013, a slight reduction of
2.7 %. Our forecast for 2012 is $
- Mortgage Interest and Amortization
This is determined by our mortgage, which we refinanced in 2011, and is
budgeted and forecast at $ 1,291,000.
For 2013, shareholders can expect a 2.00 % maintenance increase (for a total of
$ 3.50 per share per month).
Along with all other
New York City cooperatives, given the increases in real estate tax, labor,
utilities, and other costs, we are facing a maintenance increase for the year
beginning January 1, 2013. As in previous years, we will be recouping
some of the increased operating costs by holding back the NYC real estate tax
rebate due most shareholders in the first quarter of 2013. You will see a
credit/debit journal entry on your March statement. From an accounting
standpoint this is treated as an operating assessment, and thus has no impact
From the start, we
have tried to be both prudent in our expenditures and, whenever possible, to
make full use of opportunities that would contribute to our building’s overall
financial health. This includes lowering costs whenever possible.
205 West End Avenue remains one of the most financially competitive buildings
in the Lincoln Towers complex, measured by maintenance increases, maintenance
per share, general balance sheet, and capital improvement measures.
We appreciate your
confidence and ongoing feedback.
The entire Board joins
me in wishing you and your families a very good holiday season and a happy,
healthy New Year.
Sincerely, Marc Donner, President