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2019 Maintenance Letter

posted Dec 27, 2018, 6:09 PM by Marc Donner   [ updated Dec 27, 2018, 6:12 PM ]
Dear Fellow Shareholders:

The Board, supported by the building’s accountant and management staff, has reviewed the financial projections for year-end 2018 and has approved an operating budget for 2019.

2018 Summary

205 West End Owners Corporation (Coop) will finish 2018 with an anticipated operating deficit of $295,900. Unfortunately in 2018, our actual expenditures were more than our budget forecast primarily in utilities/energy costs (colder than expected winter and variability of costs), payroll/benefits and repairs & maintenance (overall upkeep of the building during the construction project and unexpected plumbing repairs).

We thank all residents for their patience as the Local Law 11 balcony project was completed over the summer. The actual total cost of the project was $4.0 million compared to the budgeted cost of $3.8 million. As noted previously, the project was funded equally from a combination of non-operating reserves ($2 million) and additional borrowing ($2 million) on our existing mortgage. A detailed review of these non-operating costs will be discussed at upcoming Shareholders’ Meetings.

2019 Budget

Due to the 2018 operating budget deficit of $295,900 for the Coop (noted above) and projected increases in 2019 expenses for real estate taxes, utilities/energy and payroll/benefits; shareholders can expect a 6.50% maintenance increase (for a total of $4.2525 per share per month) in 2019.

Here is how 2018 looks thus far, along with our budget projections for 2019:

● Real Estate Taxes - budgeted at $5,712,700 for 2018 is projected to end 2018 at $5,706,300. In 2019 we expect to pay real estate taxes of $6,122,400, an increase of $409,700 or approximately 4.0% over 2018 budgeted maintenance of $10,352,700.

This is the major driver of this year’s maintenance increase and has significantly impacted our budgets for the last few years (taxes have increased over $950,000 or 9.2% since 2016). The Board continues to aggressively work with our accountants and tax attorneys to ensure the assessed value and tax rates are accurate in order for this us to pay the proper amount.

● Utilities/Energy (steam heat, electricity, co-gen gas and water/sewer) - budgeted at a combined cost of $1,609,100 for 2018. While final bills are still to be presented, the projected energy expenditures in these categories are forecast in 2018 to be approximately $1,747,900. In 2019 we expect to pay combined costs of $1,689,100, an increase of $80,000 or approximately 1% over 2018 budgeted maintenance of $10,352,700.

The Board and AKAM’s Energy Department continue to review and monitor our energy costs very closely in order to project future costs as accurately as possible based upon negotiated rates and estimated consumption.

● Staff Payroll/Benefits (wages, union benefits, payroll taxes, workers compensation, and disability insurance) – budgeted at a combined cost $1,539,000 for 2018 is projected to end 2018 at $1,598,500. In 2019 we expect to pay combined costs of $1,681,000 an increase of $142,000 or approximately 1.4% over 2018 budgeted maintenance of $10,352,700.

As always, many of our expenses are not under the board and management’s direct control. Labor costs are set by union contracts; insurance rates are dictated by carriers; energy prices by the market; and taxes, water, and sewer charges by the City. The Board consistently tries to be both prudent in our expenditures and to make full use of opportunities to contribute to our building’s overall financial health. This includes reviewing and reducing costs whenever and wherever possible. Final numbers for 2018 are still to be confirmed. They will be audited by our accountant and reviewed with you at our annual Shareholders’ Meeting in the Spring. As in previous years, we will be recouping some of the increased operating costs by retaining the NYC real estate tax rebate due most shareholders in the first quarter of 2019. You will see a credit/debit journal entry on your June statement. From an accounting standpoint this is treated as an operating assessment, and thus has no impact on maintenance.

While the maintenance increase in 2019 is higher than past years, 205 West End Avenue continues to be one of the most conservatively managed buildings in the Lincoln Towers complex. This is measured by maintenance increase percentages over the years, maintenance per share, overall balance sheet strength, and capital improvement measures.

We appreciate your ongoing confidence and support in the Board and management’s handling of the building. The entire Board wishes you and your families a joyous holiday season and a happy and healthy 2019.

Sincerely,

Stuart Sugarman- President

Robert Stein - Treasurer

Board of Directors

● Eleanor Applewhaite

● Abigail Burns

● Larry Chaifetz

● Marc Donner

● Ernie Sander

● Robert Stein

● Stuart Sugarman
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