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2020 Maintenance Letter (December 2019)

posted Dec 14, 2019, 9:08 AM by 205 West End Avenue Owners Corporation
Dear Fellow Shareholders:

The Board, supported by the building’s accountant and management staff, has reviewed the financial projections for the 2019 year-end and has approved an operating budget for 2020.

2019 Coop Deficit Summary:

205 West End Owners Corporation (Coop) will finish 2019 with an anticipated operating deficit of $112,200.  While this operating deficit was not as much as the forecasted deficit of $295,900 in 2018, the Coop still unfortunately had higher actual expenditures than our budget projections primarily in utilities/energy costs (colder than expected winter and variability of consumption use and costs) and an increase in professional fees (tax certiorari fees for successful reduction in prior year real estate tax expense).

2020 Coop Budget Impact:

Due to the 2019 operating budget deficit of $112,200 for the Coop (noted above) and projected increases in 2020 expenses for real estate taxes, utilities/energy and insurance, shareholders can expect a 5.35% maintenance increase (for a total of $4.4802 per share per month) in 2020.

Detail of 2019 Actual with 2020 Budget Projections:

Real Estate Taxes - budgeted at cost of $6,122,400 for 2019 is projected to end 2019 at $6,117,800.  Although it came in under budget this year, in 2020 we expect to pay real estate taxes of $6,613,900, an increase of $491,500 or approximately 4.5% over 2019 budgeted maintenance of $11,025,600.

This continues to be the major driver of our annual maintenance increase and has significantly impacted our budgets for the last few years (real estate taxes have increased $1,237,541 or 23.0% since 2017). The Board continues to aggressively work with our accountants and tax attorneys to ensure the building’s assessed value is correct. While we were unsuccessful in appealing the 2019/2020 assessed value of the property, our tax certiorari will file another appeal with the City Tax Commission in the summer of 2020 to have our assessed value retroactively adjusted. They are cautiously optimistic that our appeal will be approved but there is no guarantee. The Board will explore other options if our appeal is not granted.

Utilities/Energy (steam heat, electricity, co-gen gas and water/sewer) - budgeted at a combined cost of $1,689,100 for 2019. While final bills are still to be presented, the projected energy expenditures in these categories are forecast in 2019 to be approximately $1,723,300. In 2020 we expect to pay combined costs of $1,744,800, an increase of $55,700 or approximately 0.5% over 2019 budgeted maintenance of $11,025,600.

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.  Based on the recent installation of LED fixtures in all common areas of the building and garage, the Board expects to save on our electricity expense in 2020.

Insurance – budgeted at a cost of $270,500 for 2019 is projected to end 2019 at $273,800. In 2020 we expect to pay $302,700, an increase of $32,200 or approximately 0.3% over 2019 budgeted maintenance of $11,025,600. The building’s insurance carrier has indicated our premium is increasing due to more restrictive terms set by the insurance companies. The Board will continue to work with our broker to ensure we have the proper coverage relative to our expense.

Staff Payroll/Benefits (wages, union benefits, payroll taxes, workers compensation, and disability insurance) – budgeted at a combined cost of $1,681,000 for 2019 is projected to end 2019 at $1,575,100. In 2020 we expect to pay combined costs of $1,663,100, a decrease of $17,900 or approximately (0.2)% over 2019 budgeted maintenance of $11,025,600.

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 2019 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 2020. You will see a credit/debit journal entry on a future statement. From an accounting standpoint this is treated as an operating assessment.

While the maintenance increase in 2020 is relatively high, 205 West End Avenue is 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, capital improvement measures and reserve balance.

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 2020.

Sincerely,

Stuart Sugarman - President
Robert Stein - Treasurer
Eleanor Applewhaite
Abigail Burns
Larry Chaifetz
Marc Donner
Ernie Sander
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