UNOFFICIAL DRAFT

No signed copy of these minutes has been discovered. Therefore, they should be considered unofficial though likely accurate.

In Attendance

George Pauley, President; Carlos Vargas, 1st Vice President; Sandra Goldberg, Secretary; Tim Patricio, Interim Property Manager; Mavis Mather, Assistant Manager Business Operations

Absent

Phoebe Helm, 2ndVice President; Laura Cossa, Treasurer; Steve Hanna, Property Supervisor
Call to Order at 7:08 pm

Board Member Budget Recommendation 

Carlos Vargas – To begin with all the figures that we have are all wrong, due to the action by the federal government today that reduces the rate by ¾.  That affects our income by $33-35,000, but this will not influence my figure.  I don’t believe in the so-called dooms day, I have always been against that.  I believe that I am fiscally responsible and that an increase is needed.  It is not going to be a 2% or 3% or 4% increase; it will be a 5% increase.  Again I don’t believe in the doomsday situation that people think is happening.  I believe that a good increase, a firm increase, at this particular moment is 5%.

Sandra Goldberg – I would like to increase the reserves to at least $500,000.  Looking at the reserve study I have listed where some of the prices were not correct or we can do better than that.  I think that through sacrifices both on the part of the Board watching our operating expenses as well as homeowners willing to make sacrifices by not looking to the Association for everything that they want.  We can no longer afford to do that.  I think that I am comfortable putting in a reserve contribution of $500,000.  So I think that came out to about 5.1% or somewhere around there.

George Pauley stated that it would be lower closer to 5.0something.

George Pauley – All along my goal was to keep the increase under 5%.  Now obviously we are not going to do that because there are two Board members at 5%.  I am comfortable with that increase.  I want to explain a couple of things about that.  The reserve study, if we do every single thing on the reserve study recommended and it comes in at prices they have estimated, we need to have reserve contributions of approximately $800,000 a year over the next 20 years.  Part of the reason that I am comfortable with $500,000 this year is because we have moved forward with our cooling tower replacement, which was in the reserve study a couple of years out.  This project was estimated at $760,000.  The reason that we moved it forward is because we had three consultants out, three different engineers who all agreed that the cooling tower would last us one more year, some gave us another two years or maybe for three years with a lot of maintenance and money put into it.  We are looking at this point at having a special meeting next Monday to discuss the cooling tower proposals but we are looking at coming in at least $400,000 under the reserve study estimate.  So for this year I am comfortable keeping it at the $500,000 or 5% because we have $400,000 we are coming in under budget on the cooling tower.  The Board is also going to have to have some more meetings to go over the reserve study so that we can take out the items that we do not believe that we will ever do.  There is a $50,000 item to replace all of our mailboxes in another year.  I don’t see any reason to spend $50,000 to replace our mailboxes.  There are a number of other items in there with significant cost that the Board will be taking out simply because they are things that are being recommended, not because its mechanically necessary.  They are more aesthetic things.  There were two firms that worked on the reserve study, one was an engineering firm called Full Circle and the other was Reserve Advisors.  One firm is saying that the windows will take $2,000,000 to do our windows and the other is saying that it will take $7,000,000 to do the same thing.  We are spending about $70,000 this summer to have a study done on the windows and what they need to come up with a number that is more accurate than a $5,000,000 spread, which is a very big spread with regards to the planning to fund it.  If it is a full $7,000,000 then we will have to put a lot of money into reserves to get there.  If it is at $2,000,000 it’s a considerable different number.  The main thing right now in terms of the reserve increase this year is that we don’t have enough information on some things, which we are doing studies on.  Tim and Chuck are working on some of the other issues in terms of getting numbers nailed down.  Over the course of the next year we will have a much better number to be working on.  We certainly know that we do not need to put $800,000 into the reserves every year.  How much less than that we do not know until we get this all refined.  I am sorry that Laura is not here, she said she would be able to make it tonight.  The three of us are here and we are very close on our numbers, I’ve moved mine up and Sandra has moved hers down but we are in agreement at 5%.  All of us as we have been working on this have switched our numbers around quite a bit.  There has been a recommendation from the Budget and Finance Committee for a $5.00 increase in parking fees, and a $5.00 increase in the bike room.  I think that we have given a history and a background here, and would like to get the input from the audience.

Resident Comments (Board and Management responses in italics)

Dom Yuratovic – With a 5% increase will we have $500,000 saved in our reserves at the end of the year? George Pauley stated that our reserve fund will go down because we will be spending more than $500,000 this year on the projects that we have already committed to undertaking.  The reserve fund will probably going to drop almost $200,000.

So at the end of the year we will have less than $200,000 in our reserves? George Pauley stated that we are currently at $1.5 million.  If all goes as we are looking at now our reserve fund will end the year at $1.3 million.

Is that including the cooling tower? George Pauley stated that they were planning to spend about $800,000 on the reserve projects including the cooling tower, the deck repairs, the planter repairs in the driveway, and the repairs to the mall planter, the terrazzo.  So we have $350,000 for the cooling tower, a couple hundred for the planters which is about $550,000 right there, probably another $175,000 for the deck repairs, there is a lot there. Carlos Vargas stated that the very first item that they were going to be making are the ramps for the garage which was overlooked during the rebuilding of the garage two years ago.  That was a stupid decision made at the time so we need to plan another $25,000.  This is the first item in line that we are going to attack.

Cy Peiser – You mentioned $200,000 to repair the deck, which we certainly have to do, but have we followed up as much as we can with the people who put it in?  It has to be done but it seems that it was amazingly sloppy on our part to let that happen.  Is it still under warranty?   Who is the person who put it in?  Are they still in business? George Pauley stated that he did not know who the person or the company was who put it in, but basically from what we can tell, this is over 10 years since the deck was done.  There is not much that we can do after 10 years to go back and say it didn’t hold up.  It held up for 10 years.  We have not been able to clarify if the specifications were for a different type of wood than what they used.  The Board at the time thought that the specs were for a different type of treated wood and the wood that was used was untreated and rotted.

I had talked to the office at that time because when they put in wood even in the fountains I asked if it would last.  They said that all the wood that was used there was wood that would last 20 years.  That was the answer that was given to me, they were wrong obviously, and I just wondered who the company was and if they were still around even if there was no warranty, if we had some dialog with them as to why they did that. George Pauley stated that the wood that was used for the surface decking and the edges of the planters and so forth was a very dense wood that so far as we know has not rotted at all.  The stringers underneath, that were holding up that wood, was the standard wood, nothing special, untreated and that is why that problem has occurred.  Tonight we are trying to get input on the overall budget and where people stand, what their thoughts are.  We cannot go below 4% because then we are cutting out very basic services.  We would start eliminating staff and things like that.  The 4% keeps us just doing and running.  We can go below 4% if we reduce the reserve contribution less than it was a year ago.

Becky Rossof – When the budget left the Budget and Finance Committee we were looking at operations of 8%.  Now you are talking about an increase in operations of 4%.  What has been cut from the budget between the time it left the committee and now. Tim Patricio stated that at the end of the last meeting it was indicated by Paul and George that management would continue to looking at some of the areas that we had indicated as areas of concern.  For those of you on the Budget and Finance Committee, as the Board approves what they would like distributed a memo will be going to all the Budget and Finance Committee members detailing item by item what we changed with a note as to why.  Most things are small changes that ended up being a wash but there were a couple big items in the operating that resulted in a pretty significant decrease.  One of them being roof repairs, I don’t know how specific you think we need to get but a memo will be going to all committee members with a  detailed reason as to what we did.

I was wondering specifically about the receiving room expense, is that still as it was? George Pauley asked if Becky could be more specific.

Is it still at the $6,000 that it was when it left the Budget and Finance Committee? George Pauley stated that right now it is still at $6,000.

I assume that if it’s there now when you are making your vote of 5% than it is staying in the budget. George Pauley stated that was not necessarily true.

I’m not sure what is going on, if it is in the proposed budget than why would you not keep the expense? George Pauley stated that it was an item that has been brought up for discussion by the Board.  A vote may be taken to change that contract.

But it would still appear in the budget? George Pauley stated that currently it is still in the budget. Tim Patricio stated that if she were asking if we changed that, this was not one of the line items that is on the list of having been changed.

Laura Cossa arrived for the meeting.

Nancy Ledvina – I’m not uncomfortable with the 5% increase.  My only concern is it sounds like if we continue with big increases, this will affect the people living here and when we compare our assessments with similar building assessments we seem to be pushing in on the high side.  While I understand that these projects need to be done and we have to do them, if we continue to increase the assessments even at 5% every year we are going to be looking at some ridiculously high assessments.  I don’t know what the answer is because a special assessment increase is out the widow, but seems like it is the only alternative.  This is troubling me why are our assessments, except for the Edgewater Beach which is a co-op and the Renaissance, our assessments are higher than most of the buildings in the area with the same square footage and we keep increasing.  That is the concern not just for residents but in terms of retail.  I would object to another increase in parking even if it is only $5.00.  We just got an increase in parking last year. George Pauley stated that the last parking increase was 2 years ago.  We are taking a risk here by keeping the assessment increase as low as we are.  There has been a lot of pressure that this increase should be much higher.  A lot of recommendations that we should be looking at almost double what we are recommending.  We are going on the assumption that we want more information, that we believe that we are going to be able to remove some things from the reserve study.  We were able to get 3% out of this budget just by better control of expenses.  We started out with a budget of 8% to just stay where we were.

I think that we cannot avoid the elephant in the living room.  That the reality is that our assessments have now doubled to the point that we are now higher than a number of comparable buildings in the area.  We got that huge increase from the failure to lock in the huge gas prices, but my understanding was that we had some correction and bought ahead.  I think a lot of people thought that because that was an urgent increase to deal with an immediate situation, that that might level off some of the increases that we would see in the years to follow.

Laura Cossa asked Nancy compared to other buildings what else do they include in the assessments?  All the buildings that I have looked at are pretty much comparable, in fact some of them include health club memberships in their assessments.

Sandra Goldberg asked how old the buildings were? They are similar to this.

Laura Cossa stated that it seemed to her that the assessments were not lower than ours.  Their assessments are not lower compared to our building.  I might be wrong but do you have specifics? I can show you the buildings, assessments, and square footage. 

Do they have a special assessment; have they ever had a special assessment? Some of them have, I have not done a breakdown on all of them, just some of the immediate buildings along here next to us, I see units that are bigger than mine with, 2-bedrooms that are upgraded with assessments that are lower than anyone on my floor. George Pauley stated that we were not out of the ballpark with our assessments but that we do recognize that they are on the high side.  Certainly not the highest and certainly not the lowest but we are in the middle.  That has been why the emphasis by this Board has been to take the approach of the lower assessment.  We believe that we can manage to make the repairs and do the things that we need to do at this amount.  Next year we will be looking at that again.  As Becky said the Budget and Finance Committee was looking at a bigger increase than this, Draper and Kramer was recommending a larger increase.  We are running real tight here and real close but to address your issue with the gas, we are hoping that we are going to save on the gas expenses when we get in the position to buy gas.  Our gas for this year was already locked in, our gas for next year is 60% or 70% purchased, the following year it is at 30% we cannot change the gas company we are locked in until 2010.  We have been consulting with a company that advises associations on how to purchase gas and how to buy it but they will not meet with us until 2009 because there is nothing we can do unless we could get Exelon to let us out of the contracts with them by trying to buy our way out, but right now according to their projections we have lost $110,000 on our gas purchases versus if we had bought gas on the open market.  That was through January 9.  We cannot touch that.  We could try saying if we give you $50,000 will you let us out but why would they.  I don’t think that we can get out of those gas contracts.  We will in 2009 have the opportunity to start purchasing gas again. 

Cy Peiser – Actually George with the gas, we don’t know, it could be higher than that, or it could go down.  I have a question, the way that you explained the cooling towers seemed very intelligent and evaluated in a way that it should be.  With the major expenditures, not the little ones, Tim talked about three or four but one that always bothered me is the cost of elevator maintenance.  I never could figure out why we are paying, or what we are paying, or how when the elevators are new we still need to pay $70,000.  Why were we not able to get some kind of guarantee in the first year even?  I got answers but I am not smart enough to figure it out. George Pauley stated that they were not new elevators; they were rebuilt.  The mechanics have all been rebuilt, and they were under warranty.  Was there anyone on the Board when the elevator contracts were signed?  Becky do you know anything about this were you on the Board at that time?

Becky Rossof – When the elevator contracts went out to bid, the consultant Donnelly bid it out a certain way.  Then it was several years before we got this started.  There was a question about why Donnelly bid it the way that he did and why he bid the maintenance the way that he did.  He didn’t bid it to have a big reduction in the warranty.  Then when we got around to negotiating with Otis we did not have a lot of room because unfortunately we had already signed a letter of intent with them.  When Draper and Kramer came in that was one of the things that Mary and Christina looked at.  Why the maintenance contract had been negotiated the way that it was.  They had never seen anything like that.  It goes back to the way that the bids were solicited way back when Marjorie was the president.  I am sorry you have probably heard that explanation before, and it is unsatisfying.    The truth of the matter is that they were coming in and holding to the bids that they had made and we had no room to negotiate because we had already signed a letter of intent and we were hanging out there without much other coverage. George Pauley stated that the thing is that all Boards make the best decisions that they can under the circumstances at the time.  Some of the decisions that we are making here with this Board, a year down the road or 5 years down the road people can look back in hindsight and say that we could have done it better.  We are making the best decisions at this point and time.  Do people have other thoughts I would really like to only go on with this for a few more minutes about what you think and what your opinions are on the assessment increases, the $5.00 parking increase, and the $5.00 bike room increase. Carlos Vargas stated that he believed that Laura Cossa should speak about what type of increase she would like. George Pauley stated that what he asked each Board member was what they were looking at in terms of an increase in assessments.

Laura Cossa – It seems to me that with my background as an accountant makes me very conservative.  The Budget and Finance Committee did a great job analyzing every single expense and every income and asking for us to consider an 8% increase.  I was very comfortable with an 8% increase.  I am equally comfortable with a 7% increase and I would like to say 6.99% but I don’t know why.  That’s my training based on several calculations that I ran.  This being said, this Board is extremely cheap, I can tell you that.  They are paying attention to every expense.  Tim is a great person to look over every expense so I have confidence, and I will sleep okay tonight, because I know that we will look over every expense.  Is it a good idea to stay at 5%, I don’t think so but that is my opinion.  Was it okay at 8%?  I would have agreed.  I am not happy with 5% but I know that we will look over everything.

Sandra Goldberg – That’s a good thing.  We talk about building reserves but we also have to look at our operating expenses and looking very closely at everything.

Sofia Zitek – That’s very nice, you are very nice person.  High assessments are no good.  Please keep the assessments low, some people do not have the money for higher assessments. Sandra Goldberg stated that the Board was very sensitive to that.  We are very aware that there are people living on fixed income that have lived here for many years.  We are defiantly sensitive to that.

Susan Pestine – I just think that with the increase in assessments maybe another year could go by before we raise the parking again. Sandra Goldberg stated that they tried.  This is a very modest increase, but there are certain things that are increasing that are completely out of our control.  Electricity is going up again, gas is going up, insurance is going up, salaries are going up, and the union is going up.

My salary is not going up. Sandra Goldberg stated that the union always goes up.  We cannot control those things but we are looking to closely control all the expenses that we can control.  A $5.00 increase to parking is pretty nominal.

Every other year we are increasing it. Sandra Goldberg stated that if you look at comparable buildings for parking, our parking is very reasonable.

But if you look at other buildings our assessments are higher than theirs. Sandra Goldberg stated that the building is old.  It takes a certain amount to maintain the building and to maintain the standard of living that we have here.  That is why I am coming in at 5% and Laura is coming in at 8%. George Pauley stated that he had made that argument about the parking but finally gave in.  It is basically a $5.00 parking increase or a 1% assessment increase for all the owners. Carlos Vargas stated that we have a small item increase in the bicycle room.  I wanted to pay $1.00 per week and increase to $52.00 per year and was told no.  We are increasing by $5.00 but that is nothing.  We are even looking at these small things as well. George Pauley stated that he did want to emphasize that there has been a lot of pressure on each of the Board members to have a considerably higher increase than 5%.  I know that Don is in agreement with that.

Don Yuratovic – I want money today, there is going to be a rainy day and one day we will pay.  We are not paying this year but we are going to pay one day.

Paul Groeninger – I would like to correct one thing.  The Budget and Finance Committee, by majority vote, not everyone, the consensus was an 8% increase without an increase to parking fee, or 7% with increases to the parking and bike room fee.  Just to get everyone on the same page, with that increase it resulted in no increase to the reserve increase.  Everything that they are talking about over the 4% now is added to the contribution.  It would certainly be nice if it were more, I would like for it to be more and I did take the numbers to heart and started to do the numbers myself.  Whereas it would be nice to have 8% I also don’t want to drive off residents.  We are getting to the point where, why do we live here instead of the Gold Coast with this kind of assessment.  The last time an increase passed when I was on the Board and compared our assessment to others we were in the middle.  That included quite a number of high rises.  Someone earlier mentioned the next two buildings, but as you will recall those buildings had triple special assessments too.  Next door had a 6% increase this year and their assessments are still slightly higher than ours.  I would have been more comfortable in the neighborhood with 5.5% to 6% to give us a little bit more of a buffer.  I did an analysis of our reserves, with our reserves at $1.2 million not at 1.5 as you are looking at now.  I projected mine out with a 3.5% increase for years 2009, 2010, 2011, and 2012 in the reserves and only one time did we get below $1 million and that was in 2011.  I know and everyone else knows that the reserve study is based on inflationary costs.  They may have put in too much inflationary costs are we found out with the cooling tower.  How much I don’t know, but based on my notes, assuming no changes in the amounts in the reserve study we do not drop below $1million.  I am comfortable with the 5.1%. George Pauley stated that 5.0% is where the Board is right now. Sandra Goldberg stated that her number was the 5.1%.

Anyway I would feel better with the reserve increase increased above last year.  I projected out with 5.1%, 4.9% and 6.0%.

Nancy Ledvina – Small item but bringing up the $5.00 increase to parking again, when you open up something for discussion as you did for our input, it sounded to me like you had already decided on the decision.  It seems disingenuous to me to open something for discussion that you have already decided on. George Pauley stated that it was hashed out through the Budget and Finance Committee; I think that I was the only one who did not want to increase the parking. 

Paul Groeninger – I was against it but voted with it because it was either a percentage of assessment increase or $5.00 for the parking. George Pauley stated that his arguing was in the Budget and Finance Committee not among the Board.

Nancy Ledvina – That was not my point.  My point was that I could live with the $5.00 increase but I don’t want to see us get back into an atmosphere where something is open for discussion as if our input could make a difference on the final outcome only to find out that the final outcome has already been determined.  That’s disingenuous. George Pauley stated that your input does influence us.  All of us on the Board have come into previous Board meetings thinking that we would vote one way or another but then people raise very good points in the audience and I know that I have changed my opinion after listening to people in the audience.  We all came into this meeting with preconceived notions as to where each of us were individually but there was not a discussion before this.   I asked Carlos before the meeting tonight where he was at and I asked Sandra where she was at, I did not have a chance to talk to Laura but I had an idea where she was.  I knew where I was.

Susan Pestine – Does Phoebe get to vote? George Pauley stated that if she were here.

Why do we keep her on the Board? George Pauley stated that was a whole different question but we do not have the power to remove Board members.  If Phoebe had wished to give us input by email we certainly would have taken that into consideration.  So far nobody has given me a compelling argument that has changed my opinion from when I walked in tonight.  Where I was at prior to today was prior to where I am at tonight.  Partly because Tim did some number things with me today and changed my mind a bit.

Nancy Ledvina – I don’t know if this is the meeting where this conversation should be held, but Cy was reading my mind and then Becky touched on it to.  It seems to me that we have a history for not holding feet to the fire when we enter into contracts.  I know of residential decks that have lasted for 20 years and when we hire people with expertise your not just paying for the job they are performing but for their expertise.  Do we not have recourse against people for installed wood that is going to rot on a lake front deck?  Do we not hold accountable Donnelly who we paid and contracted as an expert who put us in a situation so ridiculous that Draper and Kramer had never seen anything like it?  Who are these people that we hire that hold no legal responsibility for the advice that they give? George Pauley stated that part of that is the Board at the time.  If the Board decides to enter into a contract and signs the contract then we don’t have much legal recourse.  We have not been able to see anything that indicates that our contractor on the deck did anything other than what was specified in the contract.

Who recommends, I’m sure that any Board that we have had can just say we pick this wood and assume that when you pay hundreds of thousands of dollars that you would ask, this is the environment by the lake what should we be putting in.  It seems to me that there may still be some recourse. Carlos Vargas stated that we are talking about something that happened years ago.  It is my understanding that a lot of information and files were lost.  Maybe we can look into it again but 10 years is a lot of time for a warranty.  Do we have the records or the contract itself?  I would prefer to be in the hands of Otis elevator itself than in the hands of any other contractor.  When I worked in the city I had to deal with other contractors for elevators and at the time there were only three, Schindler, Montgomery Elevator, and Otis.  That was very hard.  We are in the hands of these people, we don’t have a lot of leverage, I dealt with these contracts years ago and it’s a nightmare.

George Pauley – I would like to limit the conversation at this point only to the assessment increase and not going back over things in the past.  If anybody else has some new comments about the assessment we will take one more and then make the motion.

Betty Terry Lundy – For the future when we have contracts can we ask people to send it in a PDF file and keep it in a folder so we don’t loose the paperwork and go through this again? George Pauley stated that he completely agreed with this.  I keep everything in my computer.  I think this is an excellent recommendation and I am sure that is what is going on now.

Motions to Approve Proposing 2008/09 Budget

Upon due motion by Sandra Goldberg and seconded by Carlos Vargas, the Board voted to approve the assessment amount for the proposed budget at a 5% increase including a $5.00 increase in parking and a $5.00 increase in bike room fees.  George Pauley, Carlos Vargas, and Sandra Goldberg voted in favor; Laura Cossa voted against; the motion passed.

Motion to Distribute 2008/09 Budget

Upon due motion by George Pauley and seconded by Carlos Vargas, the Board voted unanimously to approve distribution of the proposed 2008/09 budget to the unit owners.

Adjournment

Upon due motion by Sandra Goldberg and seconded by George Pauley the meeting adjourned at 8:08 pm.

Signed (as seen on pdf, clickable at upper right corner of these minutes)

George Pauley, President

Sandra Goldberg, Secretary