Budget Season... Again

It’s that time of the year again, back to school. This means that soon, you will need to inform your coop shareholders or condo owners that their monthly fees are increasing, again. This is in spite of a close to zero inflation economy and owners’ salaries barely increasing. Despite this, every contract and vendor that the board hires, on owners’ behalf, automatically increases their fees every year.

Vendor X may automatically increase its fee by 3% per year, while vendor Y increases its fee by 7%, and vendor Z increases it by 10%. This really adds up.

In Habitat Magazine, a resource for New York's Cooperative and Condominium boards, there are 123 pages of articles when searching for “budget.” According to one 1996 article on the subject “Boards should annually review agreements with insurance carriers, service contractors, and laundry companies for the best deals."

Yet, it is not uncommon that the board has a hard time getting insurance information from their managing agent. Additionally, many boards are unaware of many of the service contracts that they have as those were entered long before they joined the board. We assist boards in what service contracts to request from their managing agents.

It is very common to see service contracts dated as far back as the 1990s. We recently saw several elevator-maintenance contracts from 1999 with an automatic 5% annual increase. 

Boards all hear from their trusted advisors that they can’t do anything about costs because they are “fixed.” The city increased real estate taxes by approximately 10%, the DEP and labor union contracts increased by another 2.8%. To top it all off, boards can’t get alternative bids for insurance because the building has too many “problems.”

When did average become good?

One of our clients worked with a water-cost reduction consultant. This consultant told the board that their water costs were average; therefore they didn’t really recommend changing anything. That’s an interesting phenomenon since the water cost reduction consultant works on contingency. This particular board decided that average wasn’t good enough, so we helped them implement alternative solutions to reduce the building’s water use and cost to below average, saving them over 20% in water costs! That’s a significant amount of money.

What if we told you that we have analyzed private building costs for years, public companies for decades, and can provide you with some concrete examples of various service costs? Among our hundreds of benchmark buildings, and hundreds of line items, here’s one example of one cost that accounts for anywhere between 1-10% of our New York City benchmark:

Water & Sewer Costs

High $1,088

Low $324

Average $595

Source: The Folson Group

Why would you want to pay $1,088 per unit per year, if you could pay $595 for the same, or even $324?

If you want to compare these numbers to your own building, just take the numbers times the number of units in your building.

Unsure of how this can help you save money? Give us a call!

Need help with reducing your greenhouse gas emissions to avoid LL97 fines for your building, a second opinion on your insurance premiums or any other building costs? The Folson Group provides ESG consulting services to assist co-op and condo boards in minimizing their building’s operating costs. Set up a strategy call with us.