By Ira Meister
President and CEO – Matthew Adam Properties, Inc.
An annual budget for a co-op or condominium is a lot like an iceberg.
Only the tip of the iceberg can be seen, the bulk of it hidden below the sea. The bulk of a budget, while not exactly hidden, are mandated or essential costs and include salaries, real estate taxes and mortgage (for co-ops) and fuel. The exact percentage depends on the building.
This heavy load makes it difficult to minimize budget increases and requires tough decisions by boards and property managers. In effect, boards and managing agents have less leeway in determining a budget than many realize. Yet, there are areas where with diligent management revenues can be increased and costs can be reduced. The budget season for most co-ops and condos is past so as the fiscal year begins it is a good time to explore ways to increase revenues and reduce costs for the next budget.
On the revenue side, many buildings have storage and laundry rooms. These contracts should be reviewed periodically with the vendors to see where revenues for the building can be increased. A review may also disclose areas where the building is not getting all the income it should. Similarly, any commercial lease should be analyzed to ascertain if the building is collecting all the income it is entitled to. Are there charge-backs for capital work that were never processed? It is surprising what can be found in a thorough review of all contracts, not only for the coming fiscal year but into the future.
Another possible income source is cellular towers on the roof. Boards should also review potential revenue sources such as the so-called “Flip Tax” when units are sold, if the property doesn’t have one.
On the expense side, one good area to explore is energy. Matthew Adam Properties is a leader in installing LED lighting in public areas which lowers energy costs. LED bulbs also last longer and require less maintenance.
Many of the properties we manage have converted to natural gas from oil. The cost of natural gas is usually lower and can be bought for less from Energy Supply Companies (ESCOs) rather than utilities. ESCOs provide the natural gas, which is distributed either through the Con Edison grid system in Manhattan and the Bronx or other companies in Queens, Brooklyn and Staten Island. With more competition in the marketplace and the increase in ESCOs, it is worthwhile to seek out a good rate and lock it in; summer is usually the best time to get the lowest prices. There are several advantages. The co-op or condo will have a good fix on energy expenses for the upcoming season and can avoid sharp increases. Many unpredictable factors can abruptly affect prices, such as international situations, weather and the commodities market.
Using natural gas and ESCOs can produce considerable savings. Matthew Adam Properties is not in the energy business, so any savings accrued goes directly to the co-op or condo.
We have installed water heaters for use in the summer months when the boilers are not needed to provide heat. Using the water heaters, rather than the boilers, saves considerable energy. We also work with different vendors to analyze energy usage and have installed variable controls that can sense the demand for energy and control output to fit demand and provide what is needed.
We are installing tamper-proof heat-control monitors in apartments which provide data to keep apartments from overheating but remaining at a comfortable temperature. Overheating wastes energy. Some of our properties have controls that monitor the need and demand for the HVAC system pumps that operate air conditioning.
Not all buildings can convert to gas.
Some older buildings still use steam heat. In these buildings, we look to replace the steam traps and make certain the pipes and boilers are properly wrapped so heat is not lost entering building or when the boiler is operating. In fact, we check the insulation on all boilers.
Another area we monitor closely is water use. By tracking use against historic data, we can determine if water is being lost through leaks. As the city now charges for usage rather than the old system based on frontage, leaks can drain from the budget.
With boards and property managers trying to keep monthly charges as low as possible, it is important that in addition to the major expenses, they look at the tip of the iceberg (budget) to see where additional revenues and savings can be found.