Category Archives: News

Reactions to the 2016 Financial Statements

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We read through the financial statements and have a few observations, with a hat tip to Marc F. of spcomm who beat us to the punch on many of these points (spcomm membership required):

The bad:

  • Our cash position remains bad.  While the disparity between operating cash and accounts payable isn’t nearly as bad as last year (when we had under $200k in cash and almost $3MM in outstanding payables), at the end of 2016 we still had more accounts payable than operating cash.  We also drew down our line of credit by $950k (to pay the public adjuster lawsuit settlement, which was reached in 2015 but paid in 2016) and appear to have used about $1.2MM in reserve funds during the course of 2016.  The coop is also no longer keeping a separate playroom account but has moved the playroom funds into the general operating account.
  • Property taxes continue their relentless march to the stratosphere, approaching $10MM and accounting for more than a third of our total expenditures.
  • Legal costs are up by almost a quarter million.  We assume this is primarily the result of the garage litigation, where five shareholders sued the co-op to try to invalidate the parking lease with Icon Parking.  The co-op’s motion to dismiss the case (and a motion to recover our fees from the plaintiffs in accordance with the proprietary lease) was fully submitted in September 2016 but the judge has not yet ruled.
  • Commercial arrears continue creeping back up at about $100k per year since the massive write-offs of 2014.

The good:

  • Operating, repair, and maintenance expenses are down, particularly steam and gas heat, water and sewer charges, maintenance materials and supplies, plumbing and heating, window repair, and landscaping.
  • As promised in last year’s financials, the Icon contract resulted in Garage revenue going up by almost $100k.  There is a possibility for that number to increase further if enough shareholders are added to the parking roster.
  • Sublet fees are up almost $100k.  This despite oft-repeated false claims by certain shareholders that the Board “lowered” sublet fees.
  • Flip tax reached a record high of almost $6.5MM, up $2.2MM over last year.  We expect strong flip tax collections again in 2017, but probably not this high.

Prognosis:

  • With property taxes continuing to go up and some major capital repairs on the horizon stemming from the discovery of 60-year-old construction defects in some of the 18th floor terraces, we don’t expect to see break from maintenance hikes in the foreseeable future.
  • That said, with the air rights proposal on the table, and (even if we don’t sell air rights) the possibility of refinancing our mortgage in the next year or two, the Board may be able to finance some of the long-term expenses and keep maintenance increases to a minimum.  This already appears to be the mindset of the Board, as they recently passed a 1.5% maintenance increase to go into effect for fiscal 2018 as part of the N+1 budgeting process.

2017 Board Candidates

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This year seven candidates are vying for four open seats on the Seward Park Cooperative Board of Directors. The candidates are:

#1 – Arnold Sandler
#2 – Darcey Gerstein
#3 – Carol Anastasio
#4 – Karen Suss Wolfson
#5 – David Pearson
#6 – Norma Ramirez
#7 – Stanley Friedland

Darcey, Karen, and Norma are all incumbents seeking reelection.  The fourth seat is being vacated by Harold Aranoff, who served for six years.   Of the other candidates, both Carol and Stanley previously served on the Board.  Arnold ran last year, and David is brand new to Seward Park elections.

The election will be held on June 14, 2017.

On the proposed Shareholders Association

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I attended last night’s inaugural meeting of Eric M.’s shareholders’ association.   Roughly 75 people were there at any given time.  About a third of the meeting was devoted to Eric talking about himself.  About half was a discussion of air rights related concerns.  And the remainder (when not getting sidetracked by miscellaneous issues) was about the proposed shareholders’ association itself.

Some observations:

Eric likes alternative facts almost as much as Trump.  Eric is a knowledgeable guy who has put a lot of work into trying to help the coop.  But accuracy and truthfulness are not high priorities in his writing or speaking.  He frequently repeats statements that could generously be referred to as misleading (or less generously as lies).  The anonymous anti-Eric blog “Truth at Seward Park” recently published a fact check of Eric’s latest Gazette flier.  Almost every misleading statement in that fact check was repeated at the meeting.  Various shareholders (including me) attempted to correct the record a few times, but were often shouted down.

Nobody knows what the shareholders’ association is.  There were very mixed messages about the shareholders’ association’s purpose.  Eric spoke at length in vague terms about how it would be a “hyperdemocratic” way for the shareholders to engage in Seward Park politics year-round, where everybody would be welcome.  But he also made it sound like a political party and lobbying group that would try to push the Board toward certain policy goals, the first of which is to strike down any air rights deal.  The biggest cheer of the night was in response to a shareholder’s hope that the association would “stick it to the Board” (as if this were a traditional tenants’ association facing off against a greedy landlord, as opposed to a cooperative owned by the very shareholders sitting in the room).  Meanwhile, for anyone wishing to engage more in coop politics and policy, you are always welcome to submit comments (or complete posts) to the Seward Spark, and the spcomm and LESOnline forums frequently have lively online discussions about coop issues.

There is a dearth of air rights information available.   Many shareholders came to discuss the air rights deal, but the leaders of the meeting did not appear to have prepared anything on the subject other than an anti-sale petition, and were surprisingly unknowledgeable about the terms of the deal and the process of the shareholder vote.  Many valid concerns were raised about shadows and views, sharing open spaces, pollution, garbage collection, etc.  Having researched many of these subjects myself, I stepped in to try to answer as many questions as I could, and appreciate being given the opportunity to do so.  But it is clear that the Board needs to get moving with more complete and authoritative information about the deal and more opportunities for shareholders to get their questions answered.

Back Online

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The Seward Spark website was down for a month or so due to a server upgrade gone wrong, but we’re back, and hope to have some good posts regarding air rights and the upcoming election soon.

(Other) Election Results

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Curious how your neighbors voted in the presidential election?  DNAInfo has a map that breaks down the results precinct by precinct.  Since each of our buildings is its own precinct, we now know that Building 1 has the most Trump voters.  Um, congrats?

Candidate Votes Percentage
Building 1
Clinton 296 75.7%
Trump 83 21.23%
Johnson 4 1.02%
Stein 3 0.77%
Total: 386
Building 2
Clinton 352 80.55%
Trump 73 16.7%
Johnson 4 0.2%
Stein 0 0%
Total: 429
Building 3
Clinton 299 77.26%
Trump 72 18.6%
Johnson 5 1.29%
Stein 10 2.58%
Total: 386
Building 4
Clinton 362 78.87%
Trump 80 17.43%
Johnson 7 1.53%
Stein 6 1.31%
Total: 455
Overall
Clinton 1309 79.0%
Trump 308 18.6%
Johnson 20 1.2%
Stein 19 1.1%
Total: 1656

On the likelihood of a big maintenance increase

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Tiny fliers appeared under many doors this weekend.  While unsigned, they use the same fonts, writing style, and printing technology as a certain former director’s namesake newsletter.

While small in size, these fliers packed in quite a few pieces of information.  We will try to address the other (mostly dubious) items in a future post, but the most significant was a prediction of a 10-15% maintenance increase.

If true (and based on recent financial statements, we believe it is entirely possible), this would be the largest maintenance increase in quite a few years.  It will be painful for everyone.

That said, we do not see what other choice the Board has.  While Boards in recent years have taken several commendable actions to decrease expenses in certain areas (investing in our own boilers for the first time in the co-op’s history, bringing security in-house, etc.), many non-controllable expenses continue to go up.  Property taxes alone went up over $4MM (net of abatements) between 2008 and 2015.

During that same period, maintenance collections increased by less than $2MM, a cumulative increase of only 16%.  There were many years during that period where the Board staved off maintenance increases by spending flip tax receipts, flipping apartments, spending down reserves, and avoiding paying off debt.  But their avoidance of maintenance increases has left us with an empty operating account, outstanding debts that are as large as ever, and a big gap where predictable recurring expenses have increased by millions more than predictable recurring revenues.

So as much as we hate to see an increase in our monthly bills, we believe the Board will be doing the right thing if they take action to plug the hole left by their predecessors and balance the budget.

 

And the winners are…

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Congratulations to Wei-Li, James and Besty!

The final, certified vote tallies were:
#3 Wei-Li Tjong 461
#5 James Mastroianni 441
#8 Betsy Jacobson 424
#6 Leah Strock 397
#1 Arnold Sandler 360
#7 Tina Reiter 344
#2 Marc Albaum 151
ABSTAIN 3

Based on these numbers, at least 861 shareholders cast votes.

Thanks also go out to Marc Albaum, Dave Pass and Dia Shepardson for their service over the past three years.

Seward Park Board Election is This Week

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Seward Park Cooperative shareholders return to the polls on Wednesday, June 15.  Please remember to vote!  If you are unable to vote in person on Wednesday, you can vote online using the codes you should have received in the mail from Election America.  If you have misplaced your codes, please contact us and we will send you a proxy form that will allow another shareholder to cast a vote on your behalf.

This year’s Seward Spark endorsements come from Kate Nammacher, who recently served on the Board as a director, president, and treasurer.

After reviewing the candidates’ biographies and hearing their presentations at Meet the Candidates,  I believe that the following three candidates stand out for their high levels of engagement, knowledge and professionalism, and their complementary skills.

#3 Wei-Li Tjong – Wei-Li previously served three terms on the Board and distinguished himself as a leader in making improvements and finding cost savings for the co-op.  As a practicing corporate attorney his professional focus is spotting potential problems and figuring out cost-effective ways to avoid them. At Meet the Candidates he said his proudest achievements from his prior Board tenure include settling major lawsuits that could have cost us millions and slashing our legal bills by changing the way we engage with our lawyers.  He is responsible for replacing our prior management company with Greenthal/ Frank Durant, resulting in enormous quality of life improvements for all shareholders.  Wei-Li grew up in the co-op and chose to return here as an adult, representing concerns of both lifelong residents and new arrivals.

#5 James Mastroianni – Jim is a relative newcomer to SPC compared to many of the other candidates, but has jumped right in to volunteer as an active member of various co-op community groups and celebrations.  Jim is a corporate tax attorney and a partner at the accounting megafirm PWC, bringing skills that are crucial in the Boardroom.  His knowledge about co-op issues was on full display at Meet the Candidates, where Jim cited financial figures from memory and explained bylaw provisions that seemed completely unfamiliar to other candidates. With skyrocketing real estate taxes, we strongly need Jim’s level of expertise.

#6 Leah Strock – Leah has lived in the co-op since 1989.   She is a nurse practitioner with extraordinary listening and problem solving skills.  A frequent and always positive participant on various online community forums, an enthusiastic volunteer for GASP (Gays at Seward Park), children’s programs, Hurricane Sandy response and more, she is a model of neighborliness and cooperation.  At Meet the Candidates she had smart and informed answers to every question that was sent her way.  She will be a force for moderation, consensus and progress in the Boardroom.

Whether or not you agree that these candidates are the best, please exercise your shareholder right to vote! We need strong representation and good voter turnout.

Your neighbor and former director, president and treasurer,
Kate Nammacher

Suing Seward: What Could Happen?

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Executive summary:  A few shareholders are threatening to sue our  co-op to try to invalidate the Icon parking contract.  We think they have a very low likelihood of success, but even if they fail it will cost every shareholder something to defend the lawsuit.  And in the unlikely worst case scenario where they succeed and get the contract invalidated, there is a decent likelihood that Icon would sue for breach of contract, which could cost – our  co-op (and by extension, every shareholder) serious money.

Two websites reported last week that attorney Ezra Glaser has been hired by a small group of shareholders led by Don West to sue the co-op over the garage conversion.  It is unclear exactly what legal claims Mr. Glaser intends to bring, but he spoke quite a bit at one open meeting about Article 78 proceedings, and at the most recent meeting he said his ultimate goal is to invalidate the co-op’s contract with Icon.

Will Mr. Glaser succeed?  What exactly happens if he does?  And who pays for the consequences?

The Spark does not (and in our opinion should not) have access to the Icon contract.  Without it, and without having seen any actual legal complaint from Mr. Glaser, we are somewhat limited in our ability to provide analysis.  But based on what the Board has publicly communicated, and what Mr. Glaser has said in Don West’s open meetings, we can make some educated guesses.  Please note that although the author of this post is an attorney, this post is for general interest informational purposes only; it does not constitute legal advice and should not be relied upon by any party.

What is the likelihood of success?

In short: extremely low.  As a general rule, courts give wide deference to the board of a corporation (do a Google search of “business judgment rule” for more background).  Article 78 of the New York Civil Practice Law and Rules allows a court to review the Board’s decision and potentially invalidate it if it was “arbitrary and capricious” or if they failed to follow their own rules and procedures.  But it very hard for us to see how a decision that has clear benefits for the co-op as a whole (reducing the waiting list, making more money, getting more shareholders access to the parking garage that they own) and very limited adverse effects (existing garage tenants lose park-and-lock convenience, but keep access to the garage for the same price as before) could possibly be viewed by an objective outsider as “arbitrary and capricious.”  And by all accounts, the Board performed due diligence and held a series of meetings where they discussed and voted multiple times to proceed with the garage conversion.  Separate votes to hire a parking consultant, issue an RFP to operators, and select Icon were all unanimous (except for those absent from the applicable meetings).  The vote to enter into the final contract was 6-5 in favor.

What are the consequences if the lawsuit succeeds?

In the unlikely event that a court declares the Icon contract invalid, it would be up to the Board to determine what to do next in terms of how the garage would be operated going forward.  There is no guarantee that everything would go back to how it was the day before the contract went into effect.  And there is also a strong likelihood that Icon would sue the co-op for breach of their 10 year contract.  Such a lawsuit could be extremely costly to the co-op.

Who pays for everything?

Mr. Glaser’s attorney fees are between him and his clients.  But assuming he brings a suit, the co-op will at minimum have to pay attorneys to defend it, even if the case is thrown out like some of Mr. West’s previous lawsuits against the co-op.  That cost will fall on all ~1700 households in our co-op.

In the worst case scenario, where a court actually invalidates the Icon contract, Icon sues, and Icon is awarded millions of dollars in damages, every shareholder will be hit with the consequences.  The irony here, of course, is that Don West and any other shareholder who signs on as a plaintiff in this lawsuit is likely to be harmed more if the lawsuit succeeds than if it fails.