So What About These Rumors of Cost Overruns?

  • Posted on: March 12, 2014

hean in sand“Poor planning,” “poor project management,” “gross cost overruns”!  Good Lord.  Accusations abound that we’ve been misled. And the Vince-Scott crowd says we’ve got our heads in the sand. Fitting image? Let’s see.

For the benefit of our readers, here we’re going to set the record straight.  Time to give credit where credit is due.  Or, at the very least, put this “overruns” matter to rest.

Critics point to the 111 E. Chestnut Condo Assoc eMail Bulletin – Autumn Newsletter.  In it Board President Anthony Milazzo said: “Though all of the building projects listed above were completed at or below our budgeted cost estimates, the loading dock project was an [read the only] exception, coming in over budget by about 13%.”

Let’s do a little forensic accounting.

– On October 23, 2012, the Association’s 2012 Operating Budget had $195K estimated for the Loading Dock (actual was 0, i.e. we didn’t do it then). Then we budgeted $100K for 2013. We were to split the cost with the 830 Shops (Ghirardelli, Bar Toma, etc.), the property then owned by Grovesnor.

– In November 2012, our property manager said, “D&K’s loading dock [estimate] is $200K as is ours [Sudler Property Management], but keep in mind the easement agreement splits this cost and the Association only pays 50%. Hence, $100K in the budget.”

– A few months later, May 10, 2013 to be exact, we entered into a contract with Berglund Construction to the tune of $324,227.

– By July 2013, the total project had ballooned to $451,244.90! See the Enumerated Loading Dock Project Costs.

Coincidentally, it was on the same day (September 6) that the Enumerated-Costs piece was produced, that Milazzo turned around and told us that the loading dock project was the only project over budget and only by about 13%. And on September 20, our property manager was given a $3,000 bonus ostensibly for good work done with the projects.

Okay okay, let’s not jump to conclusions. Let the math speak. Using $200K as the base, our part was to be $100K. It’s looks like our part came in at around $359K, give or take. That makes our “over budget” more like 259%. That’s one scenario.  Another is vetting it in accordance with the 50/50 split (which does not appear to have actually happened but here for argument sake). So even based on that, with the total cost at $451, we’re still about 180% over budget.

BUT let’s not jump to conclusions. There’s an easier way to look at this: ya take 259; subtract Sara’s $3,000 bonus reducing the total to 256; and then per the imagined discretion of a condo board president, ya add ’em up (2+5+6). And there you have it, 13%.

Of course, that was the ONLY item over budget, we’re told. Rest assured that the roof replacement, rooftop air handlers, bike room, deck furniture, house pumps, boiler replacement and window sealant project are all good. Right?

Excuse me while I put my head back in the sand.

Comments

  1. Richard · March 12, 2014 Reply

    Facts – Loading dock work – estimate/budget $200,000, placed order $324,227, actual costs $451,224. These were $100K increases from the amount approved in the budget. Who approved these increases – the board or Sudler?

  2. john · March 13, 2014 Reply

    NOT SUDLER

    Sudler Property Management only follow Anthony G. Milazzo’s orders.

    Anthony G. Milazzo (Board President, 111 E. Chestnut Condominium Association) is very impressed with Sudler’s management team.


    “Mr. Steven Levy, President
    Sudler Property Management”

    “Dear Steven:

    Since your firm started managing our Association, Bob Graff (our supervisor) has been of immense assistance to us in helping our Association undertake a series of urgent and unprecendented infrastructure improvements to our 40-year-old building”… “At every level, Sudler demonstrates a strong commitment to exceptional customer service.

    Sincerely,

    Anthony G. Milazzo

    Board President, 111 E. Chestnut Condominium Association

  3. Gaspar M · April 9, 2014 Reply

    I am puzzled by this.

    The Board Directors are not responsible for the cost overruns and project delays.

    It is clear from our contract that Sudler our agent, has full responsibility. The board is a mere spectator. Board Directors aren’t project managers or budget controllers; we’re fellow homeowners who volunteer our time for the benefit of our condominium association. It’s unreasonable to expect us to oversee projects and to control costs. We fully rely on Sudler to contain those costs and delays.

    Per our legally binding contract with Sudler:


    …The Agent shall prepare and submit to the Association a recommended budget prior to each fiscal year showing anticipated receipts and expenditures for such year…

    …the Agent shall cause the common elements of the Condominium to be maintained according to appropriate standards of maintenance [e.g. the level of chlorine of the swimming pool]… and such other annual maintenance and repair work [e.g. the loading dock] as may be necessary…

    it’s disingenuous for John to misrepresent to homeownersmy Tony Milazzo’s past support for Sudler.

    It is evident that our agent is not performing up to standards. The cause of its poor performance must be determined. I can assure you that the board will be looking into this important matter urgently. The corrective action could be a verbal warning, up to and including, termination.

    The board members are intelligent, ethical and well-intentioned professionals who volunteer their valuable time to our Association for our benefit. Your investment is in good hands.

    • Brian Connolly · April 9, 2014 Reply

      What about the $3,000 bonus the Board gave the manager for managing these projects?! Please! The buck stops with the board. Their diligence is a legal duty.

      Of course, “We have no idea what’s going on; your investment is in good hands” is a very compelling campaign slogan.

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