Now for this month’s installment of the Monthly Board Meeting. Think perverse dance. Think highly orchestrated Electric Slide and Chopin Funeral March mashup marked by slow predictable slippery sidesteps and faux disclosures. Then again, if you’re looking for a quick image to just sum it all up, think the Boiling Frog Syndrome. Now THAT captures it!
That in mind, here are the key highlights to last Thursday’s meeting.
Debt Payoff Postponed – Who coulda predicted it?!! The Board approved extension of the Barrington Bank Loan.
Contrary to previous promises by our Board President that we’d soon be out of debt and accumulating oodles of cash, nope… not gonna happen. Well, not anytime soon. At the meeting our designated reader of the Sudler prepared Treasurer’s Report, Diana Shay announced that pretty much like last month and the month before that and the one before that, the balance of the Barrington Loan is about $700K and the Line of Credit is about $500K. That is, we are still about $1.2 million in the hole. The revised estimate for payoff of the Barrington Loan has been pushed a year and is now the Fall of 2016; and the Line of Credit sometime the middle 2017, or so.
Bottom line: at least for another two years, 111 is a bag-o-debt, where possible investors are assuming liabilities they did not create and current owners are strapped with increase burdens in higher assessments and diminished services without any tax benefit.
Improper Assessment Increase – However nominal this year’s assessment, per our By-Laws Article IV Sec. 1, it’s not lawful. Besides “repair and replacement cost, and the estimated useful life, of the property,” in determining the amount of reserves appropriate for the Association, the Board should consider, “the ﬁnancial impact on Unit Owners, and the market value of the Condominium Units, of any assessment increase needed to fund reserves.”
When asked what consideration has been given to the ﬁnancial impact on Unit Owners, or the market value of the Condominium Units, the Board was silent except for Director Brush. Serap seemed to suggest that perhaps “an independent study would suffice.” But that was then summarily milazzoed.
Fitness Center Debacle – The results of the long-awaited and much ballyhooed Fitness Center Rehab Project are in. In the choice words of Director Brush, “I’m very underwhelmed. We spent $40,000 and I just don’t see it. There are lots of issues. It looks like we didn’t spend any money.”
Of course, Serap’s assessment does not account for our Board President getting the exercise machines he wanted personally.
2015 Budget Overview – Summed up nicely by Director Greene: “There’s a lot of fat in that budget. Ya got a bunch of buckets throughout that are unnecessary. But 2015 is better than the 2014 budget.” To quote the recently Milazzo-dismissed Finance Committee Chair, Ginny Hourigan, “It’s riddled with slush funds.”
As to the several issues uncovered by the Board-appointed Finance Committee, they were discounted. Director Greene: “Do members of finance committee have any background in finance?”
$35,000 Budgeted for Concrete Repairs Totally Arbitrary – As we previously reported here, A units on floors 22 through 27 seem to be exhibiting concrete problems with their floors. According to our head engineer, Robert Ceci, “Owners should prepare for the worst.” According to Sudler’s Bob Graf, “As the problem appears in three units in a row, it could entail moving people out altogether.” One homeowner astutely pointed out that “as the problem is attributed to a bad cement pour during an exceptionally cold Winter, we need to keep in mind that the columns were poured simultaneously.” In a word, YIKES!
Anyway, upon motion the Board approved the engineering firm KGH to provide bid specs for the repairs. About $2 grand is budgeted to do the “sounding” of the existing cement to reveal pockets and problem areas. About $2,000-$4,500 is for the firm to produce the bid specs and recommend who to use to make the repairs. In short, we’ve already earmarked about a third of the budget just to determine what’s exactly wrong, the severity and how to fix it. Hard to imagine the Board has already forgotten the significant cost overruns that happened with the Loading Dock.
The 22.1 Non-Disclosure – As Director Brush pointed out during the discussion regarding the budget, “our legal expense were three times as much as anticipated, why/what?” Again, we had budgeted $20K for 2014 and the estimated actual looks like it will top $65K. Director Santogrossi pointed out that this stemmed from situation(s) “Not covered by the D&O,” i.e. Director’s and Officer’s insurance policy.
Imprudent spend aside, problem is, at least since May we’ve told prospective buyers via the 22.1 Disclosure Statement that “The lawsuit was tendered to the Association insurance carrier for coverage and defense.” Apparently, that was knowingly misleading. Is that a problem? Could that be construed as fraud? In the context of real estate transaction, at the very least can nullify a contract. And that would be the least of our worries. Incorrect information in a Section 22.1 disclosure statement may provide facts for a claim against your seller and the board of directors. The board is legally responsible for the accuracy of the information contained in the disclosure statement. Depending on the circumstances, a plaintiff could sue for intentional misrepresentation, fraudulent misrepresentation, fraudulent concealment, breach of contract, and violation of the Condominium Property Act.
Miscellaneous – Of course, the meeting included lots of other stuff. Such as:
– Whether any owners on the 11th and 12th floors were ever polled regarding a dog run. No.
– Whether the board approved committee charters are aligned with the Illinois not-for-Profit Act. No.
– Whether sealed bids would be open by more than two board members. Despite a great fight to have them open in front of additional board members by Director Del Monico, no.
– Whether the Head Engineer’s apartment was tax exempt as a common element? Well, maybe. We’ll get back to you.
– Why so soon there’s a $23,000 expenditure for the Loading Dock. Because in the renovation we forgot to add a new garage door and improved lighting.
– How much and how often do we shampoo the carpets? “$3,000, and not in the 3 years that I’ve been here,” said the Property Manager Rudnik.
So, back to the image of the boiling frog, it’s a metaphor for the inability or unwillingness of people to react to radical changes as long as they occur gradually. See, if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that’s heated slowly, it will not perceive the danger and will be cooked to death. Suffice to say, Milazzo single-most significant accomplishment in the last three years is ironically having almost completely derailed the Association Membership’s endowed natural instinct for fight or flight.
And the meeting was adjourned.
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EDITOR’S NOTE: Photo © 2010 J. Ronald Lee