UPDATE: APRIL 24, 2017
Today my wife and I received in the mail a a 3-page letter from the State Parkway’s board, post-dated May 1, 2017, inviting unit owners to the June 13, 2017, Town Hall meeting to discuss the 2016 Reserve Study Update at Hotel Indigo.
I was disappointed to see the letter claim the $1.2MM projected December 31, 2017, reserve balance as a “positive foundation.” This amount appears to be at least $58K too high, especially since it conflicts with the detailed reserve expenditure assumptions as disclosed in the 22.1 disclosure letter the board approved late last month.
To make matters worse, State Parkway does not possess the capacity to make accurate projections. In fact, State Parkway’s actual reserves as of December 31, 2016, fell $328K short of the incredulous $1.35MM projection that was made just a few months earlier as part of the 2017 Budget process. In other words, the $1.35MM year-end projection was 32.16% too high.
Notwithstanding, this purported $1.2MM number is not compared to an appropriate benchmark, such as percent fully funded. As one of my recent blog post shows, State Parkway’s percent funded as of December 31, 2016, is just 10.5%, or in the lower end of WEAK range (< 30%). In fact, Reserve Advisors recently recommended a $355K increase in State Parkway’s assessments to be phased in between the years 2018 and 2022. This means continued assessment increase shocks via more assessment increases and/or special assessments are forthcoming. A condo association with only $1K in reserves but 130% (> than 100%) fully funded, has exceptionally strong reserves. Bottom line, pay attention to the percent fully funded calculation rather than the dollar amount of the reserves!
The letter, however, conveniently ignores the fact that current unit owners are already paying more than their fair share of wear and tear because State Parkway’s board failed to maintain intergenerational equity. The question unit owners should ask at the upcoming Town Hall is when will their monthly assessment payments return to normal?
The good news is the board finally admits that replacing State Parkway’s tower windows via a loan and/or special assessment is the more expensive option. However, the board’s claim it “maybe (sic) more expensive but would spread the cost of this project to owners over a longer period” is without merit because funding for the subsequent round of windows replacement will also need to be funded in advance of the replacement. Otherwise, subsequent replacement of tower windows will have be be replaced via a loan and/or special assessment.
I don’t know what good this Town Hall will do for State Parkway’s board of directors, especially since the board, unlike unit owners, have a fiduciary duty to the Association. Meanwhile, the I should point out the board’s special assessment discussion first began at its September 2015, Board of Directors’ meeting, or 19 months ago.
At the board meeting the other night, the board announced a “Town Hall” meeting about the 2016 Reserve Study Update the board approved in January 2017, will be held at Hotel Indigo sometime in mid-June (date uncertain — check with property manager Bill Southall).
“Town halls” have been held only when State Parkway’s Board of Directors knows it does not have at least two-thirds of the proxies prior to a vote. The Special Meetings of the Unit Owners that were called for in June 2009 and April 2015, were improperly hijacked into “Town Hall” meetings by then-Board President Mary Marta. President Marta did this both times because each time she knew the Association failed to obtain at least two-thirds of the proxies in advance of the meeting.
Later in 2009, once the board obtained at least two-thirds of the proxies, the board passed the resolution to sell the Engineer’s Unit at a board meeting without this issue ever being voted, let alone discussed, at a special meeting of the unit owners.
Later in April 2015, once the board obtained at least two-thirds of the proxies, the board passed a change to the Declaration and By-Laws at a purported special meeting of the unit owners but President Marta refused to let unit owners discuss the issues prior to the controversial vote.
I disclosed the aforementioned voting irregularities in my 197-page Verified Memorandum of Law in Support for an Appointment of Custodian to Manage State Parkway’s Affairs I filed in state court in late January 2016. This forced President Marta to stop hijacking special meetings of the unit owners and converting them into “Town Halls.” In fact, last November, the board called a special meeting of the unit owners but, because the board couldn’t commit vote fraud, the board’s initiative to lower the sales price of the Engineer’s Unit by some $44K fell well short of the required two-thirds majority.
The board made it clear the other night that they will try to lower the price of the Engineer’s Unit later this year, perhaps at the annual meeting of the unit owners.
The massive price reduction ($44K) suggests the board has plans to sell the one-bedroom unit (#906), which it couldn’t sell at $229K, to a unit owner so he/she can flip it and make a small profit. The board desperately needs funds to shore up State Parkway’s insolvent Operating Fund and the very weak Replacement Reserve Fund.
The “Town Hall” being held this summer will be unprecedented. Who will get invited? If all unit owners, why not make it a special meeting of the unit owners? Moreover, the board is taking the extraordinary step of having a professional reserve study consultant from Reserve Advisors speak — after the board approved State Parkway’s 2016 Reserve Study Update, which recommended yet another assessment increase shock ($355K) for the reserve contribution line to be phased in over the next five years. I wouldn’t be surprised if Reserve Advisors now thinks the tower windows should be replaced in year 2066, instead of 2026, or an extra 40 years beyond its initial estimated life.
To deflect attention from the major issues (weak funds, massive deferred assessment increases, non-feasibility of selling Engineer’s Unit, etc., look for the board to put a host of other issues (no smoke policy, no pets) before unit owners for a vote so whatever vote attains at least two-thirds majority looks legitimate.
DO NOT GIVE ANYONE YOUR PROXY. INSTEAD YOU ARE URGED TO ATTEND ALL MEETINGS OF THE UNIT OWNERS, INCLUDING SPECIAL MEETINGS, AND REQUEST A BALLOT.