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November 2005 Informational Meeting

Shareholder Heather Lapham sent notes to complement mine. Her notes appear in green. My notes are black, and my editorial comments are red.

The meeting was hugely attended, leaving standing room only. As was evidenced later in the meeting, people were most interested in the flip-tax issue, with a very significant majority stongly indicating that it was opposed to an increase in flip-tax, and many overtly stating that they supported increases in maintenance.

The meeting was conducted with a lack of style, Freda Fried sat behind a post and Vanessa Enger never introduced herself. [These aren't issues, but it certainly made an impression on me. Also in line with impressions, Board Members are strongly encouraged to use a table cloth at the next meeting to prevent people from being distracted by their very lovely knees.]

Terry MacAvery was very reserved and refrained from any direct positions. [He later explained that he viewed the meeting as a forum for the Board's leadership to present its position and for the shareholders to respond; not being part of leadership of the Board, he thought it most appropriate to allow the difference in views between between audience and Board to come to light.]

Stanley Friedland opened the meeting with a discussion of several things. Interviewed six management companies in the search for a new management company. Some other board members took part in the search as well. Rudd took over in May 2005 and has acted on most requests. There have been many improvements, including elevators, laundry rooms exercise room. This is the second time that SPHC has a budget, thanks to Rudd (didn’t mention Finance Committee, board members). [Former Board Member Israel Keller refuted this statement, producing multiple annual budgets produced while he was on the Board years earlier]. He described this as the best budget we’ve ever had with various sources of revenue. Oil cost has gone up, and with it our heating expenses. We need to look ahead, need to ensure cover expenses. Loopholes in flip-tax rules result in some people paying half of what they should. Mr. Friedland responded to a question by stating that he favors an increase in flip-tax. In response to the question of whether the Board will disclose how Members vote on the flip-tax issue, Mr. Friedland replied that "the Board will decide if it will let shareholders know".

Jerry Waldman presented himself at great length and was very articulate. He sees the rise in value in SPHC property as a windfall and has no qualms about dipping into that so-called windfall through an increase in flip-taxes. He sat in for Treasurer Steve Danenberg who was not present. [Treasurer Steve Danenberg came in late and sat discreetly in the audience rather than taking a place on stage.] Among the points Mr. Waldman made, some which are either self-contradictory or not properly recorded:

  • does not support flip tax increase except for first-time sales
  • flip tax – not an operating item – remove flip tax altogether (appeared to flip flop on flip tax increase)
  • possible assessment of apartments to pay for increased costs
  • leases of SP property are below market, have not been collecting real estate taxes, need to negotiate leases – collect $ owed
  • Nov ’05 fiscal year – sold 5 apartments, 1 more closing – generated 2M in revenue, 6 more apartments to sell
  • Income for yr including 2M after expenditures, 6.5M in bank at end of fiscal year
  • 6 apartments still leased. Board will discuss sale. Recommendation is to use those funds (9M – which funds?)
  • 5M for lobbys & hallways (what is actual estimated cost of renovation?)
  • Budget for next year – increases of 8% payroll, 35% heating, 25% electricity
  • estimated deficit of 6% of 700k in ’06
  • If maintenance is stable (w/large savings in legal & accounting fees), 3 choices: 1) raise maintenance, 2) assessment, 3) flip tax increase
  • “Windfall” apartments – supports raising flip tax for windfall apartments

Eric Mandelbaum talked further on the issue of flip-tax. He had a lot of data at his fingertips and promised to provide more. [In any case, I am very concerned that he is trying to direct financial policy, an area in which he does not have have a proven track record.] Eric presented himself very well and attempted to be open to "discussion" of the issues. At one point he asked the assembled audience how many opposed an increase in flip-tax. A very significant majority of hands went up. He then asked how many supported an increase in flip-tax. A small minority of hands went up. Many people abstained from raising their hands at all.

[It is worth noting that it was Eric Mandelbaum, in consultation with Jerry Waldman who asked for the show of hands. It will be worth noting if they let the clear opinion expressed by the multitude of Shareholders assembled — new and old alike — enter into their consideration on the matter.]

Mr. Mandelbaum mentioned the following points:

  • he campaigned for flip tax – called for an “enlightened” approach
  • made it clear liked high flip tax, low maintenance
  • said he was contacting experts in field (what experts? banks, real estate companies?)
  • quotes of increases in apartment value over two-year periods
  • Prior to reconstitution purchase – 800%+
  • There were meetings to discuss options – the subject has been under consideration for a few weeks
  • Low-maintenance high-flip-tax attracts people prepared to stay.

Fred Rudd discussed Issues we are facing now include an increase in real estate taxes of 5-6%. Jorge Faerman is working with staff improve operations. Capital improvements under consideration include hallways and lobbies. There’s been a continued increase in apartment value. Trying to figure out how to close gap in reserve. Flip tax reveneues – went towards balancing budget (what does this mean?) . Questions under consideration are what is best way to balance budget – increase in flip tax, maintenance, other? No decision made as of yet. Open to input. In response to a question, Mr. Rudd said all floors at the Emigrant Savings Bank are currently being rented out at $20/ft.

Attorney Steve Anderson stepped out of his role of counsel and spouted rhetoric stating that the Board held off on their vote on flip-tax pending the informational meeting. [I find that hard to believe. Was there a vote on flip-tax at Tuesday's meeting? Was a vote on flip-tax really postponed in order to guage shareholder sentiment?] Steve Anderson spoke on several other points. Our legal fees are going down. We collected 18.4MM for the garage settlement which was applied to pay down our mortgage, but appeal of the judgement is in process. Current mortgage payments are $100,000 per month. Discussed provisions on flip tax, to remove insider provisions (not sure why our attorney should have a say in these matters). In response to a question about recovering from Cooper Square "damages", Steve Anderson said that "negotiations" were in progress with Cooper and that we had plenty of time to pursue various means to collect what is due to us. He (or maybe it was Fred Rudd) pointed out that we had already received $31,000 that Cooper "wrongly paid themselves". It was acknowledged that Cooper didn't properly apply real estate taxes, and that the co-op was forced to negotiate amounts due from commercial tenants to prevent them from going out of business. [It seems that the amount we lost due to Cooper mismanagement is very substantial; while negotiating to recover damages might be appropriate in many cases, the magnitude of this issues seems to call for more dramatic action, as expressed in a question posed by former Board Member Daniel Goldman.] While many elevated, informed (and angry) questions were coming up about implications of an increase in flip-tax, Mr. Anderson saw fit to insist on answering off-point by defining what our flip-tax rates are.

Nearly all the questions posed were on the subject of flip-tax. I don't recall a single person stepping up in support of an increase in flip taxes.

Tenant told by board member, re storage rooms – not for you to know unless we tell you.

Stanley responded to an agitated question by calling the questioner "Sweetheart".

During a question about the lobbies, we were told by a shareholder (and confirmed by Karen Wolfson) that 200 shareholders responded to the survey. My own experience with surveys suggests that this number is exaggerated by a factor of ten. There was a survey long ago on "bike racks" to which Juda Engelmayer said there were 300 responses, and to which Fran Marino reported last night that there had been only 30 responses. This supports the notion that there may be 10-to-1 discrepencies of how poll data may be reported. [Former Board Member Juda Engelmayer, who conducted the bike rack poll, contacted me to assert that the higher numbers formerly reported are correct.] In further questions about surveys, Fran Marino misled the audience saying that there had been a poll to determine the desirability of a ladies lounge. In fact, the survey that went around said something like "if there was a ladies lounge, would you prefer mahjong or yoga"? A shareholder asked if there was a survey done to determine whether shareholders want money to be spent on lobbies at all. There was never such a survey. Stanley Friedland asked for a show of hands to indicate who wants to renovate lobby. [The wording of Mr. Friedland’question missed the point and the results are therefore meaningless.]

A shareholder questioned the judgement in investing in the Ladies Lounge and Mens Club in light of the need for revenue-generating opportunities such as bike racks and storage space.

Mark Chernin of Rudd said that analysis of every electrical meter in SPHC was getting underway and that electrical problems would be addressed presently.

Shareholder opinion – insider benefit is not a gimmick, keeps coop from loosing tenants – tenants that want to get bigger apartment etc.

In response to a question about money wasted on heating, it was mentioned that heat traps were being replaced. [Shareholders are advised to call the management office to schedule this service in their apartments.]

In response to a shareholder question, Fred Rudd said the possibilities and demand for roof-mounted satellite dishes would be considered.

A shareholder statement called for more sensitivity to the aged and disabled when planning our spaces.

A shareholder sought clarification as to whether there was Maintenance Staff renting an SPHC room as the base for an unlicensed contracting business. Fred Rudd stated that the contracting business is not run by someone on our Maintenance Staff, and that he believes the person is properly licensed. He is checking on that point. [Jorge Faerman later looked into this issue and reported that indeed the contractor is neither licensed nor insured. He reports that the contractor will be giving up the space and will not be doing further work at SPHC.]

A few questions discussed the lobbies, but no one discussed the sinking floor in Building One.

Some of the agenda items were not discussed. Agenda items were as follows:

  • The 2006 Operational Budget
  • Transfer tax (Flip Tax)
  • Lobby Renovation Update - Committee
  • Maintenance and Grounds - Committee
  • Garage - Committee
  • Electrical Sub-metering Services and Consumption
  • Illegal Tenants and Sub-Tenants

Shareholder Questions Collected Prior to the Meeting

Grounds & Maintenance

Our hallway was painted with primer months ago, why? Now we have dirty white walls and no indication of any additional work being done. When you get off the elevator it looks like we live in the projects. Besides being an eyesore to me, it is to my guests and to any potential buyers.


We have spent millions completely renovating the elevators in all 3 buildings for the past month or so over Shabbos the "B" bank in the F section is stuck on 3 or in the lobby. Do we have a contract with the company? Are we under guarantee? Will it be repaired?


How much is in the reserve fund? Is it invested? If so with whom? Who receives & reviews bank & investment statements? Who has the power to write checks? If finances are an issue, then why have there been many vacant office spaces in the Emigrant Bank building? Why have there been empty parking spots at the Emigrant Bank parking lot?

Emigrant Bank

I observe some vehicles parked in the Emigrant Savings Bank parking lot on a regular and consistent basis. Who parks there and do the parkers pay a parking fee to the coop? In addition, there are a number of empty spaces there. Is the board going to rent the vacant spaces in the Emigrant lot to shareholders who are on the waiting list for parking? Is it true that the board is still looking at developing a building on the Emigrant Bank site? If so, what grounds are there to believe that such an undertaking is timely, given our financial status, and what grounds are there to believe that our current Board has the expertise and will to undertake such a project?

Pizzaria in Arrears?

Is it true that the Board wants to forgive real estate taxes due by the pizzaria? If so, how did that come about, and what grounds are there for us to subsidize the businesses that operate in our space?

*The original question attributed this position to Freda Fried. Ms. Fried contacted me to to in no uncertain terms that "no one should get away without paying their taxes". She emphasized that she speaks for herself and not for the Board at-large. I thank Ms. Fried for contacting me in a positive manner about this issue, for not labelling me a rumor monger as others have, and not letting this particular rumor spin out of control as so often happens in this community.

Unlicenced Contractors on Maintenance Staff

Fermin, a member of our maintenance staff, has retired. He openly operated an unlicensed, uninsured construction business out of one of the coop's ground floor rooms which he rented. Now he is gone, but has sold his business to another maintenance staff member. What gives??? Who is allowed to use an unlicensed and uninsured contractor? We are all paying big money for permits, alteration agreement fees and construction. Why is this under the radar business still being allowed to operate?

Spending Priorities

Maintenance is often of sub-par, and there are structural problems in buildings 1 and 3 have yet to be addressed. How can you justify spending on Mens Clubs, Ladies Lounge and possibly even new lobbies in light of these critical priorities?

Cooper Misappropriation?

Significant questions have been raised with regard to Cooper Square's alleged misappropriation of Co-op funds. Why is the Board dragging its feet with regard to a forensic audit?

Flip Taxes

Is the board, in fact, contemplating raising the flip taxes and if so, what is the reason for wanting to increase it? If flip taxes are raised, will the board segregate the money and allocate its use for capital improvement?


What is the status with fixing the problem with the floor in building no. 1? What is the timetable for
resolving this issue?


Is there a policy in place with using the coop's employed painters to paint apartments? If shareholders hire painters to paint apartments, who is responsible for paying them? If a shareholder uses a coop painter to paint, does the shareholder have to pay the fee charged for decorating? What do the coop painters paint if they are not painting shareholder apartments?


The data collected by Dan Strum suggests that parking spaces are going to shareholders who are not on the waiting list. His meeting with the Garage Committee evidently resulted in plans to address those problems, prevent future problems, and issue receipts. Why haven't these plans been implemented yet?


Management: have you done an analysis of whether our maintenance department is adequately staffed? And if not, why not? If we are understaffed, then I ask the Board: Are you going to hire more maintenance staff to fulfill our needs and if not, why not?

Management of Waiting Lists

How come the storage and parking waiting lists are not being managed and maintained by the management company?

Management Company

Do you approve of the fees that Management is charging Shareholders to renovate and to refinance? Is there a list of fees that are charged to Shareholders for various transactions such as renovations and refinancing?

Directors' Access to Information

I've heard from Board Members and prior Board Members that only officers have access to information, and that it is difficult for non-officers to obtain documents, correspondence, minutes, and other documents that they might need in their capacity as Directors. Would someone who is not an officer describe the information they have access to?


Does the Board plan to hold more informational meetings in the future? If so how frequently (ie, monthly, quarterly)? How frequently can we expect to receive a Report From the Boardroom?