The following is a reproduction of a memo dated 20 December 2019, distributed by management to all shareholders.
Dear Shareholders,
During the December meeting, the Board finalized the 2020 budget. In the first quarter of 2020, thanks to favorable interest rates, the Board will refinance the remaining balance on our mortgage and our line of credit into a new 15-year mortgage. This new mortgage will allow us additional funds for future capital improvements, while maintaining a sufficient reserve, and saving the co-op at least $50,000 in annual operating expenses.
The new reserve funds from refinancing our mortgage allows us to eliminate the 10% capital assessment of maintenance effective January 2020. While we will have an increase in our maintenance to cover our 2020 operating expenses, by eliminating the capital assessment, you will see a savings of $0.35 per share on your monthly costs. The Board is excited to be able to offer this reduction in overall shareholder costs while still being fiscally responsible going forward.
The mandatory modification to our elevator system at a cost of $78,000 is incorporated within the 2020 budget. This cost is fully accounted for within our operating expenses and will not require a special assessment to the shareholders. Going forward, part of the funds obtained through our new mortgage will be earmarked for a new boiler, and the Board will be exploring options shortly.
To ensure the continued financial fitness of our co-op and to prevent the need for future assessments, the Board is considering a change to our proprietary lease, subject to approval by two-thirds of shareholders at our annual meeting, to institute a flip tax. The exact terms haven’t been decided, but we plan to explore different options, including instituting the tax on the buyer. Flip taxes are commonly used by other co-ops in the neighborhood to bolster their capital funds. We hope that you will attend our next board meeting or reach out to a Board member to express your opinion on this issue.
Sincerely,
Nagle Apartments Corp. Board of Directors