Crocheron Terrace
170-06 Crocheron Ave.
Flushing, NY 11358
Proposal for Annual Shareholder Meeting
On March 29, the Crocheron Terrace (“Co-op”) Board of Directors (“Board”) reviewed the on-going budget shortfall and proposes the following measures to the shareholders:
1. Replacement of oil based heater and boiler – Require 2/3 of all Shareholder Approval
2. Flip tax – Require 2/3 of all Shareholder Approval
3. Temporary 20% assessment (Monthly increase of $142 for the largest unit) – Require only Board Approval
Background:
In Oct. 2021, the Co-op had an antenna leasing contract with Sprint which produced $41K (Net of fee) of revenue per year. Due to the recent merger of T-Mobile and Sprint, Sprint had canceled its leasing contract with the building (T-Mobile has an existing contract with the building and did not need Sprint’s lease). Due to the early termination, the contract required Sprint to cover payments up till Feb. 2022. The Board and management had made several efforts to see if other companies would provide a similar lease to no avail. No contracts are available at this time.
In Feb. 2022, the insurance policy for the building came up for renewal. The new policy requested an increase of $20K per year. The increase in premium was a result of the fire in 2019 and fall/accident charges against the building. Efforts to find other insurance policies have resulted in similar pricings.
In 2019, NYC passed the “Climate Mobilization Act” which requires the building to move away from the use of oil. Starting in 2024/2025, NYC will start to seek compliance of it requirements and impose penalties against buildings that do not conform.
As such, the building has a budget gap of $61K per year and a large modernization requirement. To cover this shortfall and be in compliance of the recent law, the Board would like to propose the following.
Proposal:
- Heat Pump/Boiler Change: One of the largest yearly expenditure is the use of oil to provide heat and hot water for the building. The building runs an annual oil expense of roughly $55K per year. To reduce the budget shortfall and remain in compliance with the “Climate Mobilization Act”, the Board would like to install Heat Pumps for every unit. Heat pumps run on electricity and will be charged against the unit’s individual utility bill. After the installation of the Heat Pumps/Boiler Change, the annual oil expense would drop to $0. Contractors estimate the total cost of the Heat Pumps/Boiler Change as $500K. The modernization would be financed by a loan. Contractors estimate installation of heat pump and the change in boiler will take only at most 2 days.
- Flip Tax: A flip tax would be imposed on every sale of shares in the Co-op against the selling price. Proceeds from the flip tax would be utilized to paydown the loan for the Heat Pumps/Boiler Change. The proposed flip tax would follow a sliding scale such that shareholders who had retained their shares for a longer period of time will owe the following tax rate at the time of sale (Note, the date of retention will start from purchase Closing Date to sale Closing Date):
Years Share Retained
Flip Tax Rate
2yr.
7%
4yr.
5%
6yr.
3%
8yr.
1%
10yr.
0%
- 20% Assessment: The assessment would be collected in the interim period till the Heat Pump/Boiler Change is paid-off. A lower assessment may be possible if the yearly loan bill is less than $61k.
Alternative:
If no other resolution can be obtained, the Board will be forced to increase the maintenance by 20% permanently. The maintenance will continue to rise to reflect for the increase in oil price and future penalties for non-compliance of the “Climate Mobilization Act”.