[ConcernedOwners] Board Meeting Reminder MONDAY, "Direct-Hire" Meeting Comments

[Concerned Owners]

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Monday Board Meeting Reminder

The April Board of Trustees meeting is this Monday, April 14, 7pm. The agenda is still in production, but will likely be similar to
the March agenda as we didn't get to several of the items. I plan to present a highly abbreviated version of my "Maintenance and
Snow Removal Alternatives" talk at the start of the meeting, showing just a few of the cost comparison slides between contractors
and employees. It is clear from the analysis that we are paying a 40% to 50% premium for the "convenience" of using our current
maintenance contractor, and likely some of the other contractors have a similar premium.

The direct employee issue will be on the agenda in one form or another. I would like to get a yes/no on the question at this
meeting. It has been over 4 years now that I have been trying and promising to improve the maintenance and lower our costs, so it is
high time for this to come to a decision. If we do go forward with this, the likely next step is to appoint a small hiring committee
to handle the details and present a proposal in May, or earlier.

There have been various points and concerns raised over the idea of hiring employees, and while many of them are things which
certainly need to be considered and handled, there is only one that really sticks out in my mind as a significant issue - we simply
have no facilities here on the property for storing equipment. On a temporary basis we could just leave everything outside, however
in the longer run this is not the best. Therefore, there will be something on the agenda aimed towards addressing this. At the very
least I would like to appoint a committee to begin work on several capital improvement projects, including a maintenance building,
dumpster enclosures, possible conversion of the "pond" to a real pond, and additional parking. Such improvements need to go through
a long and intricate process so the sooner started, the sooner finished. If anyone is interested in such a committee, let me know
before the Monday meeting, or come to the meeting in person. Even if we don't end up hiring anyone or buying any equipment, some
on-site storage building would still be very useful - contractors could use it to park their equipment at least, instead of parking
it in the clubhouse lot. It would be nice to have a better place for the snow removal equipment and salt pile, for example, which
currently sits there at the clubhouse for 6 months out of the year. Finally, having a maintenance building may give us additional
leverage in dealing with contractors, if we stayed with that approach, as they at the very least would have to beat our cost of
doing the service in-house, which we could much more easily resort to if we had an adequate equipment storage and maintenance
facility.


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Monday "Direct-Hire" Meeting Comments

The Monday direct-hire meeting went pretty well with about 15 residents in attendance. The focus was certainly on the possible
problems with direct hire, and not so much on the solutions, but still there were a few constructive suggestions. I don't think
there were too many, if any, totally new issues I hadn't already been warned about. Concerns included insurance liability, employee
supervision, equipment storage, manpower requirements, start-up costs, overtime pay, vacation/sick day coverage, cost estimation,
Board hiring experience, phase-in alternatives, other maintenance contractors, and my involvement in the plan. In my mind all these
problems, and I'm sure some others that nobody has yet foreseen, have solutions. 

2007 was one of our biggest contractor cost over-run years ever, with snow removal running $30,000 over budget and maintenance
running $80,000 over budget, for a total of $110,000 on those two contracts. While some of the maintenance cost over-run was due to
the past roof litigation, it is still a large over-run, and demonstrates a certain lack of "cost control". I still dread a 20 storm
winter one of these years, which is going to end up costing us well over a quarter million dollars at the rate we are going (about
$15,000 per storm). While a flat-rate snow contract would certainly help, after some rough calculations on duplicating just the snow
removal service, I think we could still do it quite a bit cheaper ourselves - again we are paying a 40% to 50% premium - I'll add a
slide to my talk.

I spent some time this week further researching snow removal equipment. I went to visit the Foley/CAT facility on Centennial Ave,
and the Binder/Komatsu facility on Hamilton Blvd (by Home Depot). These are two big-name heavy equipment vendors with major
sales/service facilities literally 5 minutes from here. Later in the week the CAT sales rep stopped by to get a better idea of our
possible requirements. He said absolutely/definitely this is a snow blower application - the blower won't "plow-in" all the cars,
won't require a loader to come by and move piles of snow around, won't chew up the curbs and grass, won't push the snow back over
the sidewalks, can handle a 20" storm far more efficiently than a plow/loader, and would minimize man-power requirements (one guy on
one machine, rather that two guys - one on the plow and another on the loader). He gave me some rough prices on the equipment -
slightly under $60k, which is more than I had planned in my analysis, however the equipment budget could easily be adjusted to
compensate. We could go with a used pickup truck and a used van, rather than brand new, for example. I calculated that in the worst
case the blower itself could clear all the complex roads in under 3 hours, which is certainly no worse than with a contractor (it
takes them a while to get here in the first place). The other big advantage is that the blower approach only needs one operator,
freeing another person to work on sidewalks, and making if feasible to do snow removal with a crew of 2 or 3 at the most. Foley
provides 24/7 on-site service, half-hour repair response, and one hour replacement response, according to the sales rep. The
Piscataway facility is huge and has resources to service thousands of customers. It is almost a shame that we are not taking
advantage of something like this right here in our own backyard.

-Insurance Liability. You can never eliminate all the risk, but you can take steps to reduce the risk. If there is an incident and
it can be demonstrated that the association took reasonable steps to avoid the incident, the exposure should be minimal. The most
dreaded seems to be slip-and-fall on the snow or ice, however with the right procedures and personnel, this is a surmountable
problem. Even now, if there were to be a slip-and-fall ice incident, it is quite possible the association would not be totally off
the hook, as the court is likely to closely examine the decision making process behind the snow/ice removal service, and find that
more than just the snow contractor is making the decisions - the contractor is only providing a false sense of security.

Third-party liability exposure as a result of the association fixing common-element items inside units is also minimal and
controllable, again with the right personnel and procedures. This is a low occurrence risk anyway, as I am not aware of a single
such claim ever. There are probably some organizational structures that could be put in place to further reduce risk, such as
forming an independent maintenance company, however this is mostly just playing in to the paranoia. Realize that the condominium
services industry's business model relies heavily on creating a perception of value in the service they provide. They achieve that
in two ways - first, buy selling the additional convenience they provide beyond the actual service, and second, buy scaring
customers with the additional inconvenience of trying to provide the service themselves. Increased liability exposure seems to be
one of the main scare tactics.


-Employee Supervision. The concept here is to hire people that do not require a lot of direct supervision. Such people do exist,
despite claims to the contrary and some possible difficulty in finding them. Cutting corners on personnel is generally not worth it,
so rather than hiring cheap labor and a supervisor and dealing with a lot of personnel headaches, I would rather dispense with the
supervisor and instead use the money to hire high-quality labor. A skilled, motivated, conscientious employee is going to give you
much higher value for your money. And anyway what guarantee do we have that a supervisor is going to do a good job either?? If we
are willing to blindly trust a supervisor, then why not a worker? In any case, the Board is still in change of the whole show and
should easily be able to serve in the capacity of supervisor when necessary, and furthermore there is still the property manager who
would be providing the day-to-day tasking "supervision". 


-Equipment Storage. This is the only serious problem I can see, and even so, there are temporary solutions. Equipment could be
parked in a parking lot and covered. In the longer run it should have a home, but it's not going to melt if left outside. Building a
maintenance garage would certainly take some effort and money. A 1500 square foot building (30' x 50') at $100 a square foot would
be $150k. This may seem like a lot, but you have to consider the fact that such a structure would last for a long time, so the
average yearly cost would be much less. Also keep in mind that any of these big-ticket start-up costs would be phased and paid for
over a number of years to minimize the yearly budget impact. 


-Manpower Requirements. Currently we have one 40 hour a week maintenance person. Occasionally additional personnel are brought in to
do work outside the scope of the contract, or to do two-person jobs. I'm sure the additional hours total to far less than the
equivalent of another full time person - probably 3 or 4 months worth at the most. Therefore, I don't think it is at all
unreasonable to assume that two full time workers could easily handle the current work-load, plus have ample time leftover for
starting on the numerous maintenance projects that need attention. In the winter the common element maintenance work is minimal, so
the staff should have more than enough time to deal with snow removal. With the proper equipment, I still feel that 2 people could
handle the job, with an allowance for a third if necessary. I'm sure everyone is used to seeing the contractors come through here
with their teams of 20 men with shovels - that's one approach, but not the only one and not necessarily the best one - I would
emphasize machines, rather than men. See above for the discussion of snow removal equipment.

Provisions could easily be made for backup, to quell fears of one or both of our maintenance people becoming unexpectedly
unavailable. We could have a "retainer" arrangement with an independent snow removal contractor - pay him some fixed amount every
year (couple thousand $?) to have him "on-call" in the event of a personnel problem, and then pay him by the hour for services
rendered. However, with two full-time people to start, possibly a part-timer, and possibly a third full-timer if we eventually
handle landscaping in-house, it is highly unlikely that a situation would arise in which all of these people are simultaneously
unavailable, barring of course some wide-scale calamity in which case snow removal would likely be the least of our concerns anyway.


-Start-up Costs. There would be some start-up expense. It looks like equipment cost would be in the $90k to $100k range. Again, if
we went forward with any of this, we would not hit the budget with a $100k expense right a way in the first year. We would spread
that expense over a number of years. For starters, CAT offers zero percent 3 year financing on the loader and blower, so right there
a $60k expense is reduced to $20k over 3 years. We could also consider leasing vehicles for the first few years, which would delay
the purchase expense. We could finance the other equipment, possibly at quite attractive rates. We could borrow money from ourselves
at no interest and pay it back over a number of years. We could buy some equipment used instead of new and save a considerable
amount of money. There are a lot of ways of spreading this cost, so I would not be overly concerned.


-Overtime Pay. It looks like that with the exception of certain executive, administrative, and professional employees, overtime pay
is mandatory, at a rate of one and a half times the regular rate. This may come up on occasion depending on exactly the time of the
day and the day of the week when the snow falls and needs to be cleared. I don't see it as having a significant impact on the costs.


-Vacation/Sick Day Coverage. With at least two full-time employees, the chance of both being out at the same time is relatively low.
However, in the rare case when that happens, we should be able to draw on other independent maintenance contractor resources to fill
the gaps. Just as with snow-removal backup, a "retainer" arrangement could easily be made with a contractor to provide short-term
coverage on short notice, when and if necessary. It is also not "the end of the world" when no maintenance person is on-site for a
day or so. We have had such coverage gaps in the past, even with our current contractor, and lived to tell about it. As long as
there is some provision to handle emergency situations, which are not that frequent, we should be fine.


-Cost Estimation. No, I am not an experienced cost estimator. However, I feel that I have made a reasonable effort to research the
various costs of employees and represent them accurately. Furthermore, the analysis has been made public for anyone else with such
experience to review and critique. How close those estimates are to reality will become obvious only when and if the direct employee
plan goes forward. As I have said in the past, and regardless of when we end up hiring people or not, it is very useful for the
board and the association to be more aware of the costs associated with hiring employees as an aid in determining the reasonableness
of contractor bids on an absolute scale.


-Board Hiring Experience. I don't know for a fact if other board members have or have not had hiring/interviewing experience.
Personally, I have been involved in some hiring and interviewing in my past but certainly not as my primary job function. I'm sure
that somewhere in the development are people with such experience, and I invite them to come forward and possibly assist on a hiring
committee.


-Phase-in Alternatives. The idea was suggested that if we are going forward with hiring employees, that we "phase-in" the plan
slowly over time. While in the ideal world this would be great, and is the way I would definitely proceed if I had total control
over the situation, the reality here is quite different. From my experience with the boards over the last 4 years, I have learned
that if you want to make any significant change it is better to do it as quickly as possible. Changes in the board, the political
scene, the overall mood, and so forth can make it difficult to implement long-term plans without a solid up-front commitment.
Although I sense the majority of residents are not too worried about how things are done as long as they are done well and don't
result in a fee increase, I am still slightly concerned that an employee phase-in plan is too vulnerable to derailment. Furthermore,
any such phase-in involving concurrency between our existing maintenance contractor and a direct employee is not likely to see much
benefit since I assume two-person work will still require an extra person, either contractor or association supplied. Hiring a
direct employee to handle the more mundane tasks (breezeway cleaning, litter, light bulbs, etc.) is of limited benefit as well, as
again it will not fulfill the second man needs for other maintenance work, and will not alleviate the need for extra work beyond the
scope of the existing maintenance contract. I think that if the plan is going forward, it needs a serious commitment right from the
start, which means immediate and significant changes. The rest of the change could then be phased-in, but only after the initial
commitment.


-Other Maintenance Contactors. The suggestion has also come up that we should try looking for other maintenance contractors that may
be less expensive and fit better with our needs. My concern here is that there isn't going to be much difference from one contractor
to the next, as most of the large contractors are all configured the same way, and thus the fundamental problems would remain the
same. A "one man show" or a smaller independent contractor might be a better fit, however we would still end up paying a premium in
terms of the "convenience cost" of using a contractor. In general, I would much rather get out from under the thumb of these
contractors and depart from that service model as much as possible. I still feel that is the only way we are going to get total
control over our costs and quality of service. 


-My Involvement in the Plan. I do not desire to perform maintenance work for the association, nor has anyone suggested this.
Furthermore, as the current proposal is to hire employees that don't require much supervision, the notion of a maintenance
supervisory position has been dismissed. In any case, I feel that I can be much more effective at a higher Board of Trustees level
in trying to get things changed for the better than at an employee level, so that is where my efforts will remain focused.


If I have forgotten to address any other significant issues that came up at the direct-hire meeting, or you have further comments,
please let me know.

Kevin