The Rent Is Too Damn High

My name is Joe Guzzardo. I've lived here at Park Tower for many years and I love it, both my home and the community I live in. One major problem, our assessments are extremely high. Our board had been promising us assessment increases of no more than 3.5% per year. This year however, ostensibly due to inflation, we have been "rewarded" with a 4.5% increase. How likely will this "reward" be perpetuated into future years? A former business associate once said to me, "there's nothing more permanent than a temporary solution."

I first ran for our board back in 2014. I ran then because our board was getting out of hand. Most of the people who were board members at that time have thankfully moved onto other things. Once again, however, our board is making unwise decisions about how to spend our money. Consequently, I feel the need to correct this as best I can.

Relative to other condominium buildings of our size and age, our assessments are very high. Generally, making things bigger saves money per unit. That's why we build super tankers and jumbo jets. That's why we buy economy sized detergent and venti sized coffee at Starbucks. Why don't these principles apply here? I've looked at several lakefront high rises, including high end luxury high rises along the gold coast. Compared to almost every building similar to ours, our assessments are significantly higher than theirs. Why?

We've been victimized by poor decision making by our board over the years, some of whom prioritized their own interests over those of our association.

We plan on spending almost 1.3 million dollars to refurbish our hallways this year, based upon recommendations from our reserve study. I took a look at several floors, including the 21 floors that are allegedly most in need of repair. The carpeting, as well as the lighting, on almost every floor I looked at was in pretty good condition, and is likely to be serviceable for several more years. Some of our hallways could benefit from repainting, our lobby could use some new furniture and the carpeting on some floors should be replaced, but I suggest that at least in the short term, we go no further than that. If we keep that 1.3 million in the bank for one more year, we can earn at least $50,000 in interest on that money, which equates to about a 1% increase in our assessments.

The reserve study recommendation for our hallway upgrade was based upon averages. Average wear and tear, average quality carpeting. We've beaten the averages. The carpeting itself, at least on my floor, and several other floors I've looked at, is still in very good condition, showing almost no signs of wear, and is clean. It looks good. I commend our board for purchasing high quality, durable and stain resistant carpeting at the outset, and cleaning it on a regular basis. This investment, in both quality and maintenance, has paid good dividends for us, allowing us to extend the life of this asset beyond its anticipated life expectancy. We should leverage this benefit to our advantage, rather than spending 1.3 million dollars on a project that can be deferred into the future.

A quote from Michael Parrie, at our board meeting on April, April 10th - "Having a mixture of old and new carpet on different floors creates a patchwork that does not look good for property values."

Ok, but spending our reserve money on untimely projects, which speaks directly to our high assessments, is not a good look either. Rather than spending over $600,000 to replace the carpeting in every hallway this year, why don't we replace the carpeting on the 10 or so floors that need it most with carpeting similar to what we already have? The cost per floor is about $11,000. Multiplying that out comes to around $110,000. In my mind, this is a no brainer.

We need to take a more integrated, holistic approach to our long term capital projects. Why can't we create a simple spreadsheet, listing the condition of each floor's hallway area and refurbish those hallways on a priority basis, coordinating that effort with our riser projects as well? We can apply what we've learned to date from our hot water riser project to the upcoming HVAC riser replacement project, scheduled for commencement in 2027.

Each unit has plumbing along the window baseboards for our HVAC needs. In addition, our 2 bedroom units also have an HVAC unit adjacent to the kitchen area. We can hire people to work on these riser projects, saving money on outsourcing. We hired a full time plumber for this very reason. We can carry this idea forward, hiring and training staff members for specific, targeted projects, and complete our riser projects more efficiently, saving ourselves money by doing less outsourcing, more insourcing and coordinating that effort with unit remodeling projects as they occur.

I'm thinking about getting my own unit remodeled. Might there be any cost savings to our association if I elect to have my unit's HVAC risers replaced as a part of that effort? If so, we can propose that solution to the owner of any other unit, saving money there as well. With a trained staff, dedicated to projects of this nature, how much money can we potentially save overall? The hot water risers in my unit were replaced by 2 different companies. The first company did a subpar job, causing avoidable rework and expense, which is why they were terminated.

We're fortunate in that we happen to have a very good maintenance crew here at Park Tower. I've always been impressed with the quality of their work, knowledge and professionalism. Hiring more people may cost us more money in the short run, but can save us large sums over time, particularly when addressing our expensive capital projects.

Our board points to our reserve study as a guide to determine what we should be spending, and when, on our capital expense projects. This study did not anticipate the Coronavirus, the ensuing supply chain bottlenecks or the war in Ukraine, all of which have had a significant effect on an otherwise non-existent inflationary environment. We should consider our reserve study as best advice, and not think of it as if it were commandments from a higher deity, chiseled in stone. It behooves us to maintain flexibility, particularly in light of changing circumstances. We're smarter now than we were 10 years ago when we started our riser project. Let's leverage that going forward.

In terms of day to day expenses, let's consider our health club and our swimming pool. These amenities cost us a lot of money to maintain. Is there anything we can do to keep our energy costs down? Can we implement wind and/or solar energy capture or at least better monitor our specific energy expenditures? Typical of buildings built in the 1970's, when energy was much cheaper, we overheat our common areas in the winter and overcool them in the summer. Can we implement any efficiencies to mitigate this problem?

Can we better monitor our water usage? If we could gauge the flow of water by risers (probably not that hard to do), and if we could also monitor water usage by floor (probably harder to do), we could zero in on water usage on a per unit basis. We had a unit that was fined $1,000 for excessive water leakage. Is there anything we can do, short of physical inspection, to ensure this doesn't happen again? Water leakage can cause extensive damage and be very expensive to repair in a building like ours. Taking more comprehensive measures to monitor our water usage can enhance our safety, as well as our bottom line.

We just spent a lot of money (how much?) to refurbish our pool. We need to resurface the pool floor again (how much?) to conform to city code. Why didn't we do it right the first time? Did city code suddenly change? Didn't we need a building permit to refurbish our pool? If so, why didn't that permit specify proper flooring requirements? Our board, our management company, the contractor who did the work, our legal team, as well as our City of Chicago building inspector, didn't know about city code requirements? We had oversight from multiple parties, all of whom failed to foresee and meet a clear and simple requirement. Where did we drop the ball? What can we do to ensure this doesn't happen again?

We have 4 members staffing our management office. Can we automate more of our administrative office tasks? Can we become self managed? Park Tower, with over 700 units, is effectively a small town. Can we better leverage that economy of scale? Habitat is the 3rd management company we've engaged since I moved here in 1986. We pay them over $127,000 a year for their services. This is in addition to our office management salaries of $292,000 plus benefits of $46,200 plus FICA contributions.

Consider Aegis, our vaunted pest inspection company. David Nicosia owner of that company, was a member of our board until he was litigated out of his unit. Do we really need such frequent pest inspections? How do other associations like ours manage this problem?

Another example, small but illustrative - there is a fan in the bike room that runs 24/7. Can we put some sort of control on it to save electricity? Can we apply this idea more broadly to our other mechanical systems? Can we consider installing wind and/or solar energy solutions? How many other contracts do we have with suppliers? I'd like to review our existing contracts and look for savings and better efficiencies wherever possible.

Our board's long term perspective is as monolithic as the 3 sides of our building. They suffer from tunnel vision and show little initiative toward thinking beyond what they've been doing for years. In a building of this size, we should be using a scalpel, not a sledgehammer, where appropriate. The numbers don't lie. One of my favorite real estate websites, lists the Homeowner's Association (HOA) fees for many of the condominium units listed there. I invite you to research for yourself and tell me that our assessments (HOA fees) aren't high. On a square footage basis, the comparisons are even more stark. There is an inverse relationship between the value of your unit and the assessments charged to it. If you're wondering why your property values are so low, here's one reason why.

We have to be open to change and new ideas. We either adapt and thrive, or suffer the consequences if we don't. These are some of the things I'd like to consider if I were a member of our board.

I've lived here many years and despite what this diatribe might lead you to believe, overall, I love it. Our diverse Edgewater community, adjacent to the officially designated coolest neighborhood in the United States, as well as our beautiful lakefront and proximity to amenities, make Park Tower one of the most desirable places to live in the city. This is great, but we can and should do better than congratulating ourselves while our assessments climb into the stratosphere.