What is "Year Four?"

"Year Four" promises to be an interesting year for this building.

At the last owners' meeting, the Board gave a public accounting of the assessments, and the estimated cost of future rehabilitation projects. The accounting gave a timeline of four years' projects and three years' assessment revenue.

In the end, the projections for the year after the current 3-year assessment ends - what I am calling "Year Four" - leaves less than $200,000 above nominal operating expenses remaining. In terms of project timeline, the shoreline bulkhead property repair has been relegated to "Year Four" as well, with only that additional amount in the kitty to pay for it.

Marine repair is neither easy nor cheap. A friend of mine, a member of a UN committee on small island nations, once assembled a report that estimates the average cost to build seawall is $10 million per km, or about $22 million per mile. I am not suggesting our repairs will cost as much as building a concrete seawall, but it is an illustration of how expensive shoreline construction - and that includes repairs - can become.

As such, I see a potential looming deficit, based on the Board's own projection, in Year Four. The Board and management will suggest the city or the next-door developers might agree to foot the bill, because our promenade was required to have public access. It sure is a nice thought, but these are misguided and unrealistic expectations. In all probability, this building will have to pay for some of that bill. Its like staying on the railroad tracks playing chicken, hoping the oncoming train will swerve

In light of the dramatic impact of the assessment to owners'  wallets, I implore the Board and Management to use known best practices to control costs and find creative revenue streams for increasing Building cash flow. Combined, both could be solutions in defraying some Year Four expenses while also returning value to this building.

By Year Four, you can also expect the development next door to be underway. At first the noisy and dusty construction, and then the ample luxury local housing it will create, will likely make it harder and harder for investors to realistically sustain their margins, especially if additional assessments follow. It will also continue to impact residential owners, many of whom live on some form of fixed income (salary, benefits, pensions, etc.).

It is imperative that we begin to look at Year Four, and scrutinize where we can to trim waste and get the most long-term value for any capital investment.