There’s an adage that East River directors have yet to learn, and it may cost all of us $1.5 million before the year is out. That’s how much phantom income the board wrote into its 2015-16 budget with an inflated flip tax forecast.
The board passed a budget three months late and $1.5 million short. It appears balanced only because the board majority inflated forecasts for flip tax revenue to $523,560 per month — even though the two months already in the books fell well short of that target.
How unrealistic is this forecast? Flip tax revenue of $5.7 million for the year would be more than in 2007, the height of the last real estate boom; more than in 2013 when the market finally bounced back (before falling again in 2014); in fact it would be our best year ever for flip tax revenue.
For comparison, Seward Park this year will barely reach $3.7 million in flip tax, and based on market projections has budgeted for even less next year. So does our board have a crystal ball? No — more like a crystal bubble.
The flip tax revenue at East River — 20% for first sales, 5% for all other sales — is our most unreliable income because we have no control over the real estate market. So why would the board choose such bullish projections? Because without this inflated line item, the budget for the current year would show a deficit of $1.5 million.
To cover that gap we’d need an 11.6% increase in maintenance fees. Of course, the incumbents running for re-election don’t want you to know about that maintenance increase until after the election.
But when their chickens don’t hatch, we’ll all be left with rotten eggs — 1.5 million of them.
We need honest accounting by the board and a strategy of increasing outside income to protect shareholders. Annual budget presentations by the board would keep cooperators informed and hold directors accountable to pass responsible, on-time budgets. If that sounds like the board of directors you want at East River, vote for JIM KEENAN, FAITH SCHREIER, JULIAN SWEARENGIN, and MIKE TURNER.