2008-04-18 / Front Page

DBP Water Shocker: Board Knew Of Delinquency Problem Last Year

By Nicholas Briano

While the meeting last Monday dedicated to Dayton Beach Park Apartment's $1.2 million water debt crisis provided little resolution to the problem, taped evidence revealed subsequent to the meeting provided concrete proof that the Board of Directors was aware of the problem since at least last year, but withheld the financial details from the complex's shareholders.

Dayton Beach Park Apartments officials addressed an angry and hostile crowd who demanded answers for why $1.2 million in water bills have not been paid for more than two years. Dayton Beach Park Apartments officials addressed an angry and hostile crowd who demanded answers for why $1.2 million in water bills have not been paid for more than two years. Board of Directors members Jennifer Grady and Hazel McLean, who is currently the board's secretary, provided The Wave with audio tapes of the September 17, 2007, Board of Directors meeting, at which full disclosure of Dayton's water bill debt was formally announced to the board. The two, who were not board members at the time of the meeting, said the details of this growing problem were withheld from shareholders, who only recently became aware of the water bills three weeks ago through published reports in the daily papers and in The Wave.

Carol Newman, an independent auditor for the apartments, attended that September meeting and revealed to the board that they were in arrears for a large amount of money.

According to the transcripts of the 2007 meeting, the then president, Joann Smith asked who authorized the nonpayments of the water bills.

Phipps Housing Services Inc., Dayton's management company, said it was their accountant, Jeff Teitelbaum, who refused to pay the water bill.

"The board had full disclosure," McLean said.

Newman advised Phipps to pay the bill in full, saying that they could always get the money back later, if there proved to be any discrepancies, such as an overcharge of water usage, which had reportedly been claimed by the management company.

Newman, however, informed the board at the September meeting that there was no evidence of an overcharge.

"I do appreciate the warning in advance," Smith said to Carol Newman.

However, Smith continued to state that she had no problem with Phipps' decision to hold back the money for the bills.

Records show that the $750,000 charge would have been reduced to $650,000 if the bill had been paid in full at that time. At that same meeting, Smith asked the management company if it was possible for them to pay the bill in full, to which Phipps promptly answered, yes, that it could be done.

The bill, however, as everyone now knows, was never paid, which leaves Grady wondering what happened.

The two board members said that they were concerned when Smith's last presidential report before leaving the position in February did not reflect the fact that this money was owed to the city.

Many shareholders now question why Smith and the other board members held back this information.

In the meantime, while the blame game and finger-pointing continue, the money must still be paid.

At Monday night's contentious, loud and raucous meeting, the board voted to dip into a restricted capital improvements fund to pay off the water bill.

In order to acquire money to pay the past due water bills, the board will request from its mortgage lender to release funds that were borrowed for capital improvements, specifically the re-bricking of 8400 Shore Front Parkway's façade.

Grady says the bank will deny that request, because the account is restricted from any other use than capital improvements. That was the reason the lender gave them the money in the first place.

"8400 [Shore Front Parkway] already has liens against the building for facade violations, so if the money is taken from there, then that building will never get bricked," Grady explained to The Wave this week.

"As a result, we'll never find out what happened to the $1.2 million we originally paid through maintenance fees for our water bills."

In addition to their plan of action, the board also told the shareholders on Monday night that the management company would be responsible for paying the late charges that have accrued in the past two years.

However, Phipps will not be responsible for late charges if the debt is paid in full by May in accordance with the Department of Environmental Protection's Payment Incentive Program. All accounts not paid by May will have liens placed on their property and then be sold to private debt collectors for collections.

Grady believes that, as part of a final solution to the water bill crisis, the comptroller or the attorney general should get involved and audit the financial records to find out what really happened.

"It is heartbreaking to know that all these people, in particular senior citizens, don't have the money to pay an increase, if that should be necessary, and [the board] really doesn't care," she said.

Several shareholders at the meeting, at which a Wave reporter was asked to leave the building by security guards, voiced their opinion that the only way to know what happened is to perform a full scale audit.

"There is no move to do an audit here and find out what really happened. Instead we keep playing the blame game without figuring out the truth," a 50-year-old resident said, who asked to remain anonymous for fear of retribution.

"The attorney and board members suggested we pay in one lump with money set aside for capital improvements. People are concerned though, that they may never see that money get put back," he continued.

According to the board members, Newman attempted to explain to an increasingly hostile crowd why they must pay the water bills out of this fund.

She claims there was not enough money to pay the bills, and there was barely enough in the past years' budgets to cover expenses because of rising utilities.

"Over the past three years, because you have not generated enough revenue to cover your expenses, you have eaten into almost 100 percent of your reserve funds," she said. "You can't pay a bill if you have no money, and if you don't raise enough money each month to pay your bills you eat up your reserved cash."

However, many shareholders do not understand why the accountant and management company failed to see the shortage of funds and how they could let the debt grow to over a $1 million.

"No management company can pay your bills without money. That is the bottom line," she insisted.

Phipps Housing Services, which is paid $450,000 a year to manage Dayton's complex, simply reiterated the fact that there isn't enough money to pay all of the bills.

"If you have an overabundance of bills and not enough money to pay them, decisions have to be made," Josephine Perrella, Senior Vice President of Phipps Housing Inc. said.

Grady, however, tells a different tale.

She says that there are other bloated costs and factors that contributed to the co-op's financial shortcomings, not simply rising utilities costs, as Newman and Perrella claimed.

"I think you need to make the point that the expenses outside of the utilities, like the cost of the management company being $200,000 more than the last one; thousands in legal fees, capital improvements you claim, that were not taken care of. We also have a lien on the property from department of buildings violations," she said at the meeting.

"It is a shame that you are blaming this on the skyrocketing of utilities when the fact is, if this was not in the New York Post, we would not have been told about it. It wasn't in any financial statements or the president's reports."

This comment prompted the crowd to erupt in applause and one shareholder to scream in disgust,

"Seems like this place is the only one with this problem, no one else around here has this problem, and they pay less!"

Another woman said, "First we want to hear the lies, and then tell us the truth!"

The swimming pool was another issue that came up for discussion.

Grady and McLean requested the suspension of the pool for one year, which costs nearly $250,000 to operate.

"These members, who is responsible to the shareholders, voted it down because they claim to need summer recreation," McLean said.

McLean states there is visually significant leakage in the pool and that every day gallons of water must be put back into the pool. She also says the co-op refused to fix it despite advice from several contractors to do so.

"Shut the pool down for one year and get us out of the red," McLean said.

"I refuse to let board members and others to get rich off of Dayton. We are not sitting ducks for everyone who wants to get rich," she continued.

Shareholder Marisol Martinez agreed with McLean in a letter written to The Wave this week.

"The board continues to make poor decisions like opening the swimming pool this year and wasting thousands of gallons of water the co-op can't afford," she said.

"Though a few of the board members tried to stick up for shareholders, demanding answers, their votes aren't enough to really make a significant impact," McLean added.

Martinez believes more aggressive action and input from the shareholders is vital to Dayton's financial success.

"If we don't vote these career board members out we will continue paying for their mistakes."

Another anonymous resident agreed the pool is a problem and that it wastes a lot of water each summer because it is always leaking.

"The pool is expensive because they also have to pay $40,000 a year for the lifeguards and the pool is also leaking, which wastes water," she said.

The real question that went unanswered for the shareholders and still remains open is, what happened to all the money. They are convinced there was enough to cover the expenses.

"The shareholders paid the money and paid over $10 million to the corporation and if the money is not paying bills, then where is it going?" Grady wonders.

There are other costs that are weighing down the co-op financially, she added.

That includes the Department of Housing Preservation, which is paid $1,575 a month to oversee the co-op's operations but didn't recognize this problem; and the independent auditor who collects $35,000 a year and also failed to notice and inform shareholders of what was going on, forcing necessary changes to improve Dayton's financial condition.

"They are not looking at any of the financials," Grady said. "We continue to receive no supervision by the Department of Housing Preservation and Development. Where are the audits, because $1.2 million has disappeared?"

She offered a motion at Monday's meeting to fire the management company, but it was turned down when only three people voted in favor.

"They did not pay the bills, they haven't told us anything and have no excuse for why they didn't pay," she said.

Grady also says that when the motion was suggested to fire the management company, Anne Lyons, a 20- year board member said, "Absolutely not!" in quick opposition to the motion.

Grady couldn't understand why the board would insist on keeping a management company that continuously lied to the shareholders of Dayton Beach Park Apartments.

McLean was just as upset that the board voted to keep the management company and is tired of the corruption she claims has been going on for more than 30 years.

"You are not supposed to get paid to be on the board," she said, sarcastically.

"Once we get rid of these board members, and the shareholders open their eyes, then this will stop."

"People must know that for the past 25 years you have been putting the same people on the board and for the past 25 years you have been getting robbed."

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