FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
CONTENTS Page Report of Independent Auditors 1-2 Financial Statements: Balance sheets 3 Statements of operations 4 Statements of changes in shareholders equity 5 Statements of cash flows 6 Notes to financial statements 7-15 Supplementary information: Detail of expenses 16
NUSSBAUM YATES BERG KLEIN & WOLPOW, LLP Certified Public Accountants Report of Independent Auditors 445 Broadhollow Road Suite 319 Melville, NY 11747 (631) 845-5252 Fax (631) 845-5279 112 Madison Avenue 5th Floor New York, NY 10016 (212) 684-2414 Fax (212) 684-5433 www.nybkw.com To the Board of Directors and Shareholders West Gate House, Inc. New York, New York Report on the Financial Statements We have audited the accompanying financial statements of West Gate House, Inc., which comprise the balance sheets as of December 31, 2016 and 2015, and the related statements of operations, changes in shareholders equity and cash flows for the years then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West Gate House Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. RSM US Alliance member firms are separate and independent businesses and legal en es that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM Interna onal, a global network of independent audit, tax, and consul ng firms. Members of RSM US Alliance have access to RSM Interna onal resources through RSM US LLP but are not member firms of RSM Interna onal.
Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information on page 16 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated in all material respects in relation to the financial statements as a whole. Omission of Required Supplementary Information about Future Major Repairs and Replacements Management has omitted the information about the estimates of future costs of major repairs and replacements that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by the missing information. Melville, New York April 5, 2017-2 -
BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015 ASSETS 2016 2015 Current assets: Cash and cash equivalents $ 405,066 $ 134,743 Real estate tax escrow account 2,712 - Accounts receivable from tenant shareholders 89,311 44,215 Prepaid insurance 25,917 24,771 Fuel inventory and prepaid costs 33,906 83,349 Prepaid real estate tax 61,861 63,870 Miscellaneous receivable - 63,500 Total current assets 618,773 414,448 Investments: Reserve funds 339,299 285,529 Common property: Land, building, improvements and equipment 6,668,520 6,509,723 Less: accumulated depreciation (3,316,527) (3,180,809) Net common property 3,351,993 3,328,914 Other assets: Deposit - mortgage refinancing 17,500 - Total assets $ 4,327,565 $ 4,028,891 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Mortgage payable - current $ 59,281 $ 48,552 Line of credit payable - current 1,500 6,000 Accounts payable 62,232 53,762 Deferred income 11,062 14,739 Deposits payable 16,266 16,066 Due to shareholders 28,989 30,194 Due to Sponsor - SCRIE 27,355 13,542 Total current liabilities 206,685 182,855 Long term liabilities: Mortgage payable - less current 2,060,728 2,113,977 Line of credit payable - less current 983,500 985,000 Total long term liabilities 3,044,228 3,098,977 Total liabilities 3,250,913 3,281,832 Shareholders equity: Common shares, $1.00 par value, 20,000 shares authorized, 9,499 issued and outstanding 9,499 9,499 Additional paid-in capital 3,513,522 3,461,202 Accumulated deficit (2,446,369) (2,723,642) Total shareholders equity 1,076,652 747,059 Total liabilities and shareholders equity $ 4,327,565 $ 4,028,891 See notes to financial statements. - 3 -
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Revenues: Maintenance charges $ 1,362,661 $ 1,362,239 Operating assessments 86,367 82,490 Capital assessment 133,422 133,352 Storage fees 7,883 4,364 Interest and dividends 4,474 3,056 Laundry 19,200 19,200 Sublet fees 11,140 9,641 Other 11,001 12,484 Total revenues 1,636,148 1,626,826 Expenses: Payroll and related 249,954 248,611 Utilities 101,094 137,386 Water and sewer 62,185 56,402 Repairs and maintenance 145,578 142,197 Insurance 82,240 85,455 Legal and audit fees 17,512 14,678 Management fee 42,000 42,000 Real estate taxes 329,714 299,450 Corporate taxes and miscellaneous 16,472 19,478 Interest 176,408 176,492 Total expenses 1,223,157 1,222,149 Income before depreciation 412,991 404,677 Less: Depreciation 135,718 112,452 Net income $ 277,273 $ 292,225 See notes to financial statements. - 4 -
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Common Stock Shares Amount Additional Paid-in Capital Accumulated Deficit Total Shareholders Equity Balance - January 1, 2015 9,489 $ 9,489 $ 3,311,135 $ (3,015,867) $ 304,757 Issuance of shares for hallway space 10 10 38,097-38,107 Transfer fees - - 111,970-111,970 Net income for year ended December 31, 2015 - - - 292,225 292,225 Balance - December 31, 2015 9,499 9,499 3,461,202 (2,723,642) 747,059 Transfer fees - - 52,320-52,320 Net income for year ended December 31, 2016 - - - 277,273 277,273 Balance - December 31, 2016 9,499 $ 9,499 $ 3,513,522 $ (2,446,369) $ 1,076,652 See notes to financial statements. - 5 -
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Operating activities: Net income $ 277,273 $ 292,225 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 135,718 112,452 Interest expense - debt issuance costs 6,032 6,032 Interest earned in reserve accounts (1,450) (1,448) Changes in operating assets and liabilities: Accounts receivable from tenant shareholders (45,096) (10,568) Prepaid expenses 50,306 (89,025) Real estate tax escrow (2,712) 28,872 Accounts payable 8,470 (143,735) Deposits payable 200 15,016 Due to shareholders (1,205) (2,759) Deferred income (3,677) (8,943) Due to sponsor - SCRIE 13,813 7,350 Net cash provided by operating activities 437,672 205,469 Investing activities: Expenditures for building improvements and equipment (158,797) (409,362) Incentives receivable for building improvements 63,500 (63,500) Change in reserve fund principal (52,320) 70,802 Net cash used in investing activities (147,617) (402,060) Financing activities: Deposit - mortgage refinancing (17,500) - Payments of mortgage and line of credit principal (54,552) (52,094) Proceeds from issuance of shares for hallway space - 38,107 Transfer fees 52,320 111,970 Net cash provided by (used in) financing activities (19,732) 97,983 Net increase (decrease) in cash and cash equivalents 270,323 (98,608) Cash and cash equivalents, beginning of year 134,743 233,351 Cash and cash equivalents, end of year $ 405,066 $ 134,743 Cash paid during the year for: Interest $ 170,429 $ 170,713 Corporate taxes $ 5,681 $ 8,206 See notes to financial statements. - 6 -
NOTES TO FINANCIAL STATEMENTS 1. Organization West Gate House, Inc. (the Corporation ) is a Cooperative Housing Corporation incorporated in the State of New York on June 23, 1983, to acquire title of the land and buildings located at 860-870 West 181 st Street, New York, New York. West Gate House, Inc. consists of two buildings and has 126 residential units. The Corporation s primary purpose is to manage the operations of the property and maintain the common elements. 2. Summary of Significant Accounting Policies Common Property Common property consists of land, buildings, improvements and equipment and is stated at cost. Depreciation has been computed by means of the straight-line method over the estimated useful lives of the assets ranging from 7 to 27.5 years. The buildings were fully depreciated at December 31, 2012. Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03 Interest:-Imputation of Interest: Simplifying the Presentation of Debt Issue Costs, requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the associated liability. The new standard became effective for the year ended December 31, 2016 and required retrospective application. As a result of the adoption, debt issuance costs of $16,989 were reclassified from deferred charges to reduce long-term debt at December 31, 2015. Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the term of the debt using the straightline method, which approximates the effective interest method. The unamortized amount is presented as a reduction of long-term debt on the balance sheet. Future Needs For Major Repairs and Replacements The Corporation has accumulated funds for major repairs and replacements, however, the Corporation has not conducted a study to determine the remaining useful lives of the components of common property and current estimates of costs of major repairs and replacements that may be required in the future. Accordingly, the Corporation is unable to disclose that information. When replacement funds are needed to meet future needs for major repairs and replacements, the Corporation has the right to borrow, increase regular assessments, pass special assessments, or delay replacements until funds are available. The effect on future assessments has not been determined at this time. Cash and Cash Equivalents The Corporation considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents, unless they are held for reserve fund purposes. - 7 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (Continued) Cash and Cash Equivalents (Continued) The Corporation maintains cash and cash equivalents at several financial institutions. Accounts at certain institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At times cash balances may exceed FDIC insurance limits. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based on management s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from those estimates. Maintenance Charges Tenant-shareholders are subject to monthly maintenance charges to provide funds for Corporation s operating expenses, future capital acquisitions, major repairs, and replacements. Accounts receivable from tenants at the balance sheet date represent maintenance charges due from tenant shareholders and expected to be collectible. Shareholders in considerable arrears are pursued by all legal means to speed collection. Any excess maintenance assessments at year end are retained by the Corporation for use in the succeeding year. The Board of Directors approved a 3% maintenance increase effective January 1, 2014. There have been no increases since. Corporation Income Tax For Federal tax purposes, the Corporation s taxes are filed pursuant to Subchapter T of the Internal Revenue Code. Subchapter T Corporations divide their income and expenses between patronage and non-patronage sources. Income is considered patronage sourced if it is derived from an activity that is characterized as directly related to and inseparable from the Co-op s principal business activity and business purpose. Consequently, income from non-patronage sources (non-tenant-shareholder) such as commercial rent, professional apartment rental, etc., in excess of expenses properly attributable thereto, may be subject to Federal tax. As of December 31, 2016, the Corporation had available approximately $1,221,000 of unused net operating loss carryovers that may be applied against future taxable income and expire in various years from 2018 to 2034. Due to the uncertainty of the Corporation s ability to generate sufficient taxable income before the expiration dates of these net operating losses, no deferred tax asset has been recorded in the accompanying financial statements. The Corporation is also subject to New York State franchise tax and New York City Corporation tax, both of which have been provided for based upon capital rather than income. - 8 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (Continued) Corporation Income Tax (Continued) The Corporation applies ASC Topic 740, the provision pertaining to uncertain tax positions, and has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements. The income tax returns of the Corporation for tax years subsequent to 2012 are open and subject to examination by the taxing authorities. Fuel Inventory and Prepaid Costs The Corporation values fuel inventory at cost using the First-in, First-out (FIFO) inventory valuation method. During the years ended December 31, 2016 and 2015, the Corporation paid its fuel vendor a balanced amount per month based on prior usage history. Due to the decrease in fuel prices, the Corporation s payments exceeded usage costs by $23,215 and $72,892 as of December 31, 2016 and 2015, and is included in the balance sheet as prepaid costs. The prepaid costs will be used against future fuel usage. Sublet Fees Consent for subletting is granted for a limited time and only after the shareholder has occupied the apartment for a period of three years. There is a surcharge for apartments which are subleased which is equal to 10% of the monthly maintenance charges. Accounting Method and Policy The Corporation maintains its books and records on the accrual basis of accounting and therefore recognizes revenue when earned, and liabilities when incurred. Bad debts, if any, are recognized in the period in which they are deemed to be uncollectible. Fair Value of Financial Instruments The Corporation uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value: Cash and cash equivalents - The carrying amount approximates fair value because of the short maturity of those instruments. Accounts receivable from tenant-shareholders - The carrying value of accounts receivable approximates fair value due to their short-term nature and historical collectability. Reserve funds - The carrying amount approximates fair value because of the short maturity of those instruments. - 9 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (Continued) Fair Value of Financial Instruments (Continued) Accounts payable - The carrying value of accounts payable approximates fair value due to the short-term nature of the obligations. Mortgage payable and line of credit - The carrying amount approximates fair value because of the maturity of those instruments and interest rates prevalent in the agreements. 3. Reserve Funds The Corporation has a cash management program which provides for the investment of excess cash balances in highly rated (low risk) financial instruments. These investments are designated as Reserve Funds and are to be used for capital improvements or major repairs. The Reserve Funds consist of the following as of December 31, 2016 and 2015: 2016 2015 NCB: Money Market Account - interest rate 0.1% for both years $ 75,654 $ 75,541 12-month CD - interest rate 0.22%, matures 3/26/17 28,031 27,969 Signature Bank: Money Market Account - interest rate 0.65% for both years 235,614 182,019 Total reserve funds $ 339,299 $ 285,529 4. Common Property Land, building and improvements as of December 31, 2016 and 2015 are summarized as follows: 2016 2015 Land $ 887,733 $ 887,733 Building 2,282,742 2,282,742 Improvements 3,287,265 3,203,340 Equipment, furniture and fixtures 210,780 135,908 6,668,520 6,509,723 Less accumulated depreciation (3,316,527) (3,180,809) $ 3,351,993 $ 3,328,914 During year ended December 31, 2016, the Corporation incurred total costs of $158,797 for common property additions as follows: $83,925 for the lobby project, $49,273 for plumbing and heating upgrades and $25,599 for lobby furniture and fixtures. - 10 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Common Property (Continued) During year ended December 31, 2015, the Corporation incurred total costs of $409,362 for common property additions as follows: $174,648 for the lobby project, $69,205 for lobby furniture and fixtures, and $165,509 for the plumbing and heating upgrades. The Corporation applied for and was granted incentives from the New York State Energy Research and Development Authority ( NYSERDA ) to subsidize improvements done to the buildings. Total incentives amounted to $63,500 and are included as a reduction to building improvements and as a miscellaneous receivable on the Corporation s balance sheet as of December 31, 2015. 5. Mortgage Payable The Corporation has mortgage with National Cooperative Bank ( NCB ) in the amount of $2,500,000. The mortgage is for a term of 10 years and matures on April 1, 2017 when the unpaid principal and all accrued and unpaid interest thereon becomes due and payable. The mortgage calls for monthly payments of $14,812 to be applied first to interest at the annual rate of 5.89% per annum, which approximates the effective interest rate, with the balance to principal based on a 30-year amortization. The loan may be prepaid together with a prepayment penalty based upon a yield maintenance formula. Closing costs associated with the mortgage totaled $33,232 and are being amortized to interest expense over the remaining term of the loan. Pursuant to the terms of the mortgage, the Corporation is required to deposit funds to an escrow account in order to pay its real estate taxes. The balance of the account was $2,712 and $-0- as of December 31, 2016 and 2015, respectively. The mortgage is collateralized by the land and building owned by the Corporation. Concurrent with obtaining the mortgage, the Corporation also established a $1,000,000 line of credit with NCB. This line of credit is coterminous with the first mortgage and carries an adjustable interest rate equal to the NCB s internal rate plus 500 basis points with repayments in amounts of no less than $10,000 without penalty on thirty days written notice. The interest rate at December 31, 2015 was 3.75% and adjusted to 4% as of February 1, 2016. The monthly payments consist of principal of $500 plus interest. As of December 31, 2016 and 2015 the principal balance due on the line of credit was $985,000 and $991,000, respectively. In September 2010, the Corporation obtained a third mortgage line of credit from NCB in the amount of $500,000. This line of credit is also coterminous with the first mortgage and carries an interest rate of 5%. In order to maintain the line of credit, a fee of $1,250 per annum is charged. At the balance sheet date, no amounts have been drawn on this line of credit. - 11 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. Mortgage Payable (Continued) The mortgage payable and line of credit consist of the following at December 31: 2016 2015 Mortgage payable $ 2,130,966 $ 2,179,518 Unamortized debt issuance cost (10,957) (16,989) 2,120,009 2,162,529 Less: current 59,281 48,552 Mortgage payable - less current $ 2,060,728 $ 2,113,977 Line of credit payable $ 985,000 $ 991,000 Less: current 1,500 6,000 Line of credit payable - less current $ 983,500 $ 985,000 The Corporation refinanced its mortgage and line of credit on March 28, 2017 (see Note 14). As part of the refinance process, the Corporation paid a non-refundable deposit of $17,500. 6. Management Agreement The Corporation has an agreement with Siren Management Inc. to manage of the building currently at the fee of $42,000 per annum. The agreement provides for the management agent to be in charge of: (a) collecting all rents and other charges, (b) maintaining the building premises adequately, (c) entering into building contracts, (d) purchasing of supplies, (e) keeping all books and records of the Corporation, (f) managing all building personnel, and (g) procuring insurance. 7. Shareholders Equity During 2015, the Corporation issued 10 shares to an existing shareholder in connection with the sale of hallway space for net consideration of $38,107. The Corporation treats special assessments for capital improvements and maintenance charges used to pay mortgage amortization as contributions to additional paid-in capital for income tax reporting purposes only. For the years ended December 31, 2016 and 2015 the additions to additional paid-in capital for income tax purposes were as follows: 2016 2015 Mortgage amortization $ 54,552 $ 52,094 Capital assessment 133,422 133,352 $ 187,974 $ 185,446-12 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. Transfer Fees The Amended and Restated Proprietary Lease contains a provision for the payment of transfer fees (flip taxes) equal to 3% of the gross consideration received by a shareholder for the sale or transfer of any interest in the shares and lease held by the shareholder, except for the transfer of shares by the holder of unsold shares (Sponsor) and for assignment of the right to purchase shares and leases to a third-party/assignees. Flip taxes are deposited into the Corporation s Signature Bank reserve account and designated to be used for future capital projects. As such, they are not considered income, but add to the Additional Paid in Capital of the Corporation. In 2016 and 2015, five and eight apartments were sold, respectively, which generated $52,320 and $111,970 as an increase to Additional Paid-in Capital. 9. Operating Assessment The Board of Directors approved an operating assessment that approximated the Co-op abatement tax credits in years ended December 31, 2016 and 2015. These assessments generated a total of $86,367 and $82,490 and were used to help cover rising operating expenses. 10. Related Parties As of December 31, 2016 and 2015, the holder of unsold shares, 860-870 Realty, LLC and affiliates, held 1,551 shares allocated to 22 apartments of the Corporation that represent approximately 16% of the total outstanding shares. The total maintenance charges on these apartments was $186,781 for both years with no arrears due at December 31, 2016 and 2015. 11. Due To Shareholders As a result of revisions to Section 467(a) of the New York State Real Property Tax Law, certain shareholders of the cooperative units are eligible for partial abatements of their real estate taxes over the tax years 1996/1997 to 2017/2018. In 1997, the New York State School Tax Relief Program (STAR) was authorized by Section 425 of the real Property Tax Law. The STAR Program provides an exemption from school property taxes for owner occupied, primary residences. During the years ended December 31, 2016 and 2015, the Corporation received credits of $59,906 and $58,664 on its real estate tax bills, which represents the Co-op abatement, STAR and other credits for the calendar years. These amounts are due to individual shareholders who qualify under these programs. At December 31, 2016 and 2015, credits totaling $28,989 and $30,194 had not yet been credited to the shareholders accounts. The Corporation also received Senior Citizens Rent Increase Exemption (SCRIE) credits against its real estate tax bills in 2016 and 2015 of $13,813 and $13,542, respectively. These credits are due to the Sponsor because the apartments are rented to senior citizens who qualify for rent increase exemptions. At December 31, 2016 and 2015, SCRIE credits payable to the Sponsor were $27,355 and $13,542, respectively. - 13 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 12. Multi Employer Pension Plan The Corporation participates in the 2014 Apartment Building Agreement between Realty Advisory Board on Labor Relations Incorporated and Service Employees International Union, Local 32BJ, effective for the period April 21, 2014 to April 20, 2018. The Corporation is obligated to pay into the Pension Fund, Health Fund, and Legal/Training Service Fund for employees covered under the collective bargaining agreement. Contributions paid under these plans are expensed as incurred and amounted to $69,410 in 2016 and $66,360 in 2015. The Corporation s contribution is less than 5 percent of the total contributions made to the plan by all contributing employers. In the event of withdrawal from the plan, the Corporation may, under the provisions of the Employee Retirement Income Security Act of 1974 ( ERISA ), as amended, be required to pay its proportionate share of the plans unfunded balance, which cannot be determined at this time. The Corporation has no intention of withdrawing from the plan. In accordance with the Pension Protection Act of 2006, the Fund receives an annual certified zone status from its actuary which summarizes its funding status. Plans in the red zone are generally less than 65% funded, plans in the yellow zone are 65% to 80% funded, and plans in the green zone is a least 80% funded. As of July 1, 2016, the Fund s most recent available certified zone status was red. The Plan was certified to be in critical status for the Plan Year beginning July 1, 2013 because there was a projected Funding Standard Account deficiency within three years. In an effort to improve the Plan s funding situation, the Plan s Board of Trustees (the Trustees ) adopted a Rehabilitation Plan on September 28, 2010 designed to assist the Plan in emerging from critical status by the end of the Rehabilitation Period applicable to the Plan. The Rehabilitation Period for this plan is a ten year rehabilitation period that began July 1, 2013. The following table present the Plan s status for the most current reporting period: Pension Fund Information Legal name of pension plan: Building Service 32BJ Pension Fund Employer Identification Number (EIN): 13-1879376 Plan number: 001 Type of plan: Defined Benefit Pension Plan Most current annual report for plan year end date: June 30, 2016 Zone status: July 1, 2015 - Red July 1, 2016 - Red Has the rehabilitation plan been implemented: Yes Surcharges paid to plan: None - 14 -
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 13. Capital Assessment In order to fund capital projects, including the lobby renovation and the energy savings project, the Board of Directors implemented a capital assessment of $400,000, payable over 36 months commencing January 1, 2015 and will continue through December 31, 2017. For the years ended December 31, 2016 and 2015, total capital assessment income amounted to $133,422 and $133,352, respectively. 14. Subsequent Events On March 28, 2017, the Corporation refinanced its= mortgage and line of credit by obtaining a mortgage from NCB in the amount of $4,000,000. The mortgage is for a ten year period and matures on April 1, 2027, at which time, all unpaid principal and accrued interest thereon become due and payable. The mortgage calls for monthly payments of $18,752 to be applied to interest at the annual rate of 3.85%, which approximates the effective interest rate, with the balance to principal based on a 30 year amortization. Concurrently, the Corporation obtained a $500,000 revolving line of credit, the term of which is concurrent with the mortgage. The interest rate on the line of credit shall be the greater of 3.90% or 3.75% plus LIBOR. The mortgage and line of credit are secured by the land and building owned by the Corporation. The Board of Directors and Management have evaluated subsequent events that would require adjustments to, or disclosure in the year-end financial statements through April 5, 2017, at which time the financial statements became available for issuance. - 15 -
DETAIL OF EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 2016 2015 Payroll and related: Salaries and bonuses $ 164,327 $ 165,864 Payroll taxes 13,288 13,731 Employee benefits 69,410 66,360 Payroll service fees 2,929 2,656 Total payroll and related $ 249,954 $ 248,611 Utilities: Electricity and gas $ 14,252 $ 17,410 Fuel oil 86,842 119,976 Total utilities $ 101,094 $ 137,386 Repairs and maintenance: Exterminator $ 3,510 $ 553 Elevator 21,362 12,728 Janitorial supplies 10,834 9,733 Plumbing, heating and boiler 51,884 53,181 Painting and plastering 16,435 4,075 Fire safety equipment maintenance 2,106 3,142 Windows 3,038 9,076 Exterior - 653 Consulting fees 10,905 20,826 Floors - 9,105 Doors and locks 2,511 4,567 Drain pipe cleaning - 8,566 Apartments 7,249 - Landscaping 5,244 907 Other 1,561 736 Security monitors and intercom 3,961 4,349 Sidewalk and concrete 4,978 - Total repairs and maintenance $ 145,578 $ 142,197 Corporate taxes and miscellaneous: Corporation taxes $ 5,681 $ 8,206 Telephone 5,615 5,129 Licenses and fees 2,291 3,274 Miscellaneous and administrative 2,885 2,869 Total corporate taxes and miscellaneous $ 16,472 $ 19,478-16 -