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Property manager’s fee skyrockets for seniors
September 4th, 2008, 7:00 am · 18 Comments · posted by Teri Sforza, Register staff writer
In 2004, seniors in Laguna Woods Village paid $339,300 for the services of their property manager, Professional Community Management.
This year, seniors will pay $654,100.
That’s an increase of nearly 93 percent.
“We begin to feel we’ve been had,” said rabble-rouser and LWV resident Conrad “Connie” Grundke.
Are the 18,000 or so seniors in what was formerly Leisure World getting 93 percent more service from PCM?
Not exactly, according to PCM’s official explanation. The steep hike is partly the fault of the rabble-rousers themselves. This from PCM’s official explanation (bolding courtesy of yours truly):
- The largest portion of the increase in the management fee is due to the additional costs that are incurred by PCM of CA due to lawsuits and community activists exercising their rights.
- The increase of almost $200,000 was negotiated by PCM of CA to cover increased legal fees, increased insurance premiums for Errors and Omissions (E&O) insurance, and Directors and Officers (D&O) insurance,
- and increased public relations related costs.
Well, that should teach you seniors to exercise your First Amendment rights. What’s that they say about the cost of freedom…?
Here’s the full explanation from PCM:
A management fee is paid to PCM from which is paid the General Manager’s salary and related costs, as well as employee relations expenses for the staff.
The contract between PCM and GRF includes a provision to increase the management fee by the Consumer Price Index each year. The management contract was renewed effective 1/1/07 and the negotiations resulted in an increase of the management fee over and above the rate of inflation.The largest portion of the increase in the management fee is due to the additional costs that are incurred by PCM of CA due to lawsuits and community activists exercising their rights. The increase of almost $200,000 was negotiated by PCM of CA to cover increased legal fees, increased insurance premiums for Errors and Omissions (E&O) insurance, and Directors and Officers (D&O) insurance, and increased public relations related costs.
The increase in the 2008 management fee reflects inflation of about 2.8 percent and a resolution adopted by GRF to increase the management fee by almost $89,000 to cover the cost of staff support expenditures. These expenditures were previously paid directly by GRF so the increase was offset by a simultaneous decrease in GRF’s operating budget.The budget for 2009 is not finalized, but the management fee is expected to be adjusted for expected inflation. No other increases are being requested by PCM.
Grundke and fellow activists at the dissident Residents Voice group have worked up their own charts and suppositions and analysis about all this, which can be found at their web site.
September 4th, 2008 at 8:25 am
2008 management fee reflects inflation of about 2.8 percent and a resolution adopted by GRF to increase the management fee by almost $89,000 to cover the cost of staff support expenditures.
Seems reasonable.
Is PCM a non-profit and/or how are they subsidized by our tax dollar?
And who is GRF as referenced in the article? No definition given…
September 4th, 2008 at 8:40 am
I see, so this is a case of PCM telling seniors “If you sue us and win, we’ll charge you for all of our legal fees and more”. The way I see it now, seniors in time will pass away, who will move in after they’re gone? I think in afew years we’ll have a “Laguna Woods Village Mall” or “Laguna Woods Village Parking Lot”…or a large tract of vacant land.
PCM, you’re biting the hand that feeds you.
September 4th, 2008 at 9:06 am
Ok let us look at the numbers, correctly…
FACT: 2007 Management Fee - $550,200
FACT: 2008 Management Fee - $654,100
FACT: Actually Increase - $103,900
FACT: New Hire to Help Support Community - $89,000
FACT: Actual Increase other then support - $14,900
FACT: Cost per Resident in non-support increase: $0.07/month
GRF (Golden Rain Foundation) had $37.6M in revenue.
GRF (Golden Rain Foundation) had $768K in excess gain.
GRF (Golden Rain Foundation) has $52.7M in Assets.
GRF (Golden Rain Foundation) pays $1.8M in Occupancy???
GRF (Golden Rain Foundation) spends $1.8M in Supplies???
GRF (Golden Rain Foundation) Directors earn $380K with $31K in benefits and another $10K in expenses???
In all what is that $1.7M in Occupancy? I thought that Foundation owned the land and should be able to use the buildings without paying for occupancy. Plus another $1.8M in Supplies - what is that?
Also why is their legal fees on the Foundation 990 if it appears those are being handled by the management company?
Do we have some padded expense justification?
I think it is time to look in more detail into this foundation to see what each line is paying and why their management company is justifying an increase and using things like legal fees and inflation as the director salary is already paid directly on the 990s for the Foundation…
Oh I almost forget the additional $31K/yr in pension.
…. the more I dig the more I find. What is $1M EXPENSED on an ESTIMATE?
Maybe Ms. Sforza has actually stumbled on a real story that has some interesting numbers for a change.
September 4th, 2008 at 9:30 am
Alan, your post is misleading. The article goes back to 2004, you need to do the same. Please cover the SAME time period.
September 4th, 2008 at 9:40 am
Can the OCWatchdog find out what the Laguna Woods Village occupancy rate has been for each year, for the same time period? Also any problems with seniors trying to sell and leave.
I would be interested to see if it’s increasing for decreasing since the rates have gone up.
September 4th, 2008 at 9:53 am
Alan, you may have found something here, GOOD WORK.
I found the sale listing on the seniors web site. Occupancy is dropping slowly.
September 4th, 2008 at 10:37 am
I just look at numbers.
I only presented last year as the author was once again showing larger numbers for a time frame dating back to 2004 (which averages out to around 13% a year - I am not going to attack that percentage as it is a low number - despite our differences on what is reasonable) to draw a larger number versus just the last year.
The bigger question is why lines are expensed for $1M in legal estimate and nearly $2M in both occupancy and supplies.
I do not want to get an emotional response from readers when they see a large number that is spread over so many years making it so high.
We can also look at the salary of the director at nearly $400K HOWEVER as I have stated before in reference to the compensation made by Boy Scouts Executive, personal compensation is the least of my concerns.
However, I know that has been an issue of concern for some of the readers of these articles so that is why I put those numbers on the table.
I am looking forward to seeing what can be found out about the millions in occupancy, supplies and estimate…
September 4th, 2008 at 10:52 am
Alan, I have a question: I own stock in a company. According to the last SEC filing, they had 1.2 million in legal fees, paid to a law firm where a member of the board of directors was a partner (at that time). Is this typical of publicly traded companies? I don’t like what they did.
Just wondering about this.
September 4th, 2008 at 2:54 pm
The managment company should pay their own legal fees - that would insure that they run things efficiently and without corruption. Making the seniors pay the legal fees is outrageous.
September 4th, 2008 at 3:32 pm
Well, either PCM is totally ripping them off (unlikely) or PCM is sick and tired of dealing with these stupid old cranks who have nothing better to do with their lives then complain and file lawsuits. I worked as a property manager briefly and pretty much hated every second. I never saw so much petty, stupid behavior in my life. The lawsuits are always over petty issues.
PCM has simply decided they have had enough of leisure world’s BS and have decided to sock it to them. GO PCM!!
September 4th, 2008 at 4:34 pm
Well, when you take management responsibility for a major population that has nothing to do all day, mischief is sure to come of it. And a great portion of these folks are on fixed income, so they watch their money like hawks.
They’re retired, they’re cranky, and lots of them were lawyers.
September 4th, 2008 at 5:26 pm
Staff support expenses, according to Janet Price during a Finance Committee meeting include such things as “review lunches” and other party type events for employees. The members/owners of LWV raised such unholy noise about the misuse of credit cards by top PCM employees and reimbursements that PCM simply had the line items moved to “Management expenses” so owner/members no longer have any idea where their $$ go. Presently there are NO lawsuits against PCM or the Boards (united, third, towers, grf) according to the last report at the board level. There is one arbitration going on which is not a law suit and even that is held up awaiting finalization. So the whole “cost of lawsuits” is just baloney. PCM hired at GRF’s (supposed) request a full time public relations employee to “spin” everything PCM and GRF do because every single act is questioned by concerned and aware member/residents of this HOA. If the boards were in any single way responsive to members they wouldn’t need a full time PR person. Similarly, if PCM would simply comply with the requests for information which are guaranteed in our governing documents and by law thwre would be a whole lot less angst. But the mode of operation around here is secretive and contrary to good management.
PCM doesnt have the RIGHT to decide “they have had enough of leisure world’s (sic) BS and decided to sock it to them.” Maybe they should just leave as Milt Johns has said he would do on occasion. They induce fear by threatening to leave and the reality is that if they go it would cause about as much disarray as one extra weekend inserted in the middle of one single week. The members/residents are hog tied by the requirements of law which are very much written in favor of PCM type businesses (which are for profit) and make it extremely difficult to sue or get enforcement of law. People who say “just replace the board” have NO idea of how complicated CID/HOA or whatever you care to call it law is and aren’t liable for BOTH sides’ expenses in any lawsuit. Yes, each side should pay their own expenses.
We appear to be at an historic low of owner occupied homes.There are reports that unregistered renters and other residents are at an all time high; that due to the decreased property values, many resident owners,especially those in the co-ops (who are denied the right to rent their property for more than 6 months out of the year), are facing increasing financial hardships without the ability to even sell at break-even. Services in other areas have fallen dramatically yet assessments continue to spiral out of control.
September 5th, 2008 at 8:33 am
The explanation of the Management Fee, as PCM responded to the writer of this article, illustrates additional ways that the Boards are “hoodwinked” by the action of the managing agent. Anticipated “legal fees and staff support” certainly are “guestimates” since, as lafeedubois noted, there are no law suits pending and the owners are asking only for documentation that is within their rights.
So, here is PCM’s response: We will take money that is currently allocated in the operating budget and place it in the Management Fee. That’s just moving an expense from one area in the budget to another, Right?
Wrong! If these estimated costs would not have come true, and we came in under the Operating Fund budget (which we do every year), the excess funds would be returned to the owners. With the shift of funds to the Management Fee, that defines a charge that is paid to PCM regardless of whether the monies are spent or not. The managing agent will always receive the “guestimated” expenses.
This illustrates the contempt that PCM has for the Boards and Owners. Rather than fighting every request for explanations of costs, the problems would be far less if the Boards and PCM would be Open and Above Board in their actions and respond to the “Rabble Rousers” with good intent … open and transparent management of our corporations.
New Definition; “Rabble Rouser” someone who asks for an explanation of how his/her money is being spent. If asking for an explanation of how the managing agent manages our monies constitutes being a “Rabble Rouser” then I can see we need more of them, especially on the Boards. It is your fiduciary responsibility, Directors, get with it!
September 6th, 2008 at 2:37 pm
Teri Sforza persists in referring to Mike Curtis and Connie Grundke as “rabble rousers”, a pejorative term which I find offensive.
The dictionary defines “rabble rouser” as: a person who excites others to anger, hate, or violence…..a demagogue.
These men support the rights of the residents of Laguna Woods Village and challenge those who would deny us these rights. They are not rabble rousers, they are performing a much needed community service which would not be necessary if our Boards of Directors were doing their job. The Golden Rain Foundation and the other Mutuals have abdicated their responsibility of oversight and so PCM rules.
Is Ms Sforza reporting the news or taking sides?
September 7th, 2008 at 11:24 am
The term “rabble rouser” probably would not seem as perjorative had the GRF board not called people that name in the first place. The fact that the LWV boards think they can get away with absolutely no oversite of the managing agent and his company requires the rabble (or “inmates” as resident members have also been called by GRF board president Bob Miller) to be roused and make a big stink about how members are treated and money is spent yet not accounted for openly.
October 1st, 2008 at 8:26 am
So have the Residents elect a new board that will Get rid of PCM, And/Or have them Send it out for BID and see what other Management companies would charge for the same level of service. I bet it would be in the similar price range
October 14th, 2008 at 1:16 pm
Actually, the price would be much higher.
Not to mention the new management company’s 30+ year learning curve it would have to address.
November 1st, 2008 at 1:54 pm
Another case of Racketeer Influenced and Corrupt Organizations fleecing Seniors
White collar crime being “decriminalized “in OC and elsewhere, good luck in fighting these guys
Maybe we need a HOA Meltdown!!!!