CA bonds get boost in rating

May 02, 1994|By Adam Sachs | Adam Sachs,Sun Staff Writer

A New York bond-rating agency has given the Columbia Association's credit rating a boost for the first time in 11 years, a change association officials say reflects the continuing improvement of the organization's financial condition.

Moody's Investors Service Inc. upgraded the association's rating from "A" to "A1," the fourth-highest rating on a scale of about a dozen gradations used to characterize the financial risk for investors who buy municipal and other bonds such as those sold by the nonprofit association to pay for public projects.

"CA is very pleased that Moody's . . . has chosen to raise CA's rating," said association President Padraic Kennedy in a statement. "It is proof that the policies established by the board [of directors] have been moving CA in the right direction."

The improved rating means that the association will be able to borrow money for capital projects at lower interest rates, saving costs for Columbia property owners who pay CA's annual assessment, said Robert Krawczak, CA's finance director.

The association has borrowed $15 million through bond sales over the past two years for capital projects, receiving its lowest interest rate ever -- 7 percent -- this year. Mr. Krawczak estimated that CA could have saved about $7,500 this year in interest costs and $90,000 over the life of those bonds had the "A1" rating been in effect when the debt was issued.

Though some residents have criticized the association's spending and borrowing practices, Mr. Krawczak said the nonprofit corporation has done a good job in recent years controlling expenses as income continues to grow and managing debt, which stands at $86 million, about $3 million more than three years ago.

"Rating agencies look at facts and make judgments accordingly," he said. "This very definitely indicates the financial position of CA is getting stronger, not weaker."

Mr. Krawczak said CA managed its finances well during the recession, strengthening its position in the eyes of the bond-rating agency.

"We hadn't created excesses prior to the recession," he said. "Many people had to retrench, but we didn't have to."

Moody's analyst Monique Jn-Marie said several factors were considered in awarding the upgrade: Columbia's continued growth and development and relatively affluent tax base; the continued reduction of the operating deficit the association accumulated during its early years as it built facilities for future residents; higher-than-anticipated revenue from recreational facility memberships; conservative budgeting practices; and flexibility provided by the 2 cent reduction (to 73 cents per $100 of assessed value) in the annual property charge rate two years ago.

Outgoing Columbia Council Vice Chairwoman Fran Wishnick said credit for the improved rating is to be shared by councils over the years, which established a policy for reducing CA's accumulated operating deficit and adhered to it, and association managers, who administer the budget and run daily operations.

"There's no question it signifies sound management and financial practices on the part of CA," she said. "We have constant review of our financial operations," including independent audits.

The association charges Columbia property owners an annual fee to manage the unincorporated city's recreational facilities, community programs and open space areas, under the direction of the council.

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