2 camps differ on Columbia debt load Some say stop borrowing others cite income

August 18, 1996|By Dan Morse | Dan Morse,SUN STAFF

The brief financial statement that went out with the Columbia Association's annual assessment bill last month suggests, at first glance, that the nation's largest homeowners association will spend only $1.7 million this year for interest payments.

But the association's total payments on its debt are much greater -- something only hinted at on the financial statement by an asterisk and a footnote in small type.

This fiscal year, the association will spend $12.7 million on interest and principal payments -- or 34 percent of its budget.

The difference between the financial statement and the association's actual financial situation indicates the complexity of the political debate over its debt load of $88.4 million -- a debate that has two camps sparing over how the association should serve the 29-year-old planned community of 84,000 residents.

The anti-debt camp says the association must quit borrowing and shelve plans for such projects as a proposed $6 million health club in River Hill village and a proposed $2.6 million ice rink and sports center in Harper's Choice.

They warn that assessments are leveling off and Columbia will not grow much larger -- thereby limiting the association's ability to pay its debt. They also say the association should be more candid with residents about its debt.

"Fiscal responsibility is just not happening here," says Karen Fireman, an investment consultant and member of the association's financial advisory committee, a volunteer group.

Some local officials -- joined by Wall Street analysts -- say Columbia residents need not worry.

"The level of debt, by itself, is a meaningless figure," says David Berson, the chief economist at the Federal National Mortgage Association in Washington and a member of Columbia Association's governing body, the Columbia Council.

Berson says the association can handle the debt because it has a large income stream from liens on residents' properties, business properties and recreation fees. "The income side of CA is the highest it's ever been," Berson says.

He and others point out that the association's debt has helped pay for the community's popular park spaces and athletic facilities.

And now -- even as the building of Columbia's last village, River Hill, is under way -- some officials are recommending that the association take on more debt. The association should build money-making facilities, they say, to increase its income so that it can pay some of its debt -- more than $30 million over the next 10 years.

Pub Date: 8/18/96

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