Columbia's debt Borrowing levels raise concern, but Wall Street isn't alarmed.

August 27, 1996

COLUMBIA RESIDENTS paying fees to the Columbia Association must find it unsettling to read that 34 percent of the group's revenue goes toward its $88.4 million debt. By comparison, only 12 percent of Howard County's revenue is spent on debt service. Even the U.S. government, with a $5 trillion debt, spends a smaller portion -- 15 percent -- of its revenue to repay loans.

Columbia has borrowed heavily since its inception to pay for the parks, athletic clubs, golf courses and swimming pools that have made the planned community a haven for leisure. Anyone questioning whether these expenses were worthwhile need only ask a resident with access to a neighborhood pool on a hot summer day. These costly items have saddled the community with a debt that has increased an average of $3.35 million annually over the last 10 years, but they enhance the quality of life and would have to be paid for one way or another.

Other large community associations, such as those in Reston, Va. and Woodbridge, Calif., apparently are debt-free only because developers of those communities passed on the costs of recreation facilities in land prices and, subsequently, home prices.

The CA has predicted that its debt will be eliminated in the year 2015, if the association does not borrow additional money. But in a Catch-22 quandary, the CA says it must borrow again to finance money-making facilities that will help retire its debt. Officials say a planned $6 million athletic club in River Hill eventually will generate $1 million in revenue annually and put the association on a path to profitability. The debate will continue to rage over whether the new athletic club is needed. Columbia already has two sizable clubs, and some residents and Columbia Council members are questioning the need to use the association's credit card on another expensive facility.

But the CA's current debt appears more onerous than it is. Wall Street analysts say the association is in good fiscal shape because of its guaranteed assessment receipts. And Howard County Budget Administrator Raymond Wacks points out that the CA can carry more debt than government because it doesn't have as many costs. Such views may not ease the debt burden, but they should allay concerns about it.

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