CA releases second quarter report for FY 2010

Click on a CA Division below or scroll down to read the full report.

• Administrative Services
  
• Communications and Marketing
  
• Community Services
  
• Open Space Management
  
• Sport & Fitness

Administrative Services
FINANCIAL HIGHLIGHTS

Columbia Association (CA) projects ending FY 10 with an increase in net assets of approximately $3.7 million. Total revenue and total expenses are anticipated to be $60.2 million and $56.5 million, respectively.

Total revenues are projected to be under budget by about $743,000, or 1.2 percent. The relatively small positive and negative variances in the various revenue categories nearly offset one another. The negative variance in Other Income is due to the intentional postponing of new financing (resulting in minimal excess cash to invest) and lower than budgeted rates of return on self insurance and debt service trust funds.

Total operating expenses are expected to end the year under budget by about $1 million, or 1.9 percent, due to savings in most expense categories. Depreciation expense is expected to be under budget by year-end primarily due to capital projects closing later than expected. The difference relates to the timing of capital projects compared to when they were budgeted to be completed. Projects that were expected to close in FY 09, for example, but are closing in FY 10 will only incur a half-year of depreciation instead of a full year as was budgeted.

Interest expense is also projected to be under budget by year-end due to lower than projected interest rates on credit line borrowings and the intentional delay in obtaining new financing. We are intentionally postponing the issuance of new financing because of the delay in capital projects, particularly the dredging of Lakes Kittamaqundi and Elkhorn.

For further explanation of individual variances throughout CA’s operations, please refer to the FY 2010 Second Quarter Board Report and the Division Directors’ reports.

As Phil also noted in his report, this Board Report includes a report on severance agreements entered into for the second quarter of FY 10, as required by the FY 09 Board of Directors. The report is the last page in the “Other Reports” section and includes data on the number and type of team member terminations and the amount of severance agreements as of October 31, 2009.

CUSTOMER SERVICES SYSTEM (CSS)

The information below on the progress of the CSS development was posted on CA’s website as part of the back-up materials for the December 15, 2009 Performance Oversight Committee meeting.

Alpha 3 – CA review of Alpha 3 has been completed, and final evaluation comments were delivered to ITC. No major issues have been discovered, and conference calls are scheduled to resolve functional clarifications.

Data Migration – Progress has been made over the past 30 days.  CA, ITC and CA’s data consultant have identified issues regarding compatibility of migration scripts, Excel format and missing data.  The most recent data migration test identified 300 errors, down from 9,000.  Only a subset of the entire Prime data is being used for testing at this time; however, there are a number of other data issues on the radar screen, and CA will continue to work with ITC and our data consultant to get these resolved.  Beta is the scheduled time when the entire Prime database will be downloaded into CSS for more thorough testing.

Financial Transactions – No major landmines have been discovered that will affect Go Live dates; however, a great deal of additional testing must occur.  Two tests were completed successfully over the past 30 days:  1) Lawson synchronization to CSS; and 2) ACH testing with Bank of America.

Documentation – Good progress continues to be made on development of user training materials.  CA team members were trained on the software tools needed to create the documentation; module assignments were communicated; and, completion dates (end of January) have been communicated and agreed upon by all participants. 

Load Testing – Load testing of CSS has begun.  Initial results are optimistic; however, numerous memory updates to hardware are in the process of being made to increase the size and scope of the testing.

Project Plan – Listed below are key target dates:

January 4 – Technical Documentation Delivered by ITC
January 8 – Beta Testing
February 10 – User Acceptance Testing (UAT)
May 1 – Go Live

CSS Source Code – CA is continuing to receive the source code developed to date.  CA and ITC have agreed that CA compiling of CSS will occur for the first time during Beta.

Go Live Date – The CA Project Team is still targeting May 1, 2010.  Radar screen issues remain the financial transactions and data migration.  Final agreement on ITC staffing in Columbia during Beta, UAT and Go Live has been reached.

INFORMATION TECHNOLOGY (IT)
DEPARTMENT HIGHLIGHTS

• The IT Department upgraded the anti-virus software and updated every new patch to all CA’s desktops, laptops and servers. In addition, the IT team re-built two of the servers to improve functionality and security.
  
• CA’s new Web master helped the Owen Brown and River Hill Community Association managers create new e-mail templates with their own logos and pictures. Other IT team members helped the Long Reach Community Association rebuild its lot file system server after it crashed.
  
• The IT Department worked closely with the Communications and Marketing Division to develop an application to collect inquiries from anyone outside CA and to respond within a reasonable time frame. Requirements were gathered, reviewed and approved; and the software was developed in .Net platform c#. The new application was successfully launched after comprehensive testing.
  
• The IT team also tested and successfully deployed a new e-request/support system, including training the users on the new system.
  

MOODY’S INVESTORS SERVICE –
AFFIRMATION OF CA’S BOND RATING

We are very pleased to report that Moody’s Investors Service (“Moody’s”) reviewed their rating on CA’s $32 million outstanding Senior Secured Bonds and affirmed the “Aa2” rating.  Moody’s last reviewed CA’s rating in January 2005 when they upgraded it to Aa2 from Aa3.  In the current economy, the fact that CA maintained such a favorable credit rating is a significant achievement and reflective of excellent stewardship of CA’s finances.

In their press release, Moody’s explained the three main reasons for affirming the rating:

1. Moody’s noted that CA benefits from its “strategic geographic position,” which was less impacted by the global recession that most other parts of the country. 
2. Moody’s stated that CA’s “healthy financial position is supported by strong coverage margins of senior secured debt service, comprehensive fiscal planning, and the steady growth of the assessable base.”  The analysts understand the limited nature of the annual charge, as well as our intentional and strategic decisions to rely on cash flow borrowing versus maintaining a higher cash balance at the current, extremely poor rates of return.  In fact, they note that CA has been able “to maintain a sound financial position and consistent financial performance despite the low cash balance…”
3. Moody’s has relied on the expectation that CA will continue to maintain a manageable debt burden, “given adherence to debt management guidelines, ongoing assessment growth and aggressive bond repayment…” 

This is exactly why it is so important to produce a long-term financial plan that is positive and achievable, and why the long-term impact of current financial alternatives must be carefully evaluated before decisions are made or action taken.  Again, we are very pleased with Moody’s affirmation of CA’s Aa2 rating; it validates CA’s credit-worthiness in the marketplace and will help us to obtain future financing at favorable rates.

MEDICAL INSURANCE RENEWAL

The Columbia Association and the community associations team member medical insurance was successfully renegotiated without reducing benefits at an increase of approximately four percent, which is significantly below market.  Team members’ costs increased about 15 percent, due to CA’s practice of increasing the portion paid by team members (from 9 to 10 percent for 2010, an increase of about 11 percent).  The medical and other team member insurances also serve the Village Community Association employees.

CREDIT LINE RENEWAL

During the second quarter, we successfully negotiated the renewal of CA’s $25 million line of credit, maintaining most of last year’s highly favorable terms.  Interest on the line of credit is the lower of Prime or LIBOR (London Interbank Offered Rate) plus 110 basis points, which is approximately 1.38 percent.  We were successful in limiting fees on unused available funds to .25 percent to be applied to a schedule of projected borrowings, rather than on the entire unused portion.  In the current market, credit has become a very valuable commodity, and the terms negotiated represent a significant accomplishment and excellent stewardship of CA’s resources.

Communications & Marketing

Sales of Package Plan memberships were 95.7% of the previous year’s unit sales and were 5.2% units less than FY10 budget. The shortfall was due primarily to economic conditions; however, print, direct mail and web campaigns appear to remain effective. Aggressive marketing against competition will continue to take place.

Significant accomplishments in Q2 include providing sales and services to thousands of residents who visited the Membership Service Center; distributing CA Activities Guide to 36,000 resident households; and distributing the CA Monthly newsletter through the Columbia Flier with new, improved exclusive content online. The Division also helped coordinate several successful events this quarter with increased attendance by residents, including Día de la Familia, commemorating Hispanic Heritage Month. The increased attendance was due to increased communications and marketing activities in print, web, Village communications and the new full-page calendar in the Columbia Flier.

The Division implemented an Urgent Notification System, alerting residents of weather-related or emergency CA facility and program closings or delays via cell phone text message or e-mail.  The Division is also in the process of launching a social media initiative aimed at informing Columbia residents about CA activities, programs and events through various social media platforms.

The Division projects to be at 99% of income budget for FY10, an aggressive estimate due to national economic forecasts. Year-to-date expenses are $158,000 below budget.

Community Services
The Community Services Division finished the second quarter $645,000 ahead of budget.  The positive variance over budget is primarily due to savings in Salary and Wages from Camps and School Age Services as fewer staff hours were needed than originally anticipated; Repairs and Maintenance savings as fewer repairs to the Community Buildings were made and small savings from each budget department throughout the various Operating Expense lines. 

Programmatically, the second quarter has been extremely busy. 

In celebration of National Archives Month, the Columbia Archives presented a four-part mini-course on Columbia and averaged 40 participants per session.

During the quarter, Columbia Art Center increased the summer and fall programming by five classes over the previous year; participated in the Long Reach Country Fair through a courtyard ceramics sale; continued the monthly art partnership for seniors at Longwood Senior Center; and held several art exhibits and receptions.

Some of the most popular events of the summer Lakefront Festival have been Teen Tuesdays, which have averaged around 200 teens per event and was sponsored by the Teen Advisory Committee, and the Movie Nights, which attracted over 350 participants per showing.

The Teen Center and Teen outreach programs hosted the Columbia Teen idol Competition; participated in environmental sustainability programs by planting 200 trees; and raised funds for charities through Battle of the Bands and other fundraising events.

Some of the important programs that are supported by the second quarter subsidy of $1,074,000 from the annual charge are the Summer Lakefront Festival, the  Columbia Archives, the Sister Cities program, the International Day Festival, Art Center, Volunteer Center, Teen Center, covenant enforcement fees and access to camps and before and after school care for income qualified youngsters.  In addition, it provides support to the village associations in the amount of $2,378,000 to fund village elections, covenant enforcement personnel, village board activities, community building maintenance and community-building programs and services that residents enjoy in the community centers.

Open Space Management
The Open Space Management Division completed the second quarter of the fiscal year better than the budget in total operating expenses by $965,000 and with a decrease in net assets of $5,922,000.  This represents a favorable variance of $1,357,000 from budget.  All departments in the division had total operating expenses less than the budget through the quarter.

The Land Maintenance Department expenses were less than budget in all but one line item through the second quarter.  Close to normal weather conditions and timing variances in regards to major projects kept costs down through this typically busy period.

The RV Storage Park is better than budget through the quarter in total operating expenses; however, the RV Park is not at full capacity at this time.  If this trend continues, it may require further adjustments of the year end estimate at the completion of the third quarter.

The current estimate shows that by year’s end, a total of $14,537,000 of annual charge revenue will be required to protect and maintain the environmental assets of Columbia, which include more than 3,600 acres of open space, nearly 94 miles of pathways, 171 tot lots, 284 footbridges, 34 miles of stream valleys, three lakes and 41 ponds and many other amenities.  The annual charge paid by Columbia residents allows Columbia to remain a place where residents can enjoy the natural environment and be assured this valued resource will be preserved for future generations.

Sport & Fitness
Activity at the Sport & Fitness facilities has been excellent this year. Year-to-date there have been over 51,000 more visits to the Sport & Fitness facilities than last year. CA’s three fitness clubs; the Supreme Sorts Club, the Columbia Athletic Club, and the Columbia Gym have been the main contributors to this improvement in usage.

The Sport & Fitness Division is projected to end the fiscal year right on budget. Many of the Sport & Fitness facilities have exceeded prior year performance year-to-date and are projected to surpass budget at year-end. They include; the Columbia Athletic Club, the Columbia Gym, the Horse Center, Administration, and the Discount Buying Service. Although they are not projected to exceed budget at year-end, three areas are projected to perform better than last year at year-end. They include; the Outdoor Pools, Tennis, and the SportsPark.