Columbia Association - Budget Amendments

THE 2009 FINANCIAL ADVISORY COMMITTEE REPORT ON

PROPOSED AMENDMENTS TO THE CONDITIONALLY-APPROVED FISCAL YEAR 2010 OPERATING AND CAPITAL BUDGET

COMMITTEE MEMBERS Chair: James Howard, Long Reach Vice-Chair: Dan Woodruff, Dorsey's Search Roger Hultgren, Harper's Choice Alan Romack, Owen Brown

COLUMBIA, MARYLAND FEBRUARY 12, 2009

The 2008 Financial Advisory Committee February 12, 2009 Miles Coffman Chair, Planning and Strategy Committee Columbia Association, Inc. 10221 Wincopin Circle Columbia, Maryland 21044 Dear Mr. Coffman, Please accept the attached report from the 2008 Budget Committee on “Proposed Amendments to the Conditionally-Approved Fiscal Year 2010 Operating and Capital Budget.” As always, members of the Financial Advisory Committee are available for future consultation regarding this report or other matters the Board of Directors or the Planning and Strategy Committee require. The other committee members and I sincerely appreciate the opportunity to have served the Columbia Association and residents as members of the Financial Advisory Committee and on their behalf, I remain, Respectfully,

James P. Howard, II Chair, Financial Advisory Committee

Proposed Amendments to the Conditionally-Approved Fiscal Year 2010 Operating and Capital Budget

Charge The Columbia Association Board of Directors (Board) asked the Financial Analysis Committee (FAC) to review CA staff proposed amendments to the conditionally-approved fiscal year 2010 operating and capital budget, covering the period May 1, 2009, through April 30, 2010. The Board is interested in the reasonableness of the staff’s projections, calculations, and options.

Conclusion The Financial Advisory Committee concludes that, on balance, the staff recommendations are reasonable in pursuit of the CA's mission.

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Proposed Amendments to the Conditionally-Approved Fiscal Year 2010 Operating and Capital Budget

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Background CA budgets on a 2-year cycle. The current operating and capital budget covers fiscal year 2009 (May 1, 2008 – April 30, 2009), and the conditionally-approved fiscal year 2010 budget is for the period May 1, 2009 – April 30, 2010. The conditionally-approved fiscal year 2010 operating budget projects total income of $61,214,000 and total expenses of $58,348,000 (including interest and contingency funding). The proposed amendments reflect revised estimates for total income of $60,902,000 and total expenses of $58,252,000 (including interest and contingency funding). The original budget estimate for the net increase in assets was $2,866,000; the revised estimate is $2,650,000. The conditionally-approved fiscal year 2010 capital budget totaled $9,695,500. The staff recommends net increases of $298,500, which would bring the total to $9,994,000.

Observations Revenue estimates The staff’s estimated decrease in revenue is $312,000, primarily due to lower receipts from the annual charge and reduced returns on investments. The staff estimates reduced income from the annual charge ($249,000) and reduced income from investments ($100,000) will be partially offset by increased receipts of $37,000 from promotions by the Communications and Marketing and Community Services divisions. The net change is a decrease of about 1/2 of 1 percent of the original total revenue estimate.

Operating expenses The staff’s estimated net decrease in operating expenses is $96,000. Increased expenses for personnel costs, rental of space, new identification cards, computer upgrades, and depreciation (totaling $371,000) are offset by decreases in other personnel costs (totaling $240,000) and lower interest expense (of $227,000) due to changes in capital projects. The net change is a decrease of less than 2/10 of 1 percent of the original total operating expense estimate.

Capital expenses Among the revisions recommended by staff for the capital budget are decreases of $284,000 for the Open Space Management Division and combined increases totaling $582,500 for the Sport and Fitness, Community Services, Communications and Marketing, and Administrative Services Divisions. Forty-six percent of the increase is for expenditures in the Sport and Fitness Division. Generally, major changes are in the Sport and Fitness and Open Space Management Divisions.

Proposed Amendments to the Conditionally-Approved Fiscal Year 2010 Operating and Capital Budget

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The staff recommendations consist primarily of savings by deferring equipment replacement and postponing some revisions or upgrades to CA facilities and property. Some of those savings are offset by previously unforeseen upgrades and new priorities. On balance, the staff recommendations are for a total increase of $298,500 in the capital budget. The net change in the capital budget is an increase of about 3 percent of the original total capital expense estimate.

Conclusion The Financial Advisory Committee concludes that, on balance, the staff recommendations are reasonable in pursuit of the CA's mission.