Fitch Ratings takes the following rating action on Columbia Association, Maryland's (CA) senior secured bonds as part of its continuous surveillance effort:
--$26.9 million taxable senior secured bonds affirmed at 'AA+'.
The Rating Outlook is Stable.
RATING RATIONALE:
--CA benefits from Howard County's favorable location along the Baltimore-Washington D.C. corridor and its robust commercial base, which supports a deep and diverse base of employment for its highly educated workforce.
--Wealth levels are superior and unemployment rates are historically well below average.
--Bondholder security resembles that of a municipal government's tax-supported debt.
--Sound debt service coverage from pledged annual charges.
--Liquidity needs are met primarily through a line of credit, as cash balances are maintained at very low levels.
--Flexibility to increase the annual charge rate within the legal limit is limited but Fitch believes it to be adequate given the relatively stable tax base.
--Long-range planning efforts are strong, and CA has a solid history of achieving financial and capital development goals.
KEY RATING DRIVERS:
--Continued commercial and residential redevelopment that supports revenue growth;
--Maintenance of sound financial results;
--Continued adequate revenue-raising flexibility.
SECURITY:
The bonds are secured by an annual charge of up to $0.75 per $100 of assessed property valuation on 50% of the fair market value on residential, commercial, and industrial land and improvements in Columbia. The property assessment is established by deed covenants and, if necessary, could be paid by a lien on the property. The lien is inferior to real estate taxes and superior to mortgages.
CREDIT SUMMARY:
CA is a nonprofit membership corporation providing recreation, community, and park services to the approximately 100,000 residents of Columbia, a planned community located in Howard County, Maryland (general obligation bonds rated 'AAA', Stable Outlook by Fitch). The county has high wealth levels, excellent schools, and proximity to both Baltimore and Washington, D.C. The services of CA - including tennis and golf clubs, swimming pools, fitness centers, walking trails, more than 3,400 acres of open space, and numerous youth programs - while not essential are an integral part of the lives of county residents living in Columbia. The pledged revenue base of CA, which includes a number of top county employers and a diverse mix of residential and commercial property, equals nearly 20% of the county's tax base.
Financial operations and debt management remain credit strengths for CA. Now in the fifth decade of operation, organizational priorities are focused on maintenance and improvement of existing facilities, rather than construction of new facilities. CA's debt profile is very manageable and coverage levels are strong, with actual fiscal 2010 assessment revenues covering debt service on the senior secured bonds 3.4 times (x). As of April 30, 2010, assets exceeded liabilities by $53.3 million, a figure that has increased significantly from $2.8 million at the close of fiscal 2000. Despite the strong overall results, fiscal year-end liquidity remains quite low. Over the last several years CA has increasingly used an unsecured line of credit in order to fund liquidity needs as well as approximately 1/3 of its capital needs. CA repays the line of credit using annual charge revenues and has used the line to substitute fixed-rate debt issuance in recent years. Fitch will monitor CA's reliance on the line of credit in future years. CA is currently meeting or exceeding all debt management policy targets established in 1999, and officials expect capital needs to remain reasonable.
Economic development efforts are focused on revitalization of downtown Columbia. Discussions of the 30-year project are ongoing between CA, Howard County, and Howard Hughes Corporation (previously part of General Growth Properties). The master plan has been approved and includes 5,500 new residential units, 4.3 million square feet of office space, 1.25 million square feet of new retail space, cultural buildings, plaza walkways, and other amenities.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., and IHS Global Insight.
Applicable Criteria and Related Research:
'Tax-Supported Rating Criteria', dated 16 Aug 2010.
'U.S. Local Government Tax-Supported Rating Criteria', dated 08 Oct 2010.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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