Long Term Economic Modeling

The Chief Financial Officer provides the CA Board of Directors with a 10 year forecast of potential income and expenses. The model uses major assumptions such as: Economic indicators; debt assumptions; revenue assumptions such as the annual charge, membership revenue; expense assumptions including salary, wages and other benefits, operating expenses, contractual expenses, and capital outlay for new construction or remodeling and equipment.

Trends are examined, and each year, all of the categories are reviewed and amended as is necessary. Economic Modeling is one of the primary reasons that CA has been awarded an AA rating by all major bond rating agencies.

Primary Focal Points:

• Continue to focus on the financial markets and trends
• Continue to monitor census information and trends, especially demographic related statistics
• Continue to monitor investment strategies and development of an investment policy for CA
• Continue to monitor housing needs and changes in housing types

Columbia Association’s economic model (slightly adjusted to reflect current income/expense numbers) shows that the gap between income and expenses could narrow. This planning element is intended to provide the catalyst for CA to make adjustments to ensure that we stay within CA’s financial capabilities and capacities.

Using income/expense trends over the past three years and extrapolating that data, staff projects that while the gap between income and expenses did narrow in the recent past; staff is making the necessary adjustments to stay within the parameters of Board goals and objectives. The following graph indicates that if revenue and income projections are correct, CA will average an annual net increase in assets of an estimated $3.395 million, or about $200,000 over CA Board policy requirements. (The CA Board of Directors has mandated that CA have a minimum net increase in asset value of $3.2 million at the end of each fiscal year).

The realities of the recent past from 2007 through 2011 are that CA has done very well in stewardship of income over expenses. Increases in unrestricted net assets have stayed very stable.

Over the past five fiscal years, CA has realized an average of $5.681 million in unrestricted net assets. While some of the increase is due to timing of capital project completion, the majority is due to recognition by CA team members who understand economic conditions and the need to continually improve on uses of operational and capital expenditure.