Officials debate CA fees phase-in

While two elected officials consider introducing legislation that would allow the Columbia Association to phase in property assessment charges over a period of years, the homeowners association's lawyers maintain that the state legislature cannot impose such a mandate.

In a letter to Assistant Attorney General Robert A. Zarnoch, association lawyer David H. Bamberger explained that the Columbia Association's covenants require the highest property value to be imposed immediately, and any law attempting to amend those rules would "constitute an unconstitutional impairment" of the covenants and the association's contract with bondholders.


"The legislature can take the action that it deems appropriate, but what we communicated to the assistant attorney general is we believe [requiring a phase-in] would be unconstitutional," Sheri Fanaroff, the association's general counsel, said yesterday.

Zarnoch has said that such a mandate "would raise a serious constitutional question."


Dels. Elizabeth Bobo, a Columbia Democrat, and Shane E. Pendergrass, a Howard County Democrat, are considering legislation that would either allow or require the association to phase in the charges.

However, Pendergrass said she prefers that the homeowners association staff come up with a solution on its own and is optimistic that the association can find a way to ease the financial burden that sharply rising home assessments have recently put on east Columbia homeowners.

"There's a whole range of alternatives, and certainly the optimum solution would be for CA to do it, and the worst solution would be doing something to CA," said Pendergrass, who asked the attorney general to weigh in on the issue. "But I haven't ruled those things out."

Bamberger's letter was written to Zarnoch before the assistant attorney general released a letter Aug. 15 advising that while the association's covenants restrict phasing in assessment charges, state law likely does not. Amending the covenants would require unanimous approval from all property owners.

Homes in east Columbia, which the state reassessed last year, increased in value an average 33.4 percent. Those increases have helped bring in an additional $2.7 million in revenue -- stemming from annual charges tied to property values -- to the homeowners association for fiscal year 2004.

Those funds also contributed to the association's anticipated surplus of more than $4 million for 2004.

According to an association memo evaluating the financial implications of phasing in the assessment charges, such an approach "would be highly detrimental to CA's financial condition." If assessment charges for 2004 were subjected to a three-year phase-in, the association would lose about $1.8 million in revenue.

But Pendergrass thinks that financial loss would not negatively affect the association.


"If they have a projected $4 million surplus, and it would cost $1.8 million in my mind to do the right thing, I don't think that [would harm] bond ratings or solvency or anyone's fiduciary responsibility, which in my mind allows them to take action and mitigate the problem," she said.

Pendergrass and Bobo plan to attend tonight's Columbia Council meeting to express their views to the council. They are also scheduled to meet with association staff Sept. 4 to discuss the issue.

"I'm still hopeful that there's something that can be done," Bobo said. " ... I'm not convinced that a phase-in is out of the question."

Miles Coffman, chairman of the association's board of directors, said the staff is diligently researching the association's bond agreement, trustees agreement and covenants to examine how to deal with the property value increases. He said solutions could include phasing in the assessment -- as the county does for property taxes over a period of three years -- or offering rebates.

He said it is clear that the association can increase or decrease the assessment, which is set at 73 cents per $100 of valuation on 50 percent of the fair market value. The assessment rate also has a maximum of 75 cents.

Coffman said that while the assistant attorney general and the association's lawyer believe the Columbia Association cannot phase in the assessment charges, he would like to know whether there is any way around the association's rules.


The association lawyer's letter "kind of reinforces what we've been saying -- the documents are pretty restrictive," Coffman said. "... But staff and outside council are really looking at all [the alternatives]."

Alex Hekimian, president of the Alliance for a Better Columbia, a citizens watchdog group, said the association should lower the assessment rate and not worry about phasing in the assessment increase.

"I wouldn't get bogged down in whatever the [association's] attorney said," he said. "People are going to be looking to the board of directors to reduce the rate and to give a rebate to the east-side homeowners."