Time to build? Some churches have the vision, raise the fundsCapital Campaigns, Construction, FACILITIES, FINANCE, Giving Thursday, February 25th, 2010
Is this the time for a church to be building? Jobs are being lost and families are rethinking their pledges to their church’s budget. Even as many are having difficulty with their own home mortgage much less be financing their church’s new home, one person in the building trades says the present time is “an incredible opportunity for the faith-based building sector.”
David Hatton of Churchworx sees it from the point of view of a dedicated churchman and one who’s worked many years in the building trades, focusing on church construction.
“Building a church project in these ‘uncertain’ economic times is both a very smart use of God’s money,” he says, but — and here’s the clinker — “requires an extraordinary vision, faith and leadership from the church’s pastor, staff and members.”
Value for the dollar
Hatton, who is based in Texas, says that projects in Dallas and Houston are experiencing a “total project delivered” cost decline of 19 to 23 percent today against 2007. “That translates into the fact that for every dollar spent, a church will realize $1.30 worth of total project in-place value,” he says.
That’s the dollar number that First Baptist Church of Dallas is using as they begin a capital campaign this spring and look to breaking ground in July on a $130 million project that is the largest, by far, church project in this country if not the world.
The $6 million overall project cost for Crossroads United Methodist Church in Oakdale, PA, near Pittsburgh, is small by comparison, but no less challenging for the congregation in these times. Senior Pastor Steve Cordell says that “obviously, the economic climate was on everyone’s mind. We knew that people’s assets had been deeply impacted by the falling stock market and uncertainty over jobs.”
The church of 1,100 has five live services and two video venues and the facility has reached capacity. But they have a vision of having 10 campuses “and the congregational excitement about our opportunities in Mozambique was growing,” Cordell says.
He admits that the $6 million cost was “rather daunting for a church with a $1.25 million general budget.” Working with Generis campaign experts, they took their project in two phases, and the first phase was a huge success. “We surpassed our goal of $750,000 over one year by receiving pledges of $1.2 million, with 90 percent of the church participating,” Cordell says.
Several things made the difference for this church’s success, says Cordell: obvious facility need, communication of the need over a year, strong buy-in to the overall vision, a momentum and unity in the congregation — and God’s grace.
Brad Leeper of Generis says that the phasing in of plans makes sense for some churches. “Because most churches will be unable to secure lending for a larger project in the short-term, some of these churches are using a smaller giving season in a campaign to tackle a portion of the project to prepare for the larger project hopefully in the next year.”
Taking first step
Crossroads, for example, decided on the two-stage Mission Expansion Project that allowed them to make progress toward their goal without incurring any debt — in fact, reducing the debt. They bought the property, started a new campus, covered soft cost preparatory work, furthered their work in Mozambique, and did some debt retirement.
Not moving ahead on the project, and not phasing in the work, has another impact, says Brad Leeper. “The other option is to remain silent before the church and that silence will get a church no further down the road with their mission.”
Lifepoint Church in Fredericksburg, VA is just five years old with 650 people, including children, attending in school facilities, where the school district is raising their rental rates a flat 10 percent for every 12 months they occupy the school, meaning that before long the church has to move.
Executive Pastor Jeremy Pickwell says “we knew what God wanted to do in the Fredericksburg area, and we simply used deductive reasoning to reach a timeline.” But, he notes, “The timeline just happened to fall in the middle of one of the worst recessions on record.”
Still, Pickwell says they saw the “opportunity cost.” Interest rates were historically low, “and with input from Cogun and Bank of the West, we quickly realized that commercial real estate loans are beginning to reset and vacant ‘big box’ buildings are becoming more prevalent and affordable.”
No doubt on timing
In the end, he says, when the decision was made there was zero doubt about the timing. “Our goal was $1.5 million,” he says. “God’s economy allowed us to see commitments of more than $2.4 million. Obey what God says, he is in control.” Says Generis’ Brad Leeper, “Rather than purchasing land, paying it off, then building — a five-year course perhaps — they are purchasing empty retail space at a discounted rate and then raising funds for the renovation. They can secure greater square footage and get into the building much sooner and without the expense of the infrastructure that raw land requires.”
While Pickwell says that God is doing something special, he affirms that “there is a difference between faith and foolishness.” The church is looking now for a new space. “We needed to be in a financial position to be a real candidate to purchase a building” and have begun their Accelerate campaign, he says.
When it comes to running capital campaigns, Leeper believes that “major gifts are back in play.”
“I have seen six gifts greater than $1,000,000 and several greater than $250,000. High capacity donors, while having a very high bar for the project credibility, have an increased interest in standing in the gap in this season.
“Not all people are losing money in the recession. Some are making good money and have surplus to share. The standards for giving are more demanding and the church leadership must be very well prepared to have a series of conversations with a higher capacity donor.
“Two years ago, a pastor could have one conversation about a gift and be done. One and done. Now plan on multiple conversations with a much more detailed plan for their gift,” Leeper says, “The higher capacity donor conversations are much more complex,” he says.
On the financing side too, banks are more careful than ever, with new formulas to determine loan options. “Increased cash reserves, lower debt ratios, smaller percentages of expenses in the human resources category, and other factors are much more demanding,” Leeper says.
“I often have a church brag that they are debt free, and while debt free is good, banks look more carefully at excess cash flow. Does a church have the cash flow margin to provide debt service? This factor is much more in play than ever before,” he says.
Marianne Berlan of Bank of the West says it a little differently. Her own institution has not changed its lending criteria, nor curtailed its lending activity, she says. “We continue to evaluate loan requesters based on a church’s historical cash flow, including recently implemented or ongoing capital stewardship campaigns,” she says. BOTW has “never found it appropriate for a church to rely on growth to meet their debt service requirements.”
She notes that the institution has nearly $1.2 billion in loans outstanding and has no delinquencies.
So a good time to build? While some churches may choose to postpone building plans, Stephen McSwain, senior vice president at Cargill Associates, says, “A church that can postpone its building plans is probably not the church that should be building when the economy is in better shape. What should drive any building plan is, first, the call of God, and second, the need itself.
“A church that follows those two criteria will not only be able to build but will be able to manage any residual debt and, ultimately, pay for the new facility.”
The right question McSwain says is not should a church build, but “What is God calling us to do and is there any way we can do what God is calling us to do and avoid building?”
Ronald E. Keener