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Should We Sell the Church Center Part 2

Should We Sell the Church Center Part 2

by Del Glover

Part 2 of 2

Part 1 is here

The Financial challenges facing the Episcopal Church are the most obvious factors that must be taken into account as we consider the consequences of the decision to relocate the Church Center. In recent years, the combined effects of declining membership, defecting dioceses and congregations and a depressed global economy resulted in reduced income for the Church. Efforts to identify alternative means to support programs, including creating a major gifts fundraising initiative, were inadequate. Significant cost reduction efforts were needed. In 2012, a study by the DFMS Finance Office projected that major changes were needed in income and expenses to avoid potential budget deficits.

Under the canons, the primary source, roughly 66% of the DFMS income, is from the voluntary “askings” from the dioceses of the church. Faced with financial pressures, aggravated by the economic downturn, General Convention reduced the “askings” from the dioceses from 21% to 19% over the 2009-2012 triennium. In response to the decline in the DFMS income and increased operating expenses, we went through a painful staff reduction in 2009 and deployed some staff to other locations to be more effective and efficient.

The operating cost for the building, a multimillion debt and debt service, and the declining occupancy rate are all well documented in each of the recent triennium budgets. The operating costs and capital expenditures for the building should not be the deciding factors in the decision but they are important elements to be considered. and they cannot be deferred while other “strategic” discussions continue.

We usually focus our attention on operating costs, the day-to-day costs associated with the building. But we have not always paid adequate attention to the capital expenses associated with the maintenance and upkeep of the physical infrastructure and systems of the building. Unlike many other organizations, the DFMS does not adopt and report its performance against a Capital Budget – separate and distinct from its Operating budget.

The DFMS staff has sought to offset loss of income by seeking tenants to occupy the vacated space. But there are some real challenges to locating the “right” tenants:

The physical configuration of our (Class B?) building presents limitations

The need to provide “controlled” access to tenants and their clients/guests and comply with mandated regulations on access and egress

Finding tenants who would want to share space with the headquarters of a religious denomination and would be compatible with the “image” the Episcopal Church wants to project.

The additional income from tenants will help offset ongoing capital and operating costs but we need to confirm that the additional income is in excess of capital and operating expenses so that support for ministries is in fact increased. With tenants now occupying more space in the building, our past practice of deferring capital investment maintenance can no longer continue. Some portion of the rental income should be “reserved” for those expenses and to cover taxes on imposed on “unrelated business income” that the rental fees represent.

With the presence of our new tenants, more attention must be devoted to serving their needs, an activity that is not our area of expertise and is a distraction from our primary mission.

Whether the building is a prudent investment is another consideration and we would do well to hear from the Investment Committee on this point. Does it make financial sense for us to own and/or occupy the property at 815 Second Avenue? Should we not hear from this committee if the building ought to be a part of our investment portfolio?

In summary, the financial consequences of the discussion are significant and need to be discussed and the various options presented objectively. To avoid even the appearance of impropriety or a conflict of interest only the elected persons with the appropriate knowledge, skills and experience who have been entrusted will these responsibilities may decide among the options available to us.

The logistical consequences of the decision about the Church Center impact:

How are mission and ministry enabled by its location of the Center?

The ease of accessibility for travel to/from the Center by volunteers and staff

How resources are available to be deployed to mission and ministry;

How the physical location affects morale of current and future employees and the ability to attract and retain employees with critical skills;

How the location affects salaries, relocation expenses, travel expenses and meeting facility and other operational costs

As with the financial consequences of the location of the center, the responsibilities for evaluating the logistical consequences of the relocation must rest with those who are charged to do this work and because of its importance, it demands their best efforts.

Del Glover is a layperson who lives in Providence, Rhode Island. He has served as a Deputy to several General Conventions and on Executive Council where he chaired the Finances For Mission Committee.

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Eric Bonetti

Apropos the building itself, as someone with construction, property management, and real estate experience, my feeling is that the church struggles even at the local level to manage its physical plants….I would give the average parish a C- or D in this space, and quite a few would fail outright, with poor service delivery, inflated costs, and utter lack of planning. Our cathedrals and other major physical facilities are only a shade better, and swallow vast sums of money to stay in operation.

The notion that we are or would be an effective landlord/owner for an office building thus is improbable at best. Indeed, if we were managing our resources effectively, we would lease space, versus own, since this would allow us to manage to specific outcomes and pull up stakes if we didn’t get the benefit of our bargain. But then, this being TEC, we would have to agree on a targeted outcome, which is, I suppose, Improbable.

The fact that we are still having any sort of discussion about 815 is illustrative. We have had a vote to sell…period. The outcome is not negotiable, and if 815 is still in the mix at the next convention, it must be recognized that it is an unauthorized expenditure.

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