The Four Buckets of Church Facility Budgeting

“Hey Tim…how do we get started with Facility Budgeting?” I hear that a lot from Pastors, XP’s, Business Admins, Facility Managers and lay people.  It is a universal concern.  Let’s take a 30,000 foot level view of the most effective means by which we have seen work.

When you are budgeting for your facilities, there are 4 primary buckets that need to be accounted for:

We fully believe that being intentional about all 4 buckets will keep you out of the dog house related to your facilities

  1. Operational – This includes utilities, janitorial, general maintenance and staffing. Budgeting these area will be critical to get RIGHT. What does that mean? It means that you are not spending too much on utilities and making sure you are spending enough in the other areas to keep up with the natural rate of deterioration. Here are some rules of thumb that we find to represent “best-practices” for churches:
    1. Utilities – $1.00-1.50/SF annually. If you are over $1.25/SF, you may want to consider an energy audit or a review of your HVAC controls, as 50% or more of your energy consumption is attributed to HVAC and the best way to reduce that is through proper “behavior” which can be assisted with proper controls. We also just released a free eBook on HVAC Solutions….get your free copy HERE.
    2. Janitorial (labor, material, paper products, major cleaning like carpet extractions, window cleaning, etc.) should be in the $1.50-$2.50 range annually.
    3. General Maintenance – This is below the national average of $2.25 – $3.00/SF and should be re-looked at. We have found that a lack of general maintenance is present, the likelihood of deferred maintenance increases.  In most cases $1 not spent on general maintenance will cost 3-4 times in the future.
    4. Staff – Based on national surveys by our firm and IFMA, we believe the number of facility staff for a well-run organization is one Full Time Facility Staff Employee for every 25,000 – 35,000 SF.
  2. Deferred Maintenance – These are the items that should have been addressed prior but for whatever reason, have not been accounted for. We have found that when insufficient of general maintenance is budgeted, the likelihood of deferred maintenance increases….same for staffing. As stated above, the cost of deferred maintenance can be 3-4 times the cost of the initial general maintenance. Sounds like good stewardship to avoid deferred maintenance.
  3. Capital Reserve – We have found that a church needs $1-3/SF in order to keep up with the real cost life cycle planning. Capital replacement is not an “IF” consideration but rather a “WHEN” and “HOW MUCH”. While the $1-3/SF is a reasonable way to start planning, the best way is to do “line-item” projects for each asset that has a like cycle. If you have not already done so, check out our FREE Life Cycle Calculator to help you get started.  We also have a free eBook on this topic.
  4. Capital Projects – These would be the type projects that be adding space or major renovations, expansions and the like. It would be “easy” to see the need for some added space and be tempted to take the money from one of the above buckets. Be VERY careful with that thinking…that is a slippery slope. In addition, small projects like painting, replacing a few light fixtures, etc could…and should…be part of your General Maintenance budget.

We fully believe that being intentional about all 4 buckets will keep you out of the dog house related to your facilities. If you need help evaluating these, do not hesitate to reach out and we will help you get started.


10 Keys to Maximizing Your Church Facility – Interview with Thom Rainer

Do you know what you need to focus on related to your church facility in 2018? If not, you will want to hear this podcast with Dr. Thom Rainer.

Some highlights from this podcast include:

  • Your church is more inclined to experience a parent in a divorce case trying to abduct a child than it is to experience an active shooter.
  • Presence is the #1 thing your church can do to increase security.
  • Is your church facility congruent with your mission?
  • In a perfect world, you wouldn’t have deferred maintenance; you’d have enough money to handle facility issues as they arise.
  • Your facility team is an important part of your church’s ministry.

Is your church facility congruent with your mission?

The ten keys to maximizing your church facility are:

  1. Safety and security
  2. Flow of the space
  3. Contextualization of facilities
  4. Capital reserve – facing the inevitable
  5. Addressing the 4 buckets of budgeting
  6. Staffing
  7. Defining CLEAN and how that impacts staffing and budget
  8. Spatial utilization
  9. Integrating the facility and facility staff in your ministry
  10. Empowering the membership to be active in facility stewardship

Listen to the entire interview with Dr. Rainer HERE


Church Facility Projects – You've Moved In…But You're Still Not Done

You’ve moved into the new facility and are enjoying the “new car smell” and excitement that comes with seeing the vision become reality.  As you celebrate this momentous occasion, there’s still work to be done to keep this new building running at peak performance.

Capital Reserves

Start setting aside money in a Capital Reserves Account.  Ideally, this is a separate bank account used only for facility maintenance and repair expenses.  At the very least, it can be a separate line item in the general ledger.  Don’t forget to include reserves for IT and AVL (audio, visual, lighting) equipment.  How much should you set aside?  For a new (or fairly new) construction, save $1.00-$3.00 per square foot each year.

Maintenance-Related Expenses

Add or update the maintenance-related expenses in your church’s annual budget.  Expect to spend roughly $2.00-$2.50 per square foot annually on general maintenance.  You’ll also need to budget for additional facilities staff to handle those general maintenance tasks.  Plan for one FTE (full-time equivalent) for every 25,000 – 35,000 square feet.

Utilities

Update the budget to account for the change in utility costs at your new facility.  A good place to start is $1.00-$1.50 per square foot each year.

Janitorial Services

Whether you handle this in-house or outsource janitorial work, you’ll need to budget approximately $1.75 – $2.50 per square foot each year.

Handling these behind-the-scenes tasks will help keep your new facility running smoothly and efficiently for years to come.

Intentional organizations plan today for tomorrow’s costs. That’s why it’s critical you establish a capital reserve account now. Download our FREE eBook to learn more.

Church Facility Projects – Preparing for the Capital Campaign

This next phase is all about raising money.  While that may sound unappealing in ministry, the practical reality is any building project will require a significant financial investment.  Thankfully, raising funds doesn’t have to feel slimy or worldly focused.  In fact, this is an opportunity for your congregation to come together to achieve a common vision.  It’s much less about the actual dollars than it is about developing a culture of generosity and rallying around the vision.

We spoke with Brad Leeper from Generis to get his insights on a successful campaign.  Here are his tips for preparing to launch a capital campaign:

Tip #1: Don’t assume people will be in church every weekend to hear multiple presentations about the campaign

Generis recommends a typical campaign (at least the public version) run for about five weeks.  Most people in your congregation will miss a Sunday or two within that five-week window.  Therefore, you need to tailor your communications with that in mind.

Tip #2: Campaigns shouldn’t be boring

Don’t just present a few architectural drawings and expect people to rally around those pictures.  The campaign should be fun, crazy, exciting, and life-giving.  Any guilt trip or sense of condemnation if someone doesn’t give isn’t going to work.  This should be a watershed moment in the life of the church.

You’ll need to infuse the campaign with credibility (hey, they’ve really thought this through), momentum (wow, I can see they already have key leaders onboard who’ve already donated), and energy (this is going to be an amazing building!).

Tip #3: Realize that potential givers will go through a thought process, including the following, before deciding to commit:

  •      “What’s the information?”
  •      “Why are we doing this?”
  •      “How do I participate in this?”

They’ll likely be less concerned about the information and more interested in the inspiration (the vision, the “why?”).  Whether they consciously go through this thought process or not, you’ll need to account for each of these three questions as you communicate with them about the campaign.

Potential Pitfalls to Consider

Keep in mind that church is one of many aspects of an individual’s life.  They have a job, a family, kid’s activities, and more consuming – their mental and emotional energy.  Since most people aren’t giving at a meaningful level now, they may not feel like this campaign applies to them since they aren’t giving anyway.  There’s an unspoken attitude of “why should I care?” that you’ll need to address.

An emotional appeal to rally around the vision will get some people on board.  However, others will also want to hear the practical reasons behind the project.  They want to know if it makes sense to do this project.  Be prepared to inspire and give practical reasons why to capture the attention of the widest audience.

Discuss why this project is critical to fulfilling the mission and vision of your church.  What happens if we don’t do this project?  What happens if I, as an individual giver, don’t contribute towards this effort?

Address why someone should consider prioritizing his/her finances so they can give towards this project.  What are you inviting them to be part of that’s bigger than themselves?  Don’t expect them to figure that out on their own.  Connect the dots for them and help them see why this is an effort worth sacrificing for.

As you can tell, it takes time to build up towards the public facing part of a capital campaign.  Consider the current culture of your congregation and how people will think or what they may ask as you get started.

Church Facility Projects – So You Want to Launch a Building Project?

Whether you’re renting a facility or want to expand the one you already own, the decision to embark on a building project isn’t one to take lightly.  This effort will require a significant amount of time, energy, money, teamwork, and prayer.  If you don’t have prior experience in the construction industry or an unlimited budget (who does?!), then this is time to pause and consider what you’re about to do as a church.

It’s always helpful to have a road map or GPS available before you set out on a trip into unfamiliar territory.  With that in mind, we’ve developed a series of posts to guide you through key milestones in the construction journey.  From architectural drawings to financing and more, we’ll walk you through the major issues and point out potential pitfalls.

To get started, let’s address what you need to do first.  There are lots of behind-the-scenes details to manage as you start planning this significant effort.

Determine Your Why

The first phase of any construction project starts way before you hire a construction crew or start moving dirt.  You have much planning to do before you can get to those steps.  In fact, the first thing you should consider is “why”.

  •      Why do we want to do this project?
  •      Have we outgrown our current facility?
  •      Do we see a need in our community that this project could fill (that our current facility can not)?

Getting clarity on the vision behind the project is a pivotal first step.  Without a clear vision, you’ll have trouble making decisions and communicating why people should donate towards this project.

Gather a Team of Advisors

As we read in Proverbs 15:22, “Plans fail for lack of counsel, but with many advisors they succeed.”  Unless you are fortunate enough to have people within your congregation with these specialized skill-sets, you’ll need to bring in outside experts to give you wise counsel.  This is the time to start talking with potential architects, lenders, and capital campaign consultants.  It’s tempting to think you should start with an architect before talking with potential lenders so you know how much money you’ll need.  However, talking with lenders as you meet with your architect can help you determine what a lender is willing to loan to your church.  That can have a significant impact on what you can afford to design with an architect. Remember: You can do a building project in phases as your budget allows.  Trying to do it all at once isn’t necessary.  Check out “If it’s Phase-able, It’s Feasible” for more insights into that approach.

Get Your Facilities Manager Involved Now

Whoever is responsible for the maintenance and upkeep of your current facility needs to be involved in the planning process from day one.  This is the person who knows the constraints of your current facility, who hears the complaints from staff and volunteers, and who has to figure out where to store everything for multi-functioning rooms.  Even if you’re renting a facility, this is the person who knows how your congregation uses a building and what you’ll need in a new facility.

One example of where you’ll need to involve the facilities manager is in discussions with your project management team.  Here are a few questions your facilities manager may want to ask:

  • How can we setup the lighting and HVAC controls so we can save money by making the use of electricity more efficient?
  • How are we accounting for storage?  Consider how you’ll use each room.  If a room is multi-         functioning, decide where you’ll store extra tables and chairs for various room configurations.
  • How will we maintain this new facility?  If we have lights 20-30 feet in the air with pews or theater seats below, how will we replace the bulbs?

Consider the Total Cost

The total cost doesn’t simply include what it will take to build the facility.  Construction costs are just one piece of the overall puzzle.  Construction costs typically don’t include design elements such as theatrical lighting, sound, furniture, décor, flooring, paint, environmental graphics, IT components, etc. You’ll also need to factor in what it will cost to operate and maintain the facility once you’ve moved in.  This includes monthly utilities, maintenance and repairs, janitorial services, and maintenance staff.

Another item to consider is your long-term life cycle planning.  This is your plan for stewarding the new facility and the equipment associated with it so you can maintain and replace items as needed.  Each item has a life cycle or amount of time it will last.  HVAC units eventually stop working.  You’ll need to replace the soundboards and flooring at some point.  Consider the cost of replacing each item and what you should set aside in a capital reserve fund each month so you can easily pay for those replacements when the time comes.  eSPACE provides a free Life Cycle Calculator you can use to start this planning process.

Add up the monthly mortgage payment, what you’ll spend each month to maintain the facility (including insurance costs), and what you need to set aside for capital reserves.  Is that amount something your church can comfortably afford?  If not, now is the time to adjust plans and expectations before you’ve invested any money into the project.

Start Planning for the Capital Campaign

Unless you’ve already been saving for years, you’ll likely need to run a capital campaign to raise money for this project.  Before you announce anything to the congregation, you will need to do careful planning on how and when to cast this vision.  Brad Leeper from Generis offered these tips:

  • Start talking with church staff, leaders (elders, deacons, etc.), major givers, and small groups to align leaders before presenting the campaign to the full congregation.
  • Make sure you’re clear on why you’re doing what you’re doing.  You’ll raise more money by taking a longer view of the capital campaign process.  This is more about creating a culture of generosity and leveraging that cultural change than a short-term campaign.

This planning phase is vital to the success of your building project.  Don’t shortcut or skip anything in this phase.  You’ll end up having to deal with these tasks at some point anyway, so it’s best to handle them now before you’ve invested considerable time and money.

In addition, we have recently developed a FREE Church Facility Evaluator. This simple tool will provide you with a snapshot of some key indicators associated with facility operational costs.  This 2-3 minute evaluation will give you some real time data…based on national averages…as to whether you are GOOD TO GO…or in need of help.

Don’t wait…get started HERE!

The "4 X" Reality of Deferred Maintenance

I continue to study, explore, and learn more about the impacts of deferred maintenance.  As I venture deeper into this topic, the more driven I become as to the need for Kingdom minded people to TAKE THIS SERIOUSLY!

Let me share some of the research we have been studying and how this is not to be taken lightly.

I was reading a blog that quoted Rick Biedenweg, President of Pacific Partners Consulting Group and former Assistant Vice President of information resources at Stanford University. In that blog Mr. Biedenweg said:

“Every $1 in deferred maintenance costs $4 of capital renewal needs in the future.”

WOW…that is a kick in the gut.  I have taught for years that if we do not keep up with the natural rate of deterioration (1-4% of the current replacement value – CRV) that the rate can more than double.  This reinforces this premise as the compounding factor of not spending $1 today, can grow 4 fold as the deterioration continues…coupled with the future value of time and money.

While Biedenweg worked primarily with the educational system and their needs, his numbers and research can be used with any type of maintenance department. Their research indicates educational institutions should be spending 0.5% (annually) of their building and system’s current replacement value on ongoing maintenance and regular preventive maintenance and 1.5% of CRV on capital repairs. Again, this solidifies and accentuates the positions we have taken related to Facility Stewardship and the need for intentional and proactive long term planning.

If you want a real mind-blowing experience, read this article called the “Inverse-Square Rule” by David Tod Geaslin.  This made my head hurt!  If you don’t have time to read the entire article, at least grasp this thought:

“If a necessary repair is deferred and allowed to remain in service until the next level of failure, the resultant expense will be 30-times the early intervention cost.”

Lord have mercy!

Here is one other startling thought that caught my attention in a article by the American School & University Magazine entitled Falling Behind: School Maintenance & Operations.

Here are some of the salient points in the article:

  1. The National Education Association issued a report on school facilities in 2000, “Modernizing Our Schools: What Will It Cost?” The teachers union estimated the nationwide cost of repairing, renovating, or building school facilities and installing modern educational technology at $322 billion.
  2. In 2013, the U.S. Green Building Council’s Center for Green Schools issued a report, “State of Our Schools 2013,” that takes the 21st Century School Fund’s $271 million estimate and adds to it modernization costs that would enable U.S. schools to meet current education, safety and health standards. The grand total: $542 billion.
  3. The American Society of Civil Engineers has assessed the condition of the nation’s public school infrastructure in a way that educators will understand: A report card. But schools won’t make the honor roll with the grade: D. That’s better than the F that the engineers gave to school infrastructure in 1998, or the D-minus in 2001. The D bestowed on school facilities in 2005, 2009 and again in 2013 is an indication that schools have made some progress in addressing maintenance backlogs since greater attention was given to the issue in the 1990’s, but the response has been inadequate to confront the scope of the problem.

PERSONAL NOTE: There are only 98,000 public schools in America…and over 350,000 churches. Can you imagine what the amount of church deferred maintenance there is in churches if there is $542 Billion in public schools?

“Yeah, Tim, but that is schools…and that is public domain.  We are churches, Christian Schools and Universities. We are different.”

I agree…but not the way you may be thinking.  Here are the differences I see:

  1. Schools are an “entitled” entity in our current social structure. However, our ministry and educational facilities have been ENTRUSTED to us which places even more responsibility on the stewards.
  2. Public Schools are funded through taxes…which means their funding is not provided out of the goodness of contributors hearts.

So…what is the bright side of this (I know…the above is a little depressing)?  It is never to late to get started to turn the tide.  We will look at the ways by which your organization can address these issues and turn the tide.

Make sure to download your FREE copy of 5 Intentional Steps to Establish a Capital Reserve Account.  Also, get your FREE subscription to the Life Cycle Calculator. Be INTENTIONAL!

Life Cycle Planning – FOR FREE

You all know I am a huge proponent of Capital Reserve Planning…Life Cycle Initiatives…Facility Stewardship. I am such a huge fan that our company invested thousands of dollars developing the Life Cycle Calculator as part of your eSPACE software suite of Facility Management Solutions. I believe every church should have this tool and should have a plan for the inevitability of the future costs related to facilities and capital replacement costs.

As such, our team has really struggled about how to get this in the hands of all churches with a facility.  How do we get them to use it?  How do we help them plan for the future?  What needs to be done?

Well…we have an idea that we believe is the right thing for any and every church.

MAKE IT FREE!

That’s right, effective immediately, the eSPACE Life Cycle Calculator is now FREE.  No cost.  No set up fee.  No maintenance fee. No need to purchase any of our other applications or services.  Just plain old FREE.

We believe that Capital Reserve Planning is that important. We are so passionate about it that we are actually refunding those churches that paid for it originally.

If your church has a facility…or any physical assets (vehicles, A/V equipment, IT equipment, maintenance equipment, etc) that has a life cycle and expected replacement value, then this tool will be a tremendous asset to you and your organization.

Click HERE to get started.

To help you get started with your Capital Reserve Planning make sure to download our FREE eBook to learn more.

Dan Busby (ECFA) on Church Cash Reserves—How Much Is Enough?

I have known Dan Busby from ECFA for a number of years and we have shared speaking platforms on occasion.  I have incredible respect for him and his organization.

Recently Dan reached out to me after seeing our eBook on Capital Reserve Planning.  He asked if he could reference it in his new eBook on a similar topic.  I am honored that ECFA would consider the merit of our thoughts and make reference to them in their information…of course I said yes (DUH). Below is a blog that Dan and Michael Martin posted on the ECFA site and have granted me permission to repost.  Take the time to read this and make sure you download their eBook at the bottom of the post.

Thanks guys!

Guest Blog by Dan Busby and Michael Martin of ECFA

How much cash should our church have set aside in reserve?

This is such a popular question among churches.  (Hint: If you aren’t asking, you should be!)  Why?

Cash reserves are the cushion that ensures:

  • Operating expenses are paid on-time instead of incurring late fees (typically after payables are 45 days late);
  • The church is in compliance with mortgage covenants, and the financial institution does not foreclose on the property;
  • Funds are available to replace worn-out HVAC (can you imagine the air conditioning system becoming history on a Sunday morning in July, there are zero capital replacement reserves, and the only option is to take a special offering to replace the unit?); and
  • The church has the necessary funds ready to open a new site or launch a new ministry instead of starting from scratch.

Back to our question, when determining “how much is enough”, the short answer is there is no one-size-fits-all.  But here are a few essentials every church should consider:

  1. Understand how important cash reserves are to faithful administration of church resources.  Appreciating the need for cash reserves starts with an understanding of faithful administration of God’s resources.

Churches must make cash reserves a priority if they desire to honor God in how they manage church finances.  Cash reserves play an important part in giving the world the right impression of God!

  1. Build cash reserves in good financial times.  Churches in a growth mode should take advantage of opportunities to build cash reserves.  When a church is holding the status quo or is in decline, there are few opportunities to build cash reserves.

Build cash reserve increases into the budget—otherwise there will be no intentionality in the process.  Consider these two approaches:

  1. Project next year’s revenue to be lower than current year expenses.  For example, a church may project the budget for the following year as 90% of the current year revenue.
  1. Include a cash reserves line in the budget.  Include a line-item in the budget for “Additions to Cash Reserves.”  Then, if cash coming in exceeds disbursements, the excess represents an addition to cash reserves.
  1. Segregate cash related to designated funds and mortgage reserves.  An early priority for the use of cash reserves is to be sure that reserves are at least equal to unspent gifts designated (or restricted) for projects.  Borrowing from designated balances to pay church operating expenses is a recipe for disaster.

Example:  A church has cash balances of $300,000. The church has unexpended designated balances of $350,000. The difference generally means that the church has borrowed and spent $50,000 of designated gifts for operating purposes. This $50,000 should be restored as soon as possible.

Capital replacement reserves are important. Reserves for ministry expansion are vital. But without sufficient mortgage reserves, a church may miss a loan payment and be staring at a foreclosure notice. It is a good idea to maintain mortgage reserves over and above the level required by the lender because use of lender-required reserves may create a loan default.

  1. Be specific with cash reserve goals.  Churches are well served to adopt policies requiring reserves at least adequate to cover unexpended designated gifts and debt service reserves. Targets may be appropriate for other reserves such as for capital replacements and ministry expansion.

A cap may be appropriate for operating reserves (other than the reserves relating to designated gifts, mortgage reserves, capital replacements, and ministry expansion). The adequacy of these operating reserves is often measured in the number of months of cash.

  1. Communicate the importance of cash reserves to the congregation.  Having adequate cash reserves does not exhibit a lack of faith but reflects attentiveness to good stewardship. Proactive church administrators communicate both clear measurements and the rationale for the levels of cash reserves.  This can boost congregational confidence for greater giving.

We hope these considerations are a helpful starting point in determining the appropriate level of cash reserves at your church.

For more tips and essentials, check out ECFA’s latest eBook – 9 Essentials of Church Cash Reserve.

For assistance with Life Cycle Planning, download your free copy of 5 Intentional Steps to Establish a Capital Reserve Account.

5 Consequences of Too Much Building – Part 2

In our last post, we started to explore the 5 Consequences of Too Much Building.  We spent all of our time with the first consequence:

#1: – The Money Pit

  1. Higher Utility Costs
  2. Deferred Maintenance
  3. Deferred Maintenance SQUARED

This week we want to look at the other 4 issues:

#2 – The Debt Trap – This is the consequence that burdens churches when they build too big, usually maxing out their borrowing capacity (which generally is not prudent). In these cases, the church is then strapped with mortgage payments that can strangle the funds needed for ministry and/or it can elongate the debt term, as a church may opt for a 20-30 year amortization in an attempt to reduce the monthly payment.  While I must admit that I have encouraged churches to do this, it has only been when a church is in a significant upward swing related to attendance AND giving.  Otherwise, this is a slippery slope.

#3 – Guest Perception – Have you ever gone to a function, event, or public place expecting to see lots of people only to be under-whelmed by the lack of attendance?  This is not just true in a church that is too big for the attendance, but any public setting.  I remember going to a Charlotte Hornets game when the team was doing poorly (it was the only time I could afford tickets).  The arena had no energy and it felt like I was at a funeral wake instead of a vibrant event. Guests are going to judge a portion of their experience by how the worship space “feels” to them.  Does it feel crowded or empty?  If empty, will they wonder if the church is dying? These perceptions will play a significant role in their decision to attend again.

#4 – “Wrong Sizing” – In keeping with the above, not only are guest perceptions impacted, but the overall feel of the room can have an emotional and functional impact on even your regular attenders experience.  Have you ever been to a church service that was sparsely attended and people are spread out all over the room – one over here…2 over there…a couple more in the back right corner? Then comes the time for offering; the ushers have to go down half this row to get to the first person sitting in the 7th seat who, in turn, has to stand up and walk the plate to the next person 5 seats away. If your pastor is one that says, “Tell your neighbor XXX“, but you have no neighbor; in fact, no one has a neighbor…that is awkward.

#5- Worship Impact – Worship is a personal act but when in a worship “service” it is intended to be a group activity. However, when you have too much building in your worship space, congregational worship suffers.  If you can not hear those singing around you, you are less likely to sing out.  If there is no energy in the room, you will be less likely to express yourself.

SUGGESTIONS:

For #2 above…be smart…don’t over extend…have a plan to pay off debt sooner than later.  I know, it sounds simple.  But too many churches fail to get this right.

As for the other 3 items, there are several things that could be done:

  1. “Right size” the room – this could be done with permanent walls or partitions or pipe and drape.  Getting the room to feel full will add to the guest and member experience and it will add energy. If you do it with fixed walls, you might actually save money in utility costs.
  2. Shrink Seating – If you are not inclined to “right size” the room, then consider shrinking the seating. This can be done by increasing the size of the platform as well as removing seats from the space.
  3. Rope it off – If neither of the above are acceptable solutions, then consider at least “roping-off” the back rows and closing off the balcony.  This is a hint to strongly encourage people to move closer.
  4. Use another room – If your attendance has reached a point that none of the above would help, then consider moving your service to another part of your facility. Do you have a space that is large enough to house the current attendance that you could occupy?  Again, this not only makes the space and services feel better, it can save on utilities and other operational expenses.

None of these consequences are pleasant to deal with, but deal with them you must.  Do not stick your head in the sand and pretend that these issues do not exist.  Facing reality is the first step to developing a solution and moving forward.

For assistance on Life Cycle Planning, download your free copy of the eBook, Capital Reserve Planning.

 

5 Consequences of Too Much Building – Part 1

In the past few weeks, I have been exposed to a couple of interactions that have really impacted me. The first was two days of workshops that I was asked to lead for the Center for Congregations in Indiana. Many of these churches are dealing with aging buildings and a declining attendance/membership. The second was a Podcast by Dr. Thom Rainer (What to Do When You Build too Big). Both of these shone a light on many issues churches are facing when they find themselves in a situation with more building than they need.

This issue is generally caused by a couple of factors:

1. The church has declined in attendance and facility use, and as such, the previous facilities are too large for the remaining membership and programming.

2. The church is built too big to start with, mainly because of:

  • Miscalculation of projected growth
  • Improper planning
  • A “build it and they will come” mindset

Regardless of the “cause”, the “effect” is serious business. In light of that, I want to address the 5 consequences for “too much building” and provide some possible considerations:

#1: – The Money Pit

1. Higher Utility Costs – An often over looked consequence of too much building is the cost of utilities to heat, cool and light a facility that is larger than needed. Many churches just keep paying the bills…because…well…”we have always done it that way”. But it does not have to be that way. If you do not need all of the space, then shut some of it down and stop paying for unneeded utilities. Other options may include:

  • Selling the facility and obtaining a “right sized” facility
  • Leasing, renting or sharing a portion of the facility, even it only covers the cost of utilities, maintenance and repairs
  • Merging your congregation with another. This trend has saved many congregations and provided facilities for others that may have only been renting (for more information read “Better Together: Making Church Mergers Work” by Jim Tomberlin and Warren Bird).

2. Deferred Maintenance – This is very sad to me, but due to poor planning for the inevitable costs of natural physical deterioration (1-4% annually of the current replacement value), many congregations with aging facilities (over 25 years old) find themselves in a precarious situation. Many, if not most of the churches we serve that are 25 years or older have millions and millions of dollars of deferred maintenance with no capital reserve fund or a plan as to how it can/must be addressed. In many instances this causes a catch 22…you have deferred maintenance…but the congregation is shrinking…so the income is depleted…now what? Steps that are needed here include:

  • Understanding the situation – meaning you need a Facility Assessment to understand your deferred maintenance and capital reserve needs
  • Implement a proactive plan to address the above

3. Deferred Maintenance SQUARED The above issue of deferred maintenance is compounded when adequate attention is not given, thus more than doubling the impact of the natural rate of physical deterioration. This situation will force many, if not most, churches to face other considerations such as whether to close the doors altogether or just continue to let the congregation (and the deteriorating facility) die a slow death. I have worked with one church recently that was spending 70% of their operating budget to pay for the operations, maintenance and repairs of their 80+ year old building. In my opinion, they are no longer a ministry/church but rather a group of people donating to a property management organization. Sad!

There are four more, and we will hit them next time. In the meantime, make sure to get your free copy of the eBook on Capital Reserve Planning.