NewsByte, Worship Facilities.com--February 2010

By Carol Badaracco Padgett
Worship Facilities Newsbyte sought out three top church financial experts to ask about the issues churches can’t afford to ignore. Following is a discussion with Dan Mikes, executive vice president and national manager of the Church Banking Division of San Francisco’s Bank of the West; Jim Sheppard, CEO and principal of Generis, based in Atlanta; and Scott Rolfs, managing director of the Church and School Financing Division with Chicago-based Ziegler Capital Markets.

WF Newsbyte: Briefly, what are the top three finance-related hurdles that church leaders are facing as we head into 2010?
Rolfs: 1.) Making ends meet with the operating budget given the challenging environment.

2.) How to approach needed special appeals or building fund drives for maximum success while being sensitive to the financial situation of the members of the congregation who have many of their own financial challenges.

And 3.) How to provide as much ministry as before but with less staff.

WF Newsbyte: What solutions do you propose?

Scott Rolfs, managing director, Church and School Financing Division, Ziegler Capital Markets, Chicago, IL

Rolfs: 1.) If you haven’t already, consult with your peer churches to learn ways … they are trying to approach the operating budget on a line-by-line basis. See what areas they may have cut back on in the past year and found to not have a detrimental effect on the ministry. Learn what cuts did have a detrimental effect. Exchange of information between churches is extremely helpful [as well, and] your peers will all have an empathetic ear.

2.) Consult with a reputable capital campaign or fundraising firm. They will have real-time feedback as to the success of various campaigns and approaches in different geographical regions. Be sure to bring lay leaders into this process at the very start, so that they have input and buy-in to the process.

3.) With less staffing, there is a greater reliance on volunteers. Again bring your congregation into the budget process with an open and honest evaluation of the situation. When people are presented with a genuine need, they will respond. And if they do not have monetary resources to do so, they generally can provide time and volunteer help.

WF Newsbyte: What church finance hurdles is Generis seeing?
Sheppard: In no particular order, here are four:

1.) Funding the current year ministry needs they are facing—lean economic environment has more needs, but [fewer] resources.

2.) Repositioning the long-term funding of their ministry in light of [the] lean environment. Establishing generosity in the DNA of the church.

3.) Reaching the younger generation of donors. They are generous, but they respond to different motivations than their predecessors.

4.) For churches that are expanding facilities, getting financing from banks. Loans are hard to get for now.

WF Newsbyte: What solutions can you offer?
Sheppard: I talked about this in my [recent] presentation on ‘The Nines.’ Here is the link: http://thenines.leadnet.org/sheppard.htm.

Jim Sheppard, CEO and principal, Generis, Atlanta, GA

The economy is not your main problem. Yes, there are fewer resources for non-profits, but the church is in the best position to retain its share. It’s more about internal factors like leadership, vision, culture, teaching, expectations and other key indicators. Healthy churches are faring well even in light of leaner resources. You have to make your case for support, even among committed church people. You cannot assume your people will get it. When making your case for funding, it has to be urgent (now!), compelling (wow!) and aligned (with vision/mission).

WF Newsbyte: What three church finance obstacles are most common from the viewpoint of Bank of the West?
Mikes: 1.) Declining contributions: It seems a slight majority of our customers are seeing declines in contributions ranging from negligible to significant. After years of solid trends, many churches are facing uncommon challenges with budgeting and planning for ministry outreach.

2.) Expense cuts: Contingency planning is now more important than ever.

3.) Cash reserves: While it is common for many churches to experience diminished reserves in lean summer months, it is important in this environment to be very cautious about maintaining a minimum operating reserve.

WF Newsbyte: What solutions can you share with church leaders?
Mikes: [In dealing with diminished contributions] … many churches have been slow to react, resulting in diminished operating reserves. In the current environment many better-managed churches are holding more frequent board meetings in support of enhanced budget monitoring and responsiveness.

Dan Mikes, executive vice president and national manager, Church Banking Division, Bank of the West, San Francisco, CA

[When it comes to expense cuts] … Two or more phases of expense reductions should be identified during budgeting. Reductions should be planned and promptly implemented in correlation with varying levels of revenue declines. These are hard decisions, but churches most be proactive and make these cuts in a timely fashion. This is critical for churches with mortgage debt, as most mortgage loans include cash flow, debt coverage ratio, or working capital reserve covenants. While lenders have typically waived or dealt lightly with violations of such covenants in the past, they are much less flexible in the current environment. We have numerous reports of heavy-handed lenders using these covenant violations to force borrowers into higher-priced loans or the termination of swaps resulting in steep termination charges.

[A church’s minimum operating reserve should be] equal to at least one or two month’s operating expenses. Those churches planning to expand and borrow in the future need to remember the lender will be looking at how the cash flow was managed in the 2-3 years preceding the loan application.

WF Newsbyte: Now let’s focus on the unique financial needs of small churches—300 seats or less. When they’re facing a difficult time obtaining financing for building projects or renovations, what can they do now to help their situation in the long haul?
Sheppard: To the extent that they have a healthy balance sheet, a smaller church might actually be in a better position to get bank financing in the current environment. In general, the larger the loan, the more conservative the lender’s position.

The key for any church is a healthy balance sheet—strong assets and low liabilities. For example, if a church already owes two or more times its annual budget, it is going to be difficult, if not impossible, to qualify for additional financing in the current market.

Mikes: Even in better times some banks are reluctant to lend to a church with less than 300 adults in average worship attendance. In churches of this size, the top 15 families may contribute 45% of total revenue. If a few key families lose their jobs or transfer out of the congregation, the impact to cash flow and debt service capability will be substantial.

Therefore, in the current environment it is especially important for smaller churches to manage their cash flow conservatively. The key here is to plan your level of debt based on what you could have debt serviced last year, not what you hope to be able to debt service next year after your new building is finished.

Rolfs: Small congregations have a unique opportunity in front of them to acquire a first building or a new building. There are many, many church-suitable properties on the market at the moment at low prices. Before the downturn, an ‘entry-level’ building for many churches was in the $2-million range. We just helped an Arizona congregation purchase their first site for a price of $1.2 million. This was a wonderful church building in excellent condition. This type of property would not have been available 24 months ago.

www.bankofthewest.com/churchlending; www.generis.com; www.ziegler.com/investment_banking/church_and_schools

Notes from the Editor
By Carol Padgett

Observations From the Fast Lane
By Editor-in-chief and Publisher, Brian Blackmore

Be sure to follow us on Facebook and Twitter

Sagrada Familia, Barcelona, Spain

Photo: Wolfgang Staudt

Sagrada Familia is a massive Roman Catholic basilica under construction in Barcelona, Catalonia, Spain. Construction reportedly began in 1882 and continues today. It is reported that architect Antoni Gaudi worked on the project for more than 40 years, solely devoting the last 15 years of his life to the project.

In the center will reportedly be a tremendous tower of Jesus Christ, surmounted by a giant cross. (Source: http://www.villageofjoy.com.)

Worship Facilities Magazine, Church Production Magazine, and WFX -- Worship Facilities Conference & Expo are divisions of Production Media Inc., 2610 Wycliff Road, Suite 405, Raleigh, NC 27607.

Carol Badaracco Padgett, Editor
Chris Pernell, Associate Publisher

Visit www.pmipub.com for more information.

Copyright (c) 2010
Production Media, Inc.

FrontGate Media and MobileGive Offer Charities and Churches Way to Reach More, Raise More

Orange County, Calif.’s FrontGate Media, a faith-based, pop-culture media and marketing group, announces an agreement with MobileGive of Irvine, Calif., to provide text-based, mobile fundraising strategy and services to the faith-based market.

According to the Mobile Giving Foundation, $30 million has been raised for Haiti relief via text donations. That's a six-fold increase over all of 2009. With 3.6 billion worldwide text message subscribers and more than 60% reported as "active texters," mobile fundraising has quickly emerged as a critical part of an overall fundraising strategy for non-profits of any size. The ability to connect with audiences at the moment of emotional engagement has proven to be most effective through mobile text messaging (SMS). SMS texts have an estimated 90% or more read rate and offer a highly secure environment for communication without suffering the spam issues that plague email. In fact, McAfee reports that spam constitutes 92% of all email.

The partnership between FrontGate Media and MobileGive reportedly combines the media-rich, marketing experience of FrontGate with MobileGive’s expertise in mobile fundraising. The resulting partnership enables ministries, charities, and churches to make an immediate leap of growth in both experience and in utilization of one of the top mobile giving platforms.

To learn more, see www.FrontGateMedia.com/MobileGive.

www.FrontGateMedia.com www.MobileGive.us

Account Helps Christian Schools Make the Most of Prepaid Tuition

It’s no revelation that the recent economic downturn has challenged many Christian schools. As a result, Brea, Calif.-based Evangelical Christian Credit Union (ECCU), reports that it is increasingly important for these institutions to wisely manage their primary revenue stream—tuition income.

ECCU is helping to meet this need with a tool designed specifically for Christian schools. The Prepaid Tuition Money Market Account offers a competitive rate through the end of the calendar year, including tiered rates to reward higher balances, unlimited deposits, and easy access to prepaid funds when they’re needed.

ECCU has served Christian schools since 1984, when two credit unions, including the Association of Christian Schools International Credit Union, merged to form ECCU. To learn more about the Prepaid Tuition Money Market Account and other resources, visit www.eccu.org/schools.

www.eccu.org/schools

Thrivent Financial Pledges to Match Lutheran Relief for Haiti

Dr. Gerald B. Kieschnick, president of The Lutheran Church—Missouri Synod (LCMS) in St. Louis, reports that LCMS is a recipient of Thrivent Financial for Lutherans’ recent offer to match up to $1 million in donations to help earthquake victims in Haiti.

Thrivent Financial, with offices in Minneapolis, offered to match $1 for every $2 donated by its members up to $1 million. In total, the campaign, called "Helping Haiti," may generate up to $3 million in earthquake aid. The finance company’s 50% match will apply to gifts given by its members through certain Lutheran disaster relief agencies, including LCMS World Relief and Human Care in St. Louis and Lutheran World Relief (LWR) in Baltimore. The matching funds will be spread among four relief entities, including the LCMS and LWR.

For more information, visit www.lcms.org.

www.lcms.org www.thrivent.com

Free Digital Signage Webinar Tailored for Church Leaders

RidgeLogic Development of Buffalo, N.Y., developer of the SceneStudio suite of multimedia presentation solutions, announces the launch of a free webinar series for houses of worship. The webinars are designed to show church leaders how to use digital signage, where to place displays, and the benefits it provides to the church and congregation.

“Our own research shows that 27% of the large/megachurch sector is utilizing digital signage today, so there are many facilities that can still benefit,” says Jack Boyczuk, president of RidgeLogic. “The churches that are using digital signage have … reported enthusiastic opinions about its effectiveness and place a high level of importance in it when considering their communications strategy.”

Sign up for the webinars online at: www.scenestudiodigitalsigns.com/Markets/WorshipWebinar.aspx.

www.RidgeLogic.com

Constructing a New Facility?

Then you may need a construction audit
By Jim Rosenbaum
Contracting with builders to erect a large structure(s) is likely the most visible way a church, acting collectively, interacts with a local business community. By working in good faith with an open heart, it is a unique opportunity to advance the church’s local calling and mission. Yet you want to do this while exercising good judgment and ensuring prudent use of your construction funds. It’s a delicate balance requiring accurate information about your costs and billings.

Jim Rosenbaum, president, White Mesa Inc., Plano, TX

A construction audit provides a comprehensive review and reconciliations of all costs, billings and payments. It is needed because literally no one else involved in your project—not the architect, the contractor, the project manager, or your church’s accounting/finance staff—will perform the analysis and reconciliations an audit accomplishes. Here are key points to understand:

Every (100%) of construction projects generate financial irregularities.
Every audit (that we’ve been involved in) identifies cost/billing/payment findings.
Findings exceed the fees for the audit, so this service pays for itself.
It provides the detailed information needed to demonstrate proper oversight.

Findings originate from virtually every aspect of costs and billings. Here are some examples:

Contractor’s fee miscalculation—$12,000 ($8 million medical clinic).
Auto insurance billed to Owner, although contractually excluded—$42,000 ($61 million high school).
Labor charges in excess of hours paid, double charges for holidays and vacation, and unpaid overtime—$300,000 ($25 million university student housing).

There are things that all churches, large and small, can do to reduce billing questions and overpayment. It really is in the details; don’t overlook anything. Cost transparency and clear, stated expectations are all-important:

Use contract language requiring the contractor to document all costs.
Clarify beforehand vague areas concerning price and cost. Don’t leave them open to interpretation.
Insist on retainage for all contractors until you and the architect are satisfied.

“Trust but verify,” one of President Ronald Reagan’s foreign policy favorites, is also a necessary hallmark for using your construction dollars wisely. A construction audit is an excellent tool for putting that into practice.

Jim Rosenbaum is president of White Mesa Inc. in Plano, Texas. His company provides nationwide construction audit services for commercial construction projects of all types. He has several years’ experience in auditing hospitals, medical centers, and public schools, along with university, retail, and corporate facilities. Rosenbaum holds B.S. and M.S. degrees in engineering from Texas A&M University.

www.whitemesa.biz

Clean, Safe, Non-Toxic Bug Control: Bird-X Inc. Introduces the Transonic Bugchaser

New from Bird-X, the Transonic Bugchaser reportedly packs a lot of punch in a small package, with a coverage area of 1,500 square feet. Weighing only 1.1 pounds, the unit targets roaches, ants, spiders, fleas, ticks and other crawling pests. Powerful sound waves chase away insects with a continuous array of sonic and ultrasonic signals. From church facilities to crawl spaces, the Bugchaser is safe to use around people and animals.

www.bird-x.com

High-Lites Introduces Architectural-Grade Edge-Lit LED Exit

High-Lites recently introduced the BXFO Series of edge-lit LED exit signs for surface and recess-mounted applications. BXFO Series exit signs feature rugged extruded aluminum housings and employ long-life, high-intensity LED lamps that provide reliability, brightness and low energy consumption. A slim, transparent, curved-edge acrylic exit panel contributes to the contemporary architectural design of each model. Etched letter edges reportedly provide superior visibility along corridors, pedestrian intersections and egress points.

www.highliteslighting.com

Kwikset’s Key Control Deadbolt Eliminates Need for Master Keys

Kwikset introduces the Key Control Deadbolt featuring SmartKey re-key technology, a smart and secure alternative to master keying, providing savings in both time and cost. The new deadbolts differ from traditional pin and tumbler master key deadbolts because they contain two cylinders: one concealed, patented cylinder to be used by the property manager, allowing for one-key control to all units; and a second cylinder to be used by the tenant. With Kwikset’s Key Control Deadbolts, property managers can re-key every lock, quickly and easily, in three simple steps, without removal from the door.

www.kwikset.com

Visix Improves Weather Offering, Feature Set with AxisTV v.7.0.21 & Flash Animated Weather Releases

Visix Inc. has unveiled the latest update of its premier digital signage software application, AxisTV version 7.0.21. The company is also offering a new Flash-animated weather module for AccuWeather subscribers. This feature allows users to display animated icons for a more dynamic presentation of weather information.

The release includes a variety of new features, enhancements and bug fixes for improved user experience. Two notable items are the new Channel Player Snapshot and Weather Icons Enhancement. In addition, Visix offers a Flash weather feature, which pulls weather data for a specified zip code and matches the appropriate animation with current weather conditions and a five-day forecast.

www.visix.com