Back to meeting,  Agenda

In past congregational meetings on this subject, I've worn a number of different hats. Today, the hat I'm wearing is that of the chair of the Board of Trustees, and so I must be very serious, rd like to address two subjects * (1) If the congregation votes to go forward with the renovation, what will happen in the next few months? and (2) What are the financial implications of going forward?

First, on what will happen and when it will happen:

(1) The trustees and a committee headed by the Moderator will negotiate a contract with Marvin Memorial Church to allow us to use their facilities for worship and other purposes during the time of construction. The selection of Marvin Memorial as our home away from home is the result of an extensive search for, and review of, available facilities by the Relocation Committee headed by Mike Breads. And the folks at Marvin are proving to be very accommodating to us. We would shift our worship services, CE programs, and most of our other meetings and activities to Marvin beginning in January, 2001.

(2) Preparations will be made to move our staff and church offices, including the counselors' offices, into 9601 Colesville Road, what is now the Boys and Girls Home. By a happy circumstance, the Boys and Girls Homes wanted to move out at the same time we would like to move in, so we came to a mutual agreement on the early termination of their lease. This shift would be completed by the end of December.

(3) We will have to move all of our accumulated stuff out of the CE wing and take it to Marvin or 9601 or people's homes or put it in storage. The Building & Grounds Committee, chaired by Randy Caswell and with the able assistance of our property manager Dick Meyer, will supervise the process. This, too, will have to be completed by the end of December. Some of our stuff we can store here in the sanctuary; but we likely will also have to have several storage trailers on the parking lot at 9601.

(4) As the initial step in the renovation, the trustees wilt select a contractor to remove the asbestos from our building. The work would begin in early January and would take 6-8 weeks. This is a separate contract from the rest of the renovation but its cost is included in the total estimate.

(5) The trustees and a small committee will negotiate with the Silver Spring Child Care Center to become our tenant once the renovation is completed. There has been considerable excitement about this possibility from both the child care folk and our folk, and we need to make firm plans now so that our renovation will be wholly suitable for housing a day care center. It will also be helpful to have the assurance of a reliable rental income after we move back in.

(6) The trustees will obtain a firm construction loan commitment from an interested bank by late December or early January. The Building & Design Committee will solicit bids from general contractors for the renovation, probably in January 2001. And a bid will be selected and a contract negotiated and signed in February, 2001. The main part of the renovation will begin in March.

So those are the dominos that will begin to fall if we decide to go forward today and the timetable we will have to meet.

Let me talk now about the financial implications of going forward and about the Trustees' perspective on these implications.

You've heard Tom say that the estimated total cost of the renovation is $4.6 million. That includes everything * monies we've already expended, the cost of construction itself, the financing costs through the end of the Capital Campaign, and the existing $300,000 loan we have on the houses next door to the church. This total is simply an estimate, an informed estimate, but nonetheless just an estimate. We do not know the final cost of the project today and will not know until after the bidding process is complete early next year, and even then some uncertainty will remain until the project is completed. But we do expect that the Keystones Capital Campaign pledges will total about $2.2 million by the time it comes to an end in 2003, and that total will fall about $2 - $2.4 million dollars short of the likely cost of the project.

So how do we make up the difference? The Financial Fulfillment Committee has suggested a variety of possibilities, including some funding sources from outside the church. The trustees dearly hope those plans come to pass. But as a matter of prudence, the trustees also believe that we need to vote on the renovation today as if we are willing to assume these financial obligations ourselves, because that may be what ultimately comes to pass.

It is clear that we will have to go into debt. That debt will be incurred in two stages. First, we will take out a construction loan to pay the renovation costs as they are incurred. For the first few months of the renovation process we can pay those costs out of the contributions to the Keystones Capital Campaign; but by about the summer of next year those contributions will no longer be sufficient. The interest rate on that construction loan will fluctuate monthly with the prime rate, and the total amount of the construction loan will peak at the end of the renovation process in December, 2001, or January, 2002. Sometime during the following year, i.e., 2002, we will convert the construction loan to a 20 or 25 year mortgage loan at a fixed rate of interest.

Getting these loans is not a problem. Thanks to the able work of Pete Hotchkiss, we have a couple of banks willing and eager to have our business. The hard task will be to find the means to pay off the mortgage. The cost of the annual debt service will depend, obviously, on the final amount we finance, the interest rate, and the length of the mortgage. But it will be substantial, and likely will fall in the range of $210,000 to $220,000 a year. To put that in perspective, that means we would have to increase our giving to our annual operating budget by more than 40 percent.

But, and we think this is important, that increase will not happen all at once, and it will not happen immediately. Instead, this increase in our operating budget will occur in steps. This is how it will happen (and you may want to refer to the handout on this):

(1) In our current fiscal year there is no debt service that has to be paid out of our operating budget. There is a major renovation-related cost for moving, storage, and relocation for which we have a line item of $54 thousand in this year's budget, but there are no debt service costs.

(2) In the fiscal year that begins next July 1 and runs to June 30, 2002, there still will be no debt service costs that have to be paid out of the operating budget. We will be making payments on the construction loan during that fiscal year, but those payments can be made out of the Keystones Capital Campaign Fund. The operating budget will once again have a line item for the ongoing costs of being at Marvin Memorial, of storage, and of moving back in when the renovation is complete. Again, probably around $54,000.

(3) In the following fiscal year that runs from July 1, 2002, to June 30, 2003, we will begin to have to service the debt out of the operating budget. But not for the full year. Payments to the Capital Campaign will continue until early in 2003, and while they last those payments will be used to service the debt. We will need to budget for debt service out of the operating budget for the last 4-6 months of that fiscal year * maybe $110,000 or so, which would be an increase of about $56,000 from the previous fiscal year budget. Maybe a bit less.

(4) Finally, we will have to begin to service the debt entirely out of the operating budget in the fiscal year that runs from July 1, 2003, to June 30, 2004, and then in every fiscal year after that until the mortgage is paid off. That means we would have to budget for debt service in 2003-2004 of $220,000 or so * an increase from the previous fiscal year of about $110,000.

So how can you and I do it? Again, the Financial Fulfillment Committee has charted the possibilities. First, those who are able and willing need to increase their pledges to the Keystones Capital Campaign, and some have already done so. Second, a substantial portion of what we are giving to the Keystones Capital Campaign will need to be converted into our pledges to the annual operating budget after the Capital Campaign comes to an end in February, 2003. Third, we will need to have a vigorous planned giving program, and those of us who can will need to make concrete arrangements to give some of our assets to the church. Finally, we will need to grow our membership as rapidly as we can.

If these things happen, we can do this. And because we believe they can happen, the Board of Trustees has voted to endorse going forward with the Basic Needs Plan. As the financial watchdogs for the church, we would be happier if all of the money we needed was already in hand. But that almost never happens in a building or renovation program. It wasn't true when this church was first established and built, and it is not true now. Going forward is an act of faith * in God, in ourselves, in Si)ver Spring, in the future of this church. It is also a risk. The Board of Trustees believes this is a risk worth taking.