One aspect of being chair of the Board of Trustees is that I also get to be President of Christ Congregational Church, Inc., just as Pete Hotchkiss as vice-chair is Vice-President of the corporation and Peg Hood as secretary to the Board is the Secretary of the Corporation. And one of the things we get to do as officers of the corporation is to sign documents for the church. If ever there was a year for signing documents, this has been the year. The number of applications for permits that I and sometimes Pete and sometimes Peg have had to sign in connection with the renovation has been extraordinary:

— a County permit for County sediment control permit, signed by Peg and myself;
— one for a storm water management plan;
— 10 permits from the WSSC for utility disconnects and hookups;
— a permit to remove and plant trees, signed by me;

And on and on it goes. If something in the construction and renovation process could require a permit, that something does require a permit.

Suffice to say that there has been a lot of traveling in and about the metropolitan area to secure all these signatures. But the hard work in all this, of course, is not the signing of the applications but the honchoing of the process – keeping tabs on our civil engineers, prodding the bureaucracies, unjamming the logjams, and keeping track of what’s happening. And for that we owe much to Larry Hanes. He has been both bird dog and bulldog on this process. Larry, take a bow.

But there is one signature that I have not yet done, one that I dearly hoped to do in this meeting. And that is the signing of the contract with Henry Lewis Contractors, Inc. Last Sunday before worship I said that this might be the week that everything finally came together — the contract, the building permit, the financing. We got the contract, we’ll get the building permit tomorrow or Tuesday. But we are not quite there yet on the financing.

And that is what I want to talk about now. I want everyone to be crystal clear on what we need to do to make the renovation happen now and on the implications for our operating budget in the future.

So I would like you to take a look at the handout you should all have entitled "Financing the Renovation" and we’ll walk through the numbers together. Please make a note of your questions as we go through the document but hold them until after all the presentations have been made.

First, the estimated cost of construction: Thanks to a lower than expected cost on the asbestos removal, the absence of any soil contamination around the oil tank that we had to have removed, and some diligent value engineering by our Building Design Committee, architects, and contractor, this hasn’t changed much. It’s still about $4.6 million. But we should realize that remains an approximation. Most of the figures you see in that first list are reasonably firm, but the estimates on loan fees, furniture and furnishings, and interest costs during and immediately after construction are just that — estimates. Moreover, the $254,830 budgeted for contingencies we hope we will not have to spend. That cost item is there in case our contractor encounters unexpected problems in the renovation, – something, I’m told, that almost always happens in construction projects. But we may not have to spend all of it, and the final cost may be less than $4.6 million.

Now some of these costs we have already paid or incurred. You’ll notice the line that says "pay off mortgage on residences" — $295,000. And that is one of the wonderful stories connected with this renovation. A number of years ago when Marion Tate died, she left us her house, among other things. Soon thereafter, the property that adjoins the church at 310 Indian Spring Drive came on the market; and it was with the proceeds of the sale of Marian’s house that we were able to buy that house. That purchase was, perhaps, our first leap of faith in this renovation (but certainly not the last). Since then, of course, we’ve bought the two houses on Brewster Avenue as well, but we’ve had to borrow some money to do it. The $295,000 remaining to be paid on the mortgage on those properties will have to be paid off when we take out a new loan for the renovation. So it is appropriate to include it as a cost of the renovation.

Finally, I simply want to point out that we have paid out a fair amount of money already — $563,324, to be exact. That includes most of the architectural fees, our fund-raising costs, the civil engineer, the asbestos removal, the oil tank removal, our kitchen consultant, and assorted permit fees.

Ok, so much for the cost of the renovation. Now we come to the interesting section labeled "Funds To Pay for the Renovation." I’d like to talk a little bit about each element in that list.

The foundation of our ability to pay for the renovation, of course, is the Keystones Capital Campaign. The actual amount pledged to the Campaign at the moment is about $2,030,000; but that amount keeps growing and there is no doubt that the final total will be at least $2.1 M. That, in fact, is probably a conservative estimate. And our payments on our pledges are well ahead of schedule at this point.

A second source of funds to pay for the renovation is our cash reserves. We have assorted pots of money that have accumulated over the years for various purposes in the church.

There are a couple of other small funds as well. But suffice it to say that we have cash reserves of $250 thousand that could be used for the renovation.

In addition, we have another gift from Marian Tate. In addition to her house, she left a bequest of $209,000 to the church with the request that it be invested in the UCF Balance Fund and the earnings be used for our operating budget. The corpus of that fund — which is labeled the Permanent Fund — has now grown to $310,000, and there is an additional $17,500 in available income from the fund. Under the terms of her will we probably could use not only the income but the corpus of the Permanent Fund if we had to. But that we are very reluctant to do at this point.

Then there is the allocation given us by the state of Maryland this year for selected renovation expenses related to the Link-Ages Program. The County had urged us to ask for $750,000, which we did. But a decline in expected state receipts for the coming year, coupled with some substantial increases elsewhere in the state’s budget, meant that the amount available for local projects like the Link-Ages Program were limited. Nonetheless, the Governor and the state legislature did allocate us $100,000, thanks to the earnest support of Ida Ruben in the state Senate and the hard work of Jim and Dale and Connie Iacommini, the Director of the Silver Spring Child Care Center, and, dare I say it, my wife,. That will become available to us after July 1.

Then there is the category of interest earned on our Capital Campaign contributions before they get spent. That is estimated — and this is necessarily a very rough estimate — to be about $36,000.

Then there is a bank loan. And this is the next largest element in our financing to the Capital Campaign. We’ve been talking with two banks — Potomac Valley and Sandy Spring — as well as with Cornerstones, the UCC program that came into existence just a few years ago for the express purpose of helping local congregations renovate their facilities. At one point we thought a bank would be happy to lend us whatever amount we needed. Well, that was rather naive. And it is now clear that the maximum loan we can expect from any of these lenders is $1.55 million. We had hoped to have an acceptable loan commitment letter from one of these lenders in hand by today so that I could go ahead and sign the construction contract. But that is not the case. We are still in negotiation about the conditions that will be attached to the loan. And I dearly hope that this becomes finalized in the very near future.

Well, if you add all of those sources together, the resources we have readily available to us to pay for the renovation are in the range of $3.7 - $4.1 million. That, as our potential lenders have pointed out, does not equal the $4.6 million cost of the renovation. It leaves a gap of at least $500,000 and perhaps more than $800,000.

As a consequence, we’ve had to come back to the option that was raised last fall but put on hold at that time. And that option is us. We have to come up with $650,000 or so in the form either of increased or new pledges to the Keystones Campaign or in the form of personal loans to the church. And we need to do this quickly, because the lenders are not willing to loan us any money until they can see where all of the necessary funds are coming from. What this means in practical terms is that 130 of us need to pledge or loan at least $5000 each to the church. Some of us, of course, are not in a position to do that. Some of us can do more.

Neville Platt has graciously volunteered to administer the member loan program, and he will say more about that in a few minutes. The Keystones Campaign Follow-Up Committee, co-chaired by Bob Brown and Trish Esposito will welcome new or increased pledges to the Capital Campaign.

So that’s where we are with respect to getting the renovation off the ground and done in the short run.

But because this is Stewardship Sunday, I also want to talk about the implications of the renovation for our operating budget in the next several years, because the operating budget is also a critical consideration in paying for this renovation. The immediate costs of the renovation are being borne outside of the operating budget. But you will have noted that we are borrowing a lot of money, possibly more than $2 million. Regrettably, we will have to pay that back; and that is where the impact on the operating budget occurs.

On the back of the same sheet you’ve been looking at is an effort to set forth that impact, and I would invite you to take a look at that now. Over the course of the next fiscal year — July 2001 to June 2002 — we will obtain loans from ourselves and from a bank or other lender to do the renovation. During this year we will need only to pay interest on these loans, not any principal. These interest costs will not need to be paid out of the operating budget; they will instead be paid entirely by our continuing contributions to the Keystones Campaign. We will, however, continue to have to pay out of the operating budget for the costs of our relocation here to Marvin and, eventually, of our move back into CCC. And that means we need to increase the operating budget by $40,000 or so from its present level just to pay for our relocation and moving costs. Along with other anticipated increases in costs for the coming year for cost of living increases for the staff, increased utilities costs, etc., that means we need to increase our pledges to the operating budget by at least 10%.

In the following year — July 2002 to June 2003 — we will need to begin to pay debt service costs on all of our loans for the full year. And depending on the actual amount of borrowing we end up doing, that cost will be substantial — $150,000 to $190,000. That seems staggering, and it is. But not all of these debt service costs will be paid for out of the operating budget. The Keystones Campaign will continue until February, 2003, and will bear those costs to that point. But for the rest of the fiscal year the debt service costs will need to be paid out of the operating budget. That means that for that fiscal year our operating budget will need to be $50-$63 thousand higher than it is now. To meet that obligation and other anticipated increases in the budget for cost of living increases, utilities, and the like, our pledges will need to increase by 15-20 percent above what we have pledged in the current fiscal year.

Finally, for the fiscal year beginning in July 2003 and for every fiscal year thereafter, we will have to pay the full amount of the debt service costs out of the operating budget. So by that time — beginning two years from now — we will need to increase the operating budget by $150-$190 thousand just to pay the debt service costs. Along with other anticipated increases in the budget, that means an increase in our pledges of 40-50 percent from what they are in the current fiscal year.

So we face some substantial challenges both in the short run and in the long run. In the short run, and virtually immediately, we need to come up with an additional $500-$700 thousand so that the renovation can proceed. In the long run we need to substantially increase the operating budget by nearly $200,000 to pay for the debt service costs.

Well, I’ve talked long enough, and I hope this hasn’t been too confusing. We can discuss all of these matters shortly. But first let me turn the microphone over to Neville Platt for a more detailed description of how the member loan program will operate.

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