Earlier in a comment concerning my review of the Schroeder Presentation --(http://docs.google.com/Doc?id=dg5jbc26_0dzcsh4) an MLC student asked about "Plan B" here is what President Schroeder had to say:
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The special offering being planned will address the synod’s capital debt of $22.4 million. Currently, we are budgeting nearly $3 million to make payments on that debt. If the debt is retired, we will have $3 available for missions and ministry. If the debt is not retired in full, we will continue to budget whatever is necessary to make payments on it.
There are plans under discussion right now to consolidate and restructure that debt. This step will reduce our payments by about $500,000 per year and will pay the debt off in ten years (this assumes that we receive NOTHING in the special offering.) So that is the first step of “Plan B,” if one is needed. On the spending side, we will be looking at many other possible solutions, including increased efficiencies in the way that we do things, potential staffing reductions where possible. On the income side, we have already seen a number of very positive signs that the support for the synod’s work is increasing dramatically. Early reports of congregational mission offerings are very positive. Gifts from individuals are running well ahead of projections. And gifts for the debt offering are already coming in, even before we have begun organized debt reduction efforts.
In other words, even as we plan for the offering to be successful, alternatives are being considered and plans put into place. Those plans will develop and change as more information comes to us during the next several months.
Rev. Schroeder
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2 comments:
I'm looking forward to hear specific numbers and reports on how CMO is doing and how debt retirement is going. In the words of my DP, "The debt is what is eating our lunch."
This is the kind of info that needs to be communicated to the person in the pew.
Nice blog. I just stumbled onto it.
I'm copying some comments below that I made in a Facebook discussion this past summer about synod debt. I hope it adds to the discussion. Just realize that in order to wipe out our $22.4 million debt in one year would require congregations to more than double their current giving to the synod in one year. The synod received roughly $20.4 million from all of her congregations in FY2006-07. I belong to a congregation of about 150 communicants who has pledged $18,000 to the synod in FY2007-08. To wipe out the debt, our church's portion of the special offering would be more than our CMO pledge. Within a roughly $32 million annual budget, $3 million for debt service on capital improvement seems entirely reasonable. Might it be more realistic to increase giving by $2 million a year to support the recent convention's budget?
For any individual or organization, there is "good debt" and "bad debt". In my opinion, we shouldn’t worry too much about the current level of synod debt. That’s not to say that we shouldn’t be concerned with it at all.
Obviously, the part of the debt that resulted from poor financial management is not good. But borrowing money, even a lot of it, to pay for capital expenses is good financial management.
One key to managing debt is to be sure that the debt service (monthly or yearly payments on principle and interest) is a reasonable percentage of your operating budget. The Synodical Council has proposed that we increase our ministerial education debt payments by 163% and our internal borrowing repayment by 580% in the next fiscal year. This still totals just $2.2 million out of a nearly $35 million budget. (Clearly the word just is relative.)
Another important part of managing debt is to be sure your assets are balanced with your liabilities. (The synod’s assets are very valuable, including endowment funds, four academic campuses, the Synod Administration Building campus, the Northwestern Publishing House campus, etc., totaling just under $440 million. Liabilities total just under $225 million.)
$23 million is a lot of money. I’m not trying to say it isn’t. But with an annual budget of $35 million, a balance between assets and liabilities, and a reasonable debt service, I just hope your concience isn’t burdened by it unnecessarily.
To put it in perspective, I sure wish my home loan was less than my family’s annual budget.
Chet
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