Y PROJECT WARM, SAFE & DR 2 Building Vision Timeline Building - PDF document

Y PROJECT WARM, SAFE & DR

2 Building Vision Timeline Building feasibility study Congregational visioning process Congregational survey

3 Congregational Visioning Process

4 Top 4 Priorities from the Survey Develop & implement a comprehensive strategy to reach new people and incorporate them into the life of the church Make necessary changes to attract families with children and youth to our church Enlarge or improve the physical facilities of the church to expand or enhance our ministries Work to renew & revitalize the community around the church by building coalitions with partners that share this vision and commitment

5 Leverage Location for Ministry • 78.5% of those surveyed agreed/strongly agreed: “I believe that our location on Broadway is central to our identity and call as a congregation.” • Physical appearance does have influence • Population during past 3 years within 1 mile of APCC has risen slowly • Increased traffic expected with Capitol Hill Transit Station

6 Proposed Building Improvements Aggregate Cost of $1.8 m $0 $500,000 $1,000,000 $1,500,000 $2,000,000 Masonry/Roofing/Painting Heating & Plumbing Landscaping Interiors Lewis Hall * Consultants have also estim ated the costs of fire sprinkler ($374K) and electrical ($118K) im provem ents.

7 Limited Initial Seismic Work • Will protect people in the building, exiting the building and on the sidewalk • City will require seismic improvements (in line with proposed work) for buildings with unreinforced masonry walls • City unlikely to issue current permit for roof work without addressing unstable brick arches • Would cost considerably more to do seismic work after the new roof is installed • Current two-phase approach to roof and seismic would allow you to see how much roof/exterior work costs before committing to extent of seismic work

8 An Investment for the Future  Improve safety  Make church more transparent, open & inviting  Greater income potential  More activity in building  Supports connection to community Opportunity to reach new people and draw them into life of the church

9 The Longer Y ou Defer…  Greater the cost  Greater the liability  Greater the risk of failure Miss window of opportunity and ability to leverage current momentum

10 General Approach • Base Case + 5 Scenarios • Vary with changes to 4 key assumptions Building Annual Giving Improvements Rental Income Financing

11 Base Case = Status Quo 12% ↑ Worship Attendance No 2.0% of Income Given Building Improvements $1,700 per HH No Events, Room Rentals & Tenants Held Constant Financing

12 Growth in Worship Attendance Average, 20 10 – 20 13* 12% 12% Church Congregation Records Survey * Average excludes 2012 year of pastoral transition.

13 Summary of Scenarios Scenario I Base case + Increase in weddings Landscaping N/A Scenario II CDF funds released Moderate giving & rental growth Landscaping & “Safe/Dry” Scenario III CDF funds released Same as above + Chalice + Lewis Hall tenant Landscaping, “Warm/Safe/Dry,” Lewis Hall Scenario IV CDF funds released + Finance “Warm” Same as above Same as above Scenario V Same as above Same as above + Fire Sprinkler + Electrical CDF funds released

14 Rental Income as % of Total in 2022 $700,000 $600,000 $500,000 $400,000 83% 83% 83% Giving 89% Rentals $300,000 93% 95% $200,000 17% 17% 17% 11% $100,000 7% 5% $0 Base I II III IV V

15 Rental Income • Per WA statutes, APCC needs to ensure total rental income is less than general operating and maintenance expenses each year • In all projected scenarios, rental income falls well within this budget cap • If rental income grows farther/faster, APCC will want to monitor to ensure continued compliance

16 When Does the Church Generate a Surplus & 6 Mos. of Reserves? Base I II III- V 2021 2021 2018 2018 2027 2025 2020 2019

17 Operating Reserves Months of Cash Operating Environm ent 0 Crisis – Scrambling for cash. Delaying payments to vendors. Overdrawn checking account. <1 month Cash is tight – Relying on line of credit. Waiting (hoping!) for a check to come through. Delaying payments to vendors. 1-3 months Actively managing cash – Should consider liquidity planning. Little room for “rainy days.” 3-6 months Room to breathe – Can do some medium-term thinking. Can weather some unexpected events. Not a time to be complacent. 6+ months Handles risk – Can do long-term planning. Able to withstand increasingly acute shocks such as funding cuts.

18 And the Effect on CDF Funds? • To support the continuing operations of the church, APCC would need to draw down on the CDF funds $250,000 $200,000 $150,000 $100,000 $50,000 $- Base I II III - V* * Scenario IV excludes $91,000 of interest paym ents related to the “ Warm ” financing, w hich w ould total $160,000.

19 Key Takeaways #1 • There is an “optimal” size for this building to make sense financially ▫ 335 in Worship (without rental income) ▫ 230 in Worship (with rental income) • There is a role for rental income to play ▫ Leverage space ▫ Create vibrancy ▫ Attract new members ▫ Stabilize financial situation • APCC could “turn the corner” in 5 years • Surpluses allow you to ▫ Replenish Budget Reserve Fund ▫ Expand programming in the future

20 Sustainable Endowment Spending Set Annual Spending •Set a new dollar amount each year, based on the issues facing the organization Budget •This is how Designated Funds & Budget Reserve Fund are set up Income-Based •Spend only the current income from investment portfolio Formula •Currently applies, in part, to CDF •Most common formula Rolling Average •Spend a fixed % of the average market value over previous quarters or years •Generally, a 3 or 5-year rolling average •Separates the calculation of spending levels from the market value of the Inflation-Adjusted investment portfolio •Set an initial dollar amount and adjust the level each year based on inflation •Attempts to combine rolling average and inflation-adjusted formulas Hybrid Model •Typically, only largest endowments (universities) use these, due to complexity

21 Spending Benchmarks • Rolling average models distribute 4-6% annually • Inflation-adjusted models use 3% floor and 6% ceiling to further ensure stability in spending • IRS requires 5% annual distribution of private non- operating foundations • Upper limit of 7% set when “prudence standard” updated following adoption of Uniform Prudent Management of Institutional Funds Act (UPMIFA ) ▫ WA State did not adopt this (optional) provision of the act, though prevalent throughout the nation

22 Risk of Portfolio Exhaustion After 40 Years 70 % Stocks/ 30 %Bond s 80% 70% 60% 50% 40% 30% 20% 10% 0% 3% 5% 7% Spending Rate

23 Replacement Reserves • Facilities • Equipment • Appliances • Interiors • Exteriors NOT • Routine maintenance • Emergency repairs ▫ A reserve schedule should be created to estimate the future cost and anticipated year of replacement for each item.

24 Fund Recommendations • Do not replenish Patsy Gray Fund with monies “owed” from other funds ▫ Patsy Gray will be depleted in 2013 ▫ There are no restrictions, so these funds have been used for an appropriate purpose ▫ No rules to enforce conservation of equity ▫ Terminate fund • Next, use Budget Reserve Fund ▫ Once Patsy Gray is depleted, use Budget Reserve as primary source of supplementing operating expenses ▫ Historically, both churches chose to spend principal ▫ If depleted, rebuild when practicable ▫ Over long term, surpluses used for new programming

25 Fund Recommendations • Draw down from Church Development Funds… ▫ To cover deficits, after tapping the Budget Reserve ▫ If you proceed with building improvements, spread out projects to continue generating investment returns ▫ May also use to finance “Warm” for added assurance • Continue to strive for 50/50 split between UCF and CCF ▫ Create a replacement reserve schedule for capital assets ▫ If proceed with building improvements, keep minimum $ amount in fund for this purpose • Could be accompanied by targeted fundraising campaign for smaller projects (e.g., landscaping, interior, Lew is Hall rem odel)

26 Fund Recommendations • Do not replenish McEachern Fund ▫ Monies previously on loan have been repaid ▫ Council could designate funds at the time of future pastoral search and relocation event (lies dormant) ▫ Could also terminate fund • Camps & Conferences ▫ Consider applying these funds ”creatively” toward recurring items to supplement future budgets

27 Spending Policy Recommendation • For Dedicated Funds (Cam ps & Conferences, Sam aritan, Scholarships)… • Increase annual distribution rate to 5% of 3-year trailing average ▫ Improves consistency of distributions ▫ $ amount varies with investment performance ▫ Preserves capital through ‘average’ spending