March 25, 2017

October 29, 2010


Dispatches from the HoB/D: We Need to Borrow More to Get Out of Debt

There have been a number of posts concerning the finances and leadership of the Episcopal Church. As the chair of the finance committee and a member of the audit committee, I want to address what I understand to be the key issues and the steps we are taking to address them.

The first issue is the money we have borrowed to pay for the renovations to the Church Center and the purchase of a parking lot as a future site for the national archives.

When those needs arose, the staff and Executive Council chose to borrow a combined $47 million dollars from our $50 million line of credit. The terms allowed us to pay as much or little principal as we chose - and we have made primarily interest payments and only about $500,000 in principal payments over the past six year.  I and other members of finance and audit committees as well as previous members of those committees with extensive financial expertise whom we have asked to advise us, believe that a loan of that amount should not be made with a line of credit.  It is not a standard financial practice to use a line of credit for major capital expenditures. The purpose of a line of credit is to cover cash shortfalls for small amounts of time and is normally repaid as soon as possible (generally within a year).

In retrospect, this loan was undertaken at the time when banks encouraged all of us, individual homeowners and organizations, to over-extend ourselves and to take on loans that were not adequately secured. I believe that is what happened to us. But now the time has come for us to put our financial house in order.

It was entirely appropriate and necessary for us to do the renovations at Church Center and some of the costs were a result of the need for asbestos abatement and not optional. Concerning the proposed future site of the Archives in Texas, (the parking lot) some of us were convinced that the availability of the parking lot was a good purchase at the time, especially since the Archives had been asked to vacate the space to the Seminary of the Southwest, the current home of the Archives. The parking lot is a functioning enterprise and its income is sufficient (at the currently low interest rates) to make interest and some principal payment. If interest rates increase, as well they may, this situation would change. In any case, we need a new site for the Archives and the current parking lot is one option for that.

I and others believe we now need to obtain mortgages or private financing, using the properties as collateral, just as most of us use our homes as collateral for our mortgages.  With interest rates at record low levels, we believe we should secure loans and make both interest and principal payment to service our debt - preferably paying principal at an accelerated rate, so less of the church’s funds goes towards interest payments and we can again be debt-free.

Several posts have suggested a conflict between the Treasurer, Kurt Barnes, and me. That assessment diminishes the importance of the issues before us undermines the commitment both Kurt and I feel for this Church. We simply have a difference of opinion as to how we should address these questions. Kurt, and others, including members of the staff, want to have the maximum amount of flexibility so if there is a shortfall in income from the dioceses, they can use more of the line of credit to fund the operations of the church and Church Center programs and pay less or no principle. That is understandable - the staff of an organization normally wants this kind of flexibility to do the work they have been given to do.

On the other hand, I believe that we should pay our debt first and make whatever cost reductions are necessary to allow us to do so. That is also understandable - the role of the finance committee is to look at the big picture and the long view.

Another recent thread that has been on the HoB/D list is reflections on the decline in members. I share these concerns. If we project the decline in members and income into the future, it is clear that we can not maintain the size of the operations we currently have. We have lost about 1/3 of our members in the last 50 years - but we have a structure that has stayed pretty much the same. We need to “right-size” our structures and reduce about 1/3 of our costs.  That includes General Convention, Committees/Commissions as well as Church Center programs. And it probably also will mean combining dioceses, reducing the number of bishops and committees, on the diocesan and parish levels as well. I believe these are the points Bishop Jefferts Schori was making in her comments to Executive Council.

If we begin to make those structural and organizational changes expeditiously now and focus whatever savings we can generate on our true “mission” of building the church (by which I mean, making disciples for Christ), we can turn this matter around. I keep a copy of Claude Paine’s book, “Reclaiming the Great Commission” on my desk to remind me of our mission.  (after all, my wife is a priest!)

If we all continue to focus on our dwindling resources, we will simply continue down an unhealthy slope.  While the most current manifestations of this have focused on declining membership and finances, it is, at the end, really about vision. The system we are now in is producing what it is designed to produce. I believe we need to challenge what we are doing, change direction and ultimately change the system. That will need the hard work of many, so I hope others will do their part.

I expect these comments will generate resistance - especially from those who now have the most power and resources in the system. I hope they and we all can stop, listen to what God is saying to us and refocus on what our Book of Common Prayer says so well about God’s church (i.e., God’s people) existing to be the arena by which God restores all people to God and each other in Christ. If we are not about doing that, we have truly lost our way!

Del Glover,
Chair of the Finance Committee of Executive Council


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40 comments

Dear Del,
Here’s a suggestion for you to use to “challenge what we are doing, change direction and ultimately change the system”:

1)  Stop the lawsuits (costing TEC millions per year)
2)  Stop funding the “rump” dioceses, and let them sink or swim on their own (you want to be a diocese, then be a self-sustaining diocese)
3)  Start preaching Jesus Christ - crucified, resurrected, ascended, and returning.

Just a start….

[1] Posted by GillianC on 10-29-2010 at 02:13 PM · [top]

[1] GillianC,

It may be just a start, but it would be a rather good one by comparison to the alternatives.

Pax et bonum,
Keith Töpfer

[2] Posted by Militaris Artifex on 10-29-2010 at 02:21 PM · [top]

In retrospect, this loan was undertaken at the time when banks encouraged all of us, individual homeowners and organizations, to over-extend ourselves and to take on loans that were not adequately secured. I believe that is what happened to us. But now the time has come for us to put our financial house in order.

Of course, a “church” that no longer believes in ANY personal accountability would blame it on the banks.  Like it has ANYTHING to do with the securitization of any loan.

[3] Posted by midwestnorwegian on 10-29-2010 at 02:21 PM · [top]

When ‘permanent’, amortizing debt is arranged, reliable ‘repayment sources’ are specified,  both ‘primary’ (eg. cash flow) - and ‘secondary’ (liquidation of assets).

From where, pray tell, will the cash flow to pay down the contemplated financing come?  How much financing will 80% (let’s say) loan-to-collateral value permit in the current real estate market?

If the $47 million draw-down on the line of credit had been purposeful “bridge financing”, all this would have been figured out ahead of time.

These folks have “extensive financial expertise”?

[4] Posted by Pete Haynsworth on 10-29-2010 at 02:22 PM · [top]

The system we are now in is producing what it is designed to produce.

You write this as if this is a mere bump in the road sort of problem soon to be put to right? Really, Del?  So lets see the system (ie TECUSA) is meant to produce exactly what ? A faithful witness of the Christ’s Gopsel? No, that can’t be it… no talk of proclaiming Christ’s gospel Ummm. What exactly is TECUSA supposed to be producing? Oh that’s right it is so NEW!  (ie God is doing a new and prophetic *thing*) NO ONE including our P B seems to know what it should produce. As far as many can see it is great at producing divisive litigation, millions of debt, and changing democratically crafted canon law into the rule of Law by one.

Gillian C is correct. Try focusing on some actual fundamentals of Christianity and TECUSA might just turn itself around. I would start with #3 as #1. First and foremost the church should be about proclaiming the Gospel of Christ. The others are great ideas as well. Try these 3 and I think you have the beginnings of the answer of how to change the system ultimately! Try it, you might just like it !!! Just a thought…....

[5] Posted by SC blu cat lady on 10-29-2010 at 02:46 PM · [top]

...it is, at the end, really about vision.

NO. 

It is, at the beginning, middle and end, all about the One Triune God. 
This isn’t a “vision”. 
It is truth.

[6] Posted by R. Scott Purdy on 10-29-2010 at 04:10 PM · [top]

Financial bankruptcy of the TEClub is a good thing.

There is probably a law of business that recognizes that inertia will prevent “right-sizing” and they will too slow to correct the overspending. There are too many small churches that if it was being run as a business would be cut lose. Also, the PBess fiat that properties can’t be sold to the most logical market, the ACNAers, will hurt when the dioceses finally give up on these non-viable churches.

The future looks very bleak for the TEClub - but the (true) Christian Church will prosper.

[7] Posted by robroy on 10-29-2010 at 07:18 PM · [top]

Who makes capital purchases using a credit card?

Someone who doesn’t want the wife to find out that they have put the family assets at risk to finance their habit!

[8] Posted by Pageantmaster ن on 10-29-2010 at 07:43 PM · [top]

But now the credit card company is about to foreclose unless the wife agrees to mortgage her and her children’s home.

[9] Posted by Pageantmaster ن on 10-29-2010 at 07:46 PM · [top]

and pledges her jewellery

[10] Posted by Pageantmaster ن on 10-29-2010 at 07:47 PM · [top]

Del!  You are a bonehead and demonstrate your utter lack of suitability to be FinComm Chair! 

this loan was undertaken at the time when banks encouraged all of us, individual homeowners and organizations, to over-extend ourselves and to take on loans that were not adequately secured.

I happen to work in the banking industry and have for 25 years.  FWIW, I would have let banks fail including the behemoth that currently pays my salary.  But I know “from the inside” that much of the unsafe practices are driven BY THE GOVERNMENT and by GREEDY BORROWERS leaving the Banks holding the bag.  Lines of credit for working capital are SOP.  Any bone head knows that you don’t use short-term financing for long term needs.  This has been an idustry maxim for decades at the very least.  Yet Del seems to have just learned this.  My experience would suggest that the Borrower never clearly disclosed their intention to the Lender.  There is another maxim in the industry that says if a client is set on defrauding the bank, they will find a way.

[11] Posted by Nikolaus on 10-29-2010 at 08:08 PM · [top]

#11 Granted you have a point about the silly comment about ‘the government made us do it’, and a true comment about the reckless unsuitability of this sort of 4 year short term borrowing to finance property transactions, Mr Glover and his committee were the ones who were hauled over the coals for daring to question the even more reckless actions of the Presiding Shopaholic and her staff.

[12] Posted by Pageantmaster ن on 10-29-2010 at 08:21 PM · [top]

#11 Nikolaus - I work for one of the behemoth’s too (curious which one you are at)...and funny…we both got our jaws torqued at the same phrase!!  lol

[13] Posted by midwestnorwegian on 10-29-2010 at 08:53 PM · [top]

I don’t buy what I can’t afford; it’s as simple as that.  That’s the reason why my wife and I don’t buy a new car every few years, and it’s also why we made sure we could afford to buy our home seven years ago, after selling our townhouse and paying half down on our new home; knocking the bottom out of our $256,000 mortgage in the process.  Too many first-time buyers got suckered into buying homes they couldn’t afford, and the rest is history.  Sure, we can blame the lenders, but let’s make sure the home buyers share the blame.  Don’t buy what you can’t afford, and don’t live beyond your means!

[14] Posted by cennydd13 on 10-29-2010 at 09:12 PM · [top]

I find it interesting that many of us (especially myself) are learning just what an awful thing debt is.  Yet another case where society/culture thought we knew more than what God has told us.

[15] Posted by JustOneVoice on 10-29-2010 at 09:13 PM · [top]

Does anyone to whom Mr Glover was referring at this point?

I expect these comments will generate resistance - especially from those who now have the most power and resources in the system.

[16] Posted by MichaelA on 10-29-2010 at 11:42 PM · [top]

Whatever. From my perspective, now outside TEC, I think Mr. Glover’s general arguments make sense. The snarky headline about borrowing to get out of debt—and I am connoisseur of snarky—doesn’t give credit to the guy wanting to set the books right and make whatever hard decisions need to be made. Might that even involve not leaving the Wicked Witch with a pot of cash to spend on lawsuits without having to bother with such troublesome details as budgets and canons? That said, TEC has become a post-Christian deist club for liberals, so I have no interest in seeing them succeed, unless they repent. One line did make me snort coffee out my nose, though I don’t know exactly why it struck me as hilarious: “(after all, my wife is a priest!).”

[17] Posted by Romkey on 10-30-2010 at 10:33 AM · [top]

Thanks to Pageantmaster for his delightful critique in #8-10.  It would be comical if it weren’t so very grim and tragic.  I think PM’s sarcastic series very much fits the tone set by Greg Griffith with his title for this thread: “borrowing to get out of debt.”  What idiot ever came up with that idea?

But as usual, robroy (#7) is right.  I really don’t think the leadership of TEC is going to repent and come out of denial until they hit bottom financially and are FORCED to change.  Fortuantely (for the rest of us), that brutal day of reckoning may come sooner rather than later.  Sooner than most of us supposed.

David Handy+

[18] Posted by New Reformation Advocate on 10-30-2010 at 10:36 AM · [top]

MichaelA (#16),

I’m always glad to find araes where we share common ground (of which there are actually many).  I had the same instinctive response you did to that tantalizing line about Mr. Glover expecting push back from “those who now have the most power and resources in the system.

But immediately the PB herself came to mind.  Who currently has more power within the system than she does?

Maybe this explanation from the chair of the finance committee helps to explain the PB’s mysterious but ominous remarks vilifying those resisting her attempts to give TEC an extreme makeover.

David Handy+

[19] Posted by New Reformation Advocate on 10-30-2010 at 10:43 AM · [top]

Aren’t archives things that can be digitized? It seems like in the modern computer age (unless it is some kind of artifact)a lot of information can be stored in a very small space. Why would they need to spend 10 million for the “footprint” alone. Why I’d bet that I could store it right here in my new computer. Maybe I could lease the space to TEC. I could firewall a partition on drive C and it could be kind of an Ecto Containment Unit.

[20] Posted by Fr. Dale on 10-30-2010 at 12:10 PM · [top]

#20 I wondered if it was anything to do with the plans of 815 some time ago to have I think 4 branch offices at all points of the compass?  That is the only reason I can think of for borrowing $10m on your credit card to buy a car park when you could have used the money to buy a storage facility or another building easily adapted or used one of the existing facilities which is under-utilised.  The obvious candidates would have been the theological colleges which have been struggling and selling off land, and it would have helped them out as well.

It sounds to me as if they have, or had, much bigger plans under the Presiding Spendaholic.

The more I think about this, the raiding of trust funds, the capital spending out of short-term borrowing intended for ‘working capital’, the undeclared litigation costs estimated at $22m or more, and the continued litigious approach of 815, I just wonder just how financially at risk the whole thing is?  By the way, where did they hide the income from commercial rents for the tenanted parts of 815 in their accounts?  I couldn’t find them.

[21] Posted by Pageantmaster ن on 10-30-2010 at 12:26 PM · [top]

21. PM,
I don’t know why they would take that path for the archives but then I’ve never figured out why Huston became the launch control site for Cape Canaveral.

[22] Posted by Fr. Dale on 10-30-2010 at 12:33 PM · [top]

22-three letters. LBJ.

The guy seems pretty reasonable from a financial standpoint. 

The irony is that with technology and resulting productivity advances, the congregant to national staff ratio should have shrunk over the last 50 years, even if TEC had not lost a single member.

[23] Posted by Going Home on 10-30-2010 at 01:11 PM · [top]

#23 This is a reasoned argument from a man who does seem to be trying to do his best for his church.  Much thanks has he had for it, but a repulsive and angry tirade from the Presiding Bishop.

But a reminder of what was not so long ago a great and decent church and a light for others.

[24] Posted by Pageantmaster ن on 10-30-2010 at 03:00 PM · [top]

#22 Fr Dale

I’ve never figured out why Huston became the launch control site for Cape Canaveral.

Perhaps they felt safe there in case a rocket blew up?

[25] Posted by Pageantmaster ن on 10-30-2010 at 03:03 PM · [top]

PM,
Good guess considering our first satellite effort with the vanguard rocket (I think it almost went up from Vandenberg AFB). but Going Home was correct.

[26] Posted by Fr. Dale on 10-30-2010 at 03:19 PM · [top]

Yes, probably more to do with communications and telemetry than keeping a safe distance.

[27] Posted by Pageantmaster ن on 10-30-2010 at 03:26 PM · [top]

[27] Pageantmaster,

I believe the key to the answer to your question was the “LBJ” in the response by Going Home.

L(yndon) B(aines) J(ohnson), as John Kennedy’s Vice President succeeded to the Presidency when Kennedy was assassinated. Johnson was a Congressman and Senator from Texas for 24 years prior to being elected Vice President. His ability to arm twist and broker deals was widely known. What we in the USA refer to as political “pork barrel” politics.

Pax et bonum,
Keith Töpfer

[28] Posted by Militaris Artifex on 10-30-2010 at 03:46 PM · [top]

#28 Thanks Keith for the explanation.
I recognised the initials but not the implication.

[29] Posted by Pageantmaster ن on 10-30-2010 at 03:52 PM · [top]

“We Need to Borrow More to Get Out of Debt”

Hey, it worked for the federal government, why not TEC?
[/sarc]

[30] Posted by Jim the Puritan on 10-30-2010 at 05:16 PM · [top]

I have yet to see anyone refute the Curmudgeon’s “Constitutional Crisis Part V” summary. 

Gotta love this: 

“In retrospect, this loan was undertaken at the time when banks encouraged all of us, individual homeowners and organizations, to over-extend ourselves and to take on loans that were not adequately secured”.

That must be it—it’s the banks’ fault.

[31] Posted by Anti-Harridan on 10-30-2010 at 06:02 PM · [top]

[26] Fr. Dale

Vandenberg AFB

Ah, VAFB.  The home of 1STRAD, and 4315th CCTS, and the place I entered active duty.  I have many fond memories of the fog at VAFB.

carl
SAC Will Rise Again

[32] Posted by carl on 10-30-2010 at 07:41 PM · [top]

In his prime, no one was better at strong arm politics than LBJ.He managed to get everything from NASA to free pants through arm twisting. 

He inherited a war he questioned from the beginning and it ultimately destroyed him.

[33] Posted by Going Home on 10-30-2010 at 07:45 PM · [top]

#31, We all have vivid recollections of walking down the street in 2008, keeping an eye out for rogue mortgage brokers, picking up the pace when strolling past the branch banks, being forced at gunpoint by aggressive loan officers to take out an adjustable rate mortgage.

Del was probably minding his own business when a sultry voice seduced him with sexy talk about ‘low introductory rates’ and ‘easy payments’. A few hours alone together and he found himself dazed and confused with telltale ink stains on his fingers.

He had a moment of weakness. Who are we to judge?

[34] Posted by Matthew A (formerly mousestalker) on 10-30-2010 at 08:00 PM · [top]

Perhaps he really wants to secure a long term loan so that they can free up that line of credit to cover other expenses.  Like….

[35] Posted by BillK on 10-31-2010 at 08:54 AM · [top]

#34. Matthew A (formerly mousestalker),
In today’s parlance he would have been caught up in a phishing scam. Matthew, we must remain ever vigilant. Someone might even force us to believe the wrong gospel.

[36] Posted by Fr. Dale on 10-31-2010 at 11:59 AM · [top]

It’s interesting to see so many people commenting on things that aren’t actually in this statement.

The Johnson Space Center in Houston was established in 1961 and renamed after LBJ in 1973.  More about its history here.

[37] Posted by DavidH on 10-31-2010 at 12:06 PM · [top]

Ummm… I don’t think Del is the bad guy here.  He seems to be the only one actually talking sense with regard to the state of TEC’s finances.

He recognizes the idiocy of borrowing $47 million for capital improvements on a line of credit.  He has faced the reality that TEC membership is declining, and what’s more he has suggested that this membership drop means the structures of TEC need to shrink with it. This is the closest we have gotten to a member of the leadership of TEC acknowledging what most of us had thought to be true; TEC is going broke.

As to who will respond with “resistance”, I’m sure it’s the current fatted calfs at 815.  I’ve never met a liberal who didn’t love to spend and here goes the Chairman of the Finance Committee throwing cold water on 815’s parade.

[38] Posted by billqs on 11-1-2010 at 09:41 AM · [top]

Good observation, Billqs. I don’t think all of us are making out Del Glover to be the bad guy. It is just that many here have been watching TECUSA’s demise for a long time. So to have someone on ‘the inside’ recognizing the idiocy of TEC’s present system- producing what law suits and mountains of debt ?? - is just another sign that TEC is in a death spiral. From what I understand Del is a minority voice in a system destined to produce decline and death. IF TECUSA is as serious about change as Del seems to be, then it will take what was first discussed- a complete change from the top to the bottom first focusing on the gospel.However many of us are not convinced that TEC can be turned around as many in leadership roles don’t want to focus on the gospel as it would convict their hearts and souls.

[39] Posted by SC blu cat lady on 11-1-2010 at 09:56 AM · [top]

Pair the following statement from KJS:

I think my challenges in the next few years are going to be about governance and management. We have a very complex governance structure that involves a great many people that’s not agile or nimble.

With this statement from Del Glover:

If we project the decline in members and income into the future, it is clear that we can not maintain the size of the operations we currently have. We have lost about 1/3 of our members in the last 50 years - but we have a structure that has stayed pretty much the same. We need to “right-size” our structures and reduce about 1/3 of our costs. That includes General Convention, Committees/Commissions as well as Church Center programs. And it probably also will mean combining dioceses, reducing the number of bishops and committees, on the diocesan and parish levels as well. I believe these are the points Bishop Jefferts Schori was making in her comments to Executive Council.

Del Glover knows who he is working for and his statements were choreographed to bolster support for her future plans. He has provided an additional rationale for “right-sizing” which we all know is downsizing.

[40] Posted by Fr. Dale on 11-1-2010 at 12:58 PM · [top]

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