This document was written 11 years ago and has not been revised to reflect more than $100,000 in capital improvements that occurred over the past decade. This document also refers to a goal of raising $1,000,000 which in 2014 would have lowered the CCS mortgage to 2.2 million (which was a prerequisite for the Green Family [philanthropic purchasers] at that time.) for about ten years, CCS has paid a monthly mortgage of over $15,000 a month and paid the balance down more than $1.2 million since taking ownership of the property in 2012.
This document is made available now merely to make it clear to those who ask me how I feel about a recent development: the pending sale of the CCS PROPERTY to a financially sound like-minded local ministry willing to lease to CCS. While I have not played a part in this most recent process (since I’m now fully retired from CCS), I could not be happier, and I hope that this document (from 11 years ago) will help any concerned parties to see that this pending model is not a new concept. It will help the school focus on Christian education and put the best-use and future development of this asset in very capable hands. God’s timing is perfect.
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The Advantages of Stewardship over Ownership for the Future of CCS presented to CCS Board 2-22-2014
For over a year, CCS leadership
has been focused on a plan to secure the building without necessarily owning
it. The plan is based on a third-party philanthropist buying the building and
then giving it to a local like-minded ministry that is supportive of CCS and
its goal to continue operating in the facility (under the protection and
benefit of an affordable “shared-use agreement”). This has been our only plan for over a year,
and for that reason we call it “Plan A.” The only variable in Plan A has been
which local “recipient” is most likely to put the Kendra property to best
ministerial use while also providing the most advantageous arrangement for CCS?
The recently introduced Plan B (LLC) is the same concept. It merely assumes a
different “philanthropic purchaser.” The outcome of Plans A and B need not be different.
After nearly two years of
experience with the costs of the Kendra property, CCS leadership continues to
see that the advantages of occupying this building are far greater when not
encumbered with the financial responsibilities of owning it. It is now time to
communicate with our constituency the advantages of this position; to help them
see that the limited school budget cannot afford to absorb the costs of
ownership (some of the reasons are outlined below). While communicating this
message, we should also explain what is at stake if we fail to meet this goal
by June 15 (Diocese at the door [At the time of this document, our building was listed by Fifth/Third Bank “for sale” and St. Mary’s K-8 in SL had walked through our building three times. Our one-year lease expired on June 15. We were glad St. Mary’s decided to build at their current location rather than move to the CCS property, but that was unknown at the time.]), and then urge all those who care about CCS to
put additional “skin in the game” to help meet the $1M goal.
The following five points
underscore some of the costs that will be assumed by the co-occupant
“recipient” of this property. They help explain why CCS leadership is thankful
that such a local ministry is willing to take on the bulk of future financial
responsibilities inherent in this philanthropic plan.
1.
$40,000+
in additional maintenance personnel: For the past two years, our school
budget has not had a “facility director.”. We have a $300/month
consultation/assistance agreement with the former facility director who helps
with certain maintenance tasks after hours, but there is no “on-site” staff taking care of the normal day-to-day,
wear-and-tear maintenance of this $5M property and its equipment and buses. The
CCS administrator and volunteers shovel sidewalks, clean windows, etc. (One experienced person used to be paid for
the higher-skilled tasks she now does voluntarily.) We are thankful for a
“housekeeping” team of three part-time custodians (minimum
wage), putting in less than 30 man-hours a week, but our current cost-saving
program is not a good long-term plan. The future owner of this building will
likely add a paid staff person ($40,000+?) to properly maintain this building. Of all the possible
“owner” / co-occupants of this facility, which one best understands the
need to fund long-term maintenance personnel in their budget?
2.
$50,000+ in annual “deferred maintenance.” The
term “deferred maintenance” in a property owner’s budget refers to the funds
the owner should set aside annually for the large ticket items that will need
to be replaced or repaired over periods of long-term ownership. For instance,
the commercial carpet in this building has held up well for 15 years, but
high-traffic areas in front of doorways will someday need to be replaced. It is
highly unlikely that all carpet in the building would be replaced at the same
time, but just for the sake of discussion, let’s calculate how much that would
cost (using conservative figures):
The nylon commercial carpet in
our building costs $2.70+- /SF. Tear- up and installation of new carpet is at
least $3.30 /SF, making a total of $6.00 per square foot to install new carpet.
There is approximately 50,000 SF of carpet in the building (after taking out
gym, balcony, and café). That means (conservatively speaking) that it would
cost at least $300,000 to re- carpet the building. If such a project were to
happen when the building is 25 years old (when our current kindergarten is in
10th grade), the owner of this building should be putting aside
$30,000 per year in the “deferred maintenance” just for carpet.
Imagine how much higher the
annually “deferred maintenance” line should be to cover the inevitable purchase
of a new boiler, new drinking fountains (one is already dead), new commercial
freezer (ours needs a $1,000 compressor), new lawn equipment (ours is 10 to 15
years old), repairs to irrigation system in every zone, new maintenance
equipment (our commercial vacuums cost about $800 each and ours are old), new
sound equipment in the gym (needed immediately for Sunday church occupancy). In
the next ten years of “ownership” of this building, everything inside will age
from 15 to 25-years-old. Some accountants recommend putting at least 1% of a
building’s value into “deferred maintenance”. This building is worth more than
$5,000,000. So 1% represents a line item of $50,000 per year. Of all
the possible “owner” / co-occupants of this facility, which one is prudently
adding “deferred maintenance” of this building to their budget?
3.
Total
future CCS cost to occupy is a 50/50 split of
annual “overhead” costs ($200,000 plus the $50,000 mentioned: $250,000):
$125,000. That is less than $1.79/SF per year. Compare that cost to typical
“rental” situation using a modest $4 / SF (using 70,000SF): Rent would be
$280,000 annually PLUS the “overhead”
which results in more than $400,000 per year to “occupy”. That would be an untenable financial
obligation for CCS, but so is the prospect of taking on full responsibility for
the costs of owning the current 70,000SF facility. As the school’s real-estate
consultant said in a recent meeting. CCS could not ask for more favorable terms
than the offer to split overhead costs ($125,000) as its full financial
obligation in a long-term co-occupancy agreement. The business advantage of
such an arrangement will be equally obvious to financial donors/investors who
seek the best for CCS’s future.
4.
$1,000,000+
in immediate “start-up” costs for a church and future construction costs: [remember this document is 11 years old and does not reflect current pending arrangement.] Now consider the fact that one of the
possible church co-occupants in dialogue with CCS is also committing to
spending more than $50,000 just to “equip” the pending “church plant” for
services in our building (sound equipment, lighting equipment, etc.) There are
also expressed intentions for them to build a church office/ reception area
separate from the current school footprint so the church can have its doors
open during the week when the school wings are
secured (as required by law). Along with the office construction, there
plan to construct a nursery through “preschool” wing currently lacking in the
building. It is not the business of CCS
speak more specifically of another organization’s budget or expenditures
in these projects, but clearly it involves far more financial “investment” on
the other side of Plan A than the $1M CCS
“Lease Adjustment Payment” which satisfies the bank’s expectations for
final sale. Of all the possible “owner”
/ co-occupants of this facility, which one is prepared to underwrite such
start-up costs and construction to improve this building for use by two
separate Christian ministries?
The above “church” improvements indirectly help the school: Future concerts will have a proper sound
system again. The lighting board that a donor purchased for CCS will be put to
full use. The video projectors for the gym screens will be replaced with
state-of-the-art projectors.
The fact that almost all church
traffic will be in a different wing Mon-Friday (once construction is done)
makes church reception/ office space
more private and quiet and allows the school to be in compliance with standard
security measures. A new nursery through preschool wing, means parent traffic
for preschool (and possibly kindergarten) is in the SE parking lot rather than
the front of the building.It also means that the elementary wing gains at least
one more classroom (possibly two if kindergarten class could move to the new
wing). That means the growing CCS program gains two more classrooms without any
new construction in the classroom wing.
5. The advantage of having such a “fixed cost” shared-use agreement in our budget means all annual fund-raising above $125,000 would go directly into improving our program and giving teachers and staff a long-overdue improvements in their compensation packages. (Under the church from 2000 to 2010, the CCS staff saw annual modest increases and had a 5% retirement program. They put aside 2% and the church matched 5%--modest program but under independent model, they have no retirement, and the 2014-2015 school year quite likely represents their sixth year of a pay freeze.) Our highest paid classroom teachers with their master’s degrees and 25+ years of classroom experience do not make first year BS degree pay in a public school. It may also be worth noting that current CCS administrative pay is based on the same teacher pay scale (rather than September through May, his contract includes June through August duties). He accepted a large pay-cut when he moved from the church budget to the school budget three years ago. The lower pay represents a $45,000 decrease in his income so far. He refinanced his house to make up for the change in income. Even so, he does not share the concern to restore teacher compensation for his own benefit. He is speaking on behalf of a faculty and staff that cannot be asked to bear continual sacrifice when we have the opportunity to embrace a much better stewardship model by welcoming the idea of co-occupancy with a $125,000 “shared-use agreement” rather than ownership without a comparable financial advantage for CCS.
Closing thoughts: Do you know that when CCS “accounts receivable”
gets calls from CCS parents who cannot pay their tuition on time, the most
common excuse is, “We had other bills to pay.”
It is frustrating that some parents don’t consider their tuition bill as
important as “other bills.” In the last CCS board meeting, it was reported that
CCS may be facing a cash-flow issue by mid-April. This could mean that teachers
may be getting only partial pay in from that time through the ends of their
contracts (as cash flow allows). There was no mention of telling the utility
companies or trash removal or snow plow service that their payments would be
late. How is this thought process any different than when families tell CCS
that other bills matter more than tuition?
In that same board meeting, the administrator mentioned that in his 33 consecutive years of K-12 Christian education, he was never “short paid” nor had he ever faced the prospect of telling his employees they would be “short paid.” CCS leadership must do everything possible to make sure a “short-pay” announcement can be avoided. Likewise, thinking down the road a few years or a decade, CCS must also do everything possible to make sure that our limited budget is being put to the best possible use for the CCS program and CCS faculty and staff. “Ownership” is a financial obstacle to that goal. If God is so kind to provide us with a financially able “owner/co-occupant” on this campus, let us embrace it.
Lord, help us show our gratitude
to another ministry that is willing to take on such financial responsibilities
for the glory of God. The administrator cannot overstate how strongly he feels
about this. Once we embrace and communicate why the stewardship model of Plan A
(or B if needed) is far better than ownership, we can focus on our mission and
those who help us fulfill it (i.e. program enhancements and incremental staff
compensation restoration).
Any concerns regarding co-occupancy can be addressed in the shared-use
agreement. CCS faculty and staff know they can be a good co-occupant because
they have done it before. Let us all commit to remembering the very functional
years as a ministry of Calvary Church (rather than the last two years when
their financial crisis caused regrettable strain in church/school relations.
Let us remember that the former church’s financial burden included all of the
cost of ownership mentioned above AND over $300,000 per year in mortgage
payments AND the school administrator’s salary (until July, 2011). Let’s acknowledge that CCS greatly benefitted
from the church-hosted model for most of time shared in this building. The ASCI
accreditation team of 2007 gave both the church and the school kudos for how
well they worked together, and it was an accurate commendation. Let us remember
that the former church congregation and leaders once had such a vision for
Christian education that they invested millions of dollars into this fine
building and supported the school ministry for several years. Those years were
exemplary in many ways, and the school leadership was able to focus its
attention on the school. Plan A (or B if needed) allows that to be true
again.
Let’s focus our attention on the best years of our past
as we pray for and strive toward a hopeful future. If God wills that these
moving parts to “work together for good,” let us strive to live and lead worthy
of such a blessing and to be excellent partners with the other ministry that
uses this place. May this outpost on Kendra Road lift high the cross of Christ to all who pass
for years to come. If such a story unfolds in the months ahead, may all glory
go “…to him who is able to do far more abundantly than all that we ask or
think, according to the power at work within us…” Ephesians
3:20 (ESV)
Tom Kapanka
[The story of CCS maintaining excellent credit and a flawless payment record with its mortgage-holding bank for all these years is truly a “loaves and fishes” miracle. Thanks be to steadfast support of a faithful donor base.The fact that a very similar situation (of continued service in the building without the burden of ownership) has again presented itself to CCS 11 years after the above document was written is an unforeseen blessing. To God be the glory.]
