The Advantages of Stewardship over Ownership for CCS’s Future Written 2-22--2014

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 10^th 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.]