Building & finance nuts and bolts

On October 22, the sale of the Valois building that had housed the Church of the Resurrection was finalized.  On October 27, at the monthly Parish Meeting, our Strategic Plan for the next five years was presented.  The plan covered both aspects of our life and ministry as a community, and more practical concerns about making sure our financial resources and property can support that life and ministry.

Understanding the complexity of parish finances can be a challenge, and as we have navigated 2019 there has been some confusion because of the difficulty of sorting out operating income and expenses from capital projects such as the elevator and the tunnel work. (The database we use, PowerChurch, isn’t very helpful in that regard either.) It might perhaps make it clearer to look at some aspects of our situation by comparison to a household budget.

1. Operating income and expenses. These are like the regular paycheque and the regular bills.  Income comes in (hopefully in a regular and predictable manner) and expenses go out (hopefully also in a regular and predictable manner!).  As long as income exceeds expenses – whether by $0.01 or $100,000 – you don’t have to go into debt or worry about how to pay the bills.
2. Funds (restricted and unrestricted) and capital projects.  The funds are like a savings account, and the capital projects are like a home renovation project.  We have various pots of money designated for purposes like building maintenance, organ maintenance, etc.  These are funded by special donations, memorial gifts, the daycare contributing to building maintenance, and so on – not by regular envelope contributions and other operating income.  When we need to do building projects (like the elevator and tunnel) we turn to these funds.  Obviously, if they are spent down and not replenished, we have a problem – just like if you saved $10,000 and spent it all on a bathroom renovation, and then your car needed an expensive repair.  But (for example) if we started a given year with $150,000 in these funds, we could end the year with $75,000 in the funds or $250,000, and it wouldn’t make any difference as to whether the operating budget was balanced – just like in your household budget, as long as you can pay your monthly bills, your savings account can fluctuate significantly without affecting the solvency of the household.
3. Endowment funds. These are like an inheritance from a wealthy relative.  You put them in the bank and try not to touch them, and they sit there, generating a certain amount of income thanks to the capitalist financial system.  Both St. Andrew & St. Mark’s and Church of the Resurrection had a modest amount of endowment money deposited in the Anglican Funds before the merger, but with the sale of 99 Mount Pleasant, our endowments are now much more significant. In our case, we can’t spend the capital without permission, so it’s as though the “inheritance” is governed by a “trustee” (the Diocese) who has to sign off on any withdrawals from the capital. There are two important things to understand about this large “inheritance”: one is that, although it will noticeably boost our operating income (by virtue of the 4% annual yield, which we can spend without restrictions), we must not let that encourage us to become slack in our giving to the parish.  Again, in household budget terms, having received the inheritance, we’re not going to quit our job and sit around living off Great-Uncle’s fortune; we’re going to use the additional income to have a more interesting life!  The other thing to understand is that we do plan to make periodic, strategic withdrawals (with permission) from the capital in order to undertake important projects, but we will need to pay ourselves back in order to keep receiving the permission. In other words, this portion of our “household” finances is like a home equity line of credit, which enables us to spend large amounts as necessary but also needs to be paid back in due course – it’s not just a windfall that we spend until it’s gone.

I hope that this summary has brought some clarity to what’s going on (and that I haven’t made any terrible mistakes that Trevor will point out!).  If you have any questions, feel free to leave a comment or to talk to me or the Wardens at any time.

Executive Archdeacon Robert Camara will be with us this Sunday, November 10, to formally present the cheque from the sale of the Valois building, and he will also give the congregation time to ask questions after the 10 AM service.