Allen MAC hired me to write a case statement for client Centenary United Methodist Church’s “Building on a Sure Foundation” capital campaign.
Capital Campaign Case Statement
Building on a Sure Foundation
A Capital Campaign for Centenary United Methodist Church
A Sure Foundation for Centenary’s Future
Winston-Salem’s Centenary United Methodist Church is a thriving downtown church with more than 4,000 members. Our congregation is open, welcoming and deeply committed to sharing the word of God and the love of Jesus Christ with all people. Our origins date back to 1832 when the Mulberry Society began meeting beneath a tree near the present-day Kent Road. We have worshiped at our Fifth Street location since 1931.
In 1995, Centenary conducted a successful capital campaign to fund major renovations to our main building’s first level, to acquire property for a parking lot and to create a columbarium. With the planned improvements underway, several additional, unanticipated needs became apparent. The heating, ventilation and air conditioning system began to fail. Asbestos discovered during renovations had to be safely removed. Actual costs of several planned improvements exceeded initial estimates.
In 1999, Centenary purchased the Snavely Building and the second floor of the Bell Davis & Pitt Building. Both buildings face Fourth Street and back up to 4 1/2 Street directly behind the church. More recently, the church made additional facilities improvements and invested in two independent studies to help establish priorities and plan for the future. The Administrative Board has approved several additional renovation projects for the sanctuary, but these have not yet begun, nor have they been funded.
As a result of these renovations, property acquisitions and studies during the past eight years, our facilities are more attractive, accessible and functional than ever. The entire first level of our main building has been beautifully renovated, furnished and equipped to support the many ministries of our busy church. We know we can rely on our new, energy-efficient HVAC system for trouble-free, year-round comfort now and well into the future. We have convenient, ample parking and room to grow beyond the bounds of our original property. We have the information we need to make informed decisions about our future. With a few finishing touches, our magnificent sanctuary will be completely refurbished.
The leaders of our church used bank loans and money from the Centenary Fund to supplement the 1995 campaign proceeds and cover the costs of all renovations, property acquisitions and related expenses. In all, we withdrew more than $1.8 million from the Centenary Fund and borrowed approximately $6.5 million from the bank. Through the Building on a Sure Foundation Campaign, Centenary now seeks to restore and strengthen the financial foundation of the church by repaying the bank debt, replenishing the Centenary Fund and funding the remaining sanctuary renovation projects. Our church will emerge from the campaign financially strong and well prepared for a future of continuing growth and service. As you determine your part in the campaign, we ask you to consider thoughtfully and prayerfully the following case statement.
A Vision for the Future
John Wesley, the founder of Methodism, coined the phrase: “The world is our parish.” He challenged his churches to set their eyes on a broad field of ministry…never allowing their vision to become too introspective or self-centered. Centenary UMC has lived up to that challenge since it opened its doors in 1931.
The world around us is changing. Put another way, we have a new parish. There is a coming transformation of downtown Winston-Salem (including industry headquarters, medical research facilities, the renovation of Fourth Street, a new presence of the School of the Arts, and the construction of downtown condos and townhouses). Our church is strategically located to offer ministry to, and to partner in service with, the new parish evolving around us.
To reach out to our parish will require a church that is visionary…not reactive but pro-active as it imagines and addresses the needs and opportunities of the people who will live and work within the shadow of our sacred structure. As Fourth Street changes…as community demographics (e.g., age, racial mix, economics, etc.) are altered…as increased human traffic in our parish presents a myriad of human and spiritual needs…Centenary UMC must bring its programs and personnel to bear on the surrounding population in inspiring, educational and transforming ways. We are called to a living, breathing witness to our community…called to bring life and hope to the cultural and professional mix of the new population around us.
With that in mind, we envision strengthening specific areas of ministry (including but not restricted to):
- Provide traditional and contemporary worship services in a changing world.
- Establish ourselves as a Teaching Center through outstanding Disciple, Stephen Ministry, Music and Evangelical programs.
- Position Centenary as a mission-based church leading local, national and international outreach.
- Achieve 50% ACTIVE membership by persons between 18 and 40 and their families by the year 2008.
- To partner with other downtown churches in a renewal ecumenism.
- Actively pursue creative methods to deliver our programs through the arts, sports and health related venues.
- Communicate the Love of Christ through radio, television, video and internet by delivering our ministry effectively through each of these mediums.
Why We Need a Capital Campaign
In the 1850s, when our founding congregation built its first church building in Winston, the construction schedule was tied directly to the availability of funds. As our church historian, the Rev. G. William Bumgarner, wrote, “When the money ran out, the work stopped. When there was money the work resumed.”
Fortunately, more than 150 years later, our church is strong enough financially to keep building and renovation projects running smoothly to completion. During the past decade, major renovations and real estate purchases have been completed at Centenary. Through the judicious use of savings and credit during the past decade, the important ministries and activities of the church were able to continue with the least possible disruption.
Centenary’s leaders first recognized the need for major renovations to our building’s lower level in the early 1990s. Starting with the rear entrance and extending to the lobby of the Children’s Building, we refurbished the entire floor, including the parlor, classrooms, restrooms and kitchen. We reconfigured space to create a larger and more functional place for our musicians to rehearse and prepare for services. We also added two elevators—one for the West Wing and the other for the Children’s Building—to improve access.
The idea for building a columbarium on church property originated at about the same time. In 1990, our Board of Trustees appointed a committee to study the possibility and, in 1992, recommended to the Administrative Board a suitable location west of the sanctuary. As plans for the columbarium took shape, Centenary’s leaders proposed to ease chronic parking problems by buying property on the north side of Fifth Street for a church parking lot.
1995 Celebrate the Vision Campaign Priorities
|Estimated costs for planned renovations||$ 1,400,000|
|Fifth Street parking lots||950,000|
Centenary’s 1995 Celebrate the Vision Campaign was to pay for the renovations, the columbarium and the parking lot. Our congregation generously supported the campaign priorities and achieved the $2..7 million goal.
With work on the campaign-funded projects well underway, a number of urgent, unanticipated needs began to emerge. The heating, ventilation and air conditioning system we had cobbled together over the past 70 years began to fail, and some components dating back to the original construction were beyond repair. Workers discovered asbestos—a common building material now recognized as potentially hazardous—that could be safely removed only by specially trained and equipped experts under rigorously controlled conditions.
As planned renovations continued, actual costs for completing the projects and furnishing the renovated spaces were exceeding the initial estimates upon which the campaign goal had been based. Design fees, permits and testing generated additional costs not included in the original campaign plans. Ultimately, we spent $5,743,258—more than twice as much as the campaign’s $2.7 proceeds. We borrowed $1,628,000 from the bank and made grants from the Centenary Fund totaling $1,415,258 to cover the $3,043,258 shortfall.
Additional Costs for Campaign-Related Projects
|Phase I HVAC, 10% contingency||$675,178|
|Design fees, permits and tests||400,000|
|Cost overruns, 12% contingency||793,080|
As building renovations neared completion in 1998, Centenary commissioned a $64,500 space utilization study to evaluate our refurbished facilities in light of our program needs and goals. One specific study goal was to evaluate Centenary’s need for a new church life center. The study’s authors agreed such a facility could effectively support key strategies, ministries and goals of the church. The consultants also suggested a consolidation of administrative offices might improve our operating efficiency.
In 1999, with the need for additional space confirmed by the space utilization study, Centenary purchased the Snavely Building and the second floor of the Bell Davis & Pitt Building. The two properties, located side by side on Fourth Street, back up to 4 1/2 Street across from the main church building’s rear entrance, making them ideal for accommodating Centenary’s continuing growth. The church borrowed the $191,000 down-payment from the Centenary Fund and took out mortgage loans totaling $1,473,000 to pay the balance due on the $1,664,000 purchase. The church uses rental income from the two buildings to make mortgage payments.
Snavely and Bell Davis & Pitt Buildings
|Total purchase price||$1,664,000|
Also in late 1999, the Church purchased the old Social Security Building on the corner of Spring and Sixth Streets as well as the adjacent parking lot between Pilot View and Sixth Streets and the small parking lot at the southwest corner of Pilot View and Spring Streets. The purchase of the properties for $516,401 was funded by a bank loan. In February 2000, 50% of the loan was repaid by a grant from the Centenary Fund.
In December 2000, the Social Security Building was sold for $301,383. The bank loan balance and accrued interest expense, which had been funded out of the annual operating budget, were repaid. The balance of $26,788 remaining after the sale and repayment of the loan and interest expense was placed in the Centenary Fund.
In October 2001, Centenary commissioned a $25,000 campaign feasibility study to evaluate potential support of a capital campaign to fund four priorities:
- Construction of a new church life center
- Sanctuary renovations and debt reduction
- Creation of an administrative wing to bring all staff offices together in one area
- The new heating, ventilation and air conditioning system
The feasibility study report, completed in April 2002, indicated Centenary was not prepared to support a capital campaign based on the four priorities proposed. While several study participants were enthusiastic about building a new church life center and many recognized the potential advantages of consolidating administrative space, the clear consensus was that we should first reduce or eliminate our debt before embarking on any new building projects. Study participants also agreed the new heating, ventilation and air conditioning system should be finished immediately and paid for as soon as possible.
Centenary finished work on the HVAC system early in 2003, using a $3,400,000 bank loan to pay for this second phase of the HVAC system installation. We paid for the $64,500 space utilization study, the $25,000 campaign feasibility study and the $125,000 front entrance ramp with loans from the Centenary Fund. The costs of these additional projects amounted to $3,614,500.
Additional Completed Projects
|Front entrance ramp||$125,000|
|HVAC Phase II||3,400,000|
|Space Utilization Study||64,500|
|Campaign Feasibility Study||25,000|
The Building on a Sure Foundation Campaign
Following recommendations in the campaign feasibility study report, Centenary’s leaders planned a capital campaign to reflect study participants’ priorities. In a February 20, 2003, memorandum to the Administrative Board, Trustees proposed a campaign with two goals: to replenish and strengthen the Centenary Fund and to eliminate church debt. On March 6, the Administrative Board unanimously approved a motion to launch the campaign, which now included a third priority to fund several previously approved sanctuary renovations. The three campaign priorities total $8,000,000.00.
Since 1995, Centenary has borrowed a total of $6,501,000 from the bank. The church’s 2003 budget allocates $212,500 for interest payments on these loans—a figure amounting to almost $18,000 per month and representing nearly five percent of the $4,506,242 budgeted for all church expenses during the year. The money we are obligated to spend on debt service is 13 percent more than the $188,600 budgeted for national and world outreach and 61 percent more than the $131,700 budgeted for local outreach ministries. The greatest portion of the Building on a Sure Foundation Campaign will be used to pay off Centenary’s bank debt and eliminate this substantial ongoing expense.
Repayment of Bank Loans
|Loans to cover additional campaign projects costs||$1,628,000|
|Mortgage on buildings||1,473,000|
|Completion of HVAC system installation||3,400,000|
|Total bank loans||$6,501,000|
For many years, the Centenary Fund has been a source of ready cash for a variety of important needs. The withdrawals from the fund to help cover the additional costs of the renovations completed in 1998 were made as grants totaling $1,415,258. While church leaders were grateful to have access to the fund’s resources to supplement campaign proceeds and bank loans, they were concerned with the resulting depletion of the Centenary Fund. After further consideration, they agreed to treat future withdrawals of fund principal as loans so they could preserve the Centenary Fund intact as an endowment. Subsequent loans from the fund amounted to $405,500. A portion of gifts to the Building on a Sure Foundation Campaign will be used to replenish and strengthen the Centenary Fund.
Repayment of Loans from the Centenary Fund
|Down payment on buildings||$191,000|
|Front entrance ramp||125,000|
|Space Utilization Study||64,500|
|Campaign Feasibility Study||25,000|
|Total Centenary Fund loans||$405,500|
After more than 70 years of constant use, the hardwood floors and pews in our sanctuary need refinishing. The sanctuary’s outdated sound and lighting systems need to be upgraded to improve the technical quality of our popular radio and television broadcasts, and our organ needs repair. Centenary also must purchase three 15 passenger mini-buses to transport church members to and from events and activities. Because Centenary’s Administrative Board has already approved these essential projects, they are also included, along with the Campaign Budget, as important priorities of the Building on a Sure Foundation Campaign.
Approved Sanctuary Renovations, Miini-buses and Campaign Budget
|Sound and lighting systems, organ repairs||$300,000|
|Three 15 passenger Mini-buses||150,000|
|Hardwood floor, pew refinishing, roof||458,500|
|Total new expenses||$1,093,500|
Our church buildings are now in excellent condition. We have attractive, functional, accessible spaces in which to learn and grow together, to worship and to serve God. We have extended the boundaries of our property to insure the continuing viability of our downtown location. We are fully engaged in the vigorous pursuit of our goals and ministries and committed to continue the important work of the church while the campaign is in progress. Now we must complete the funding of these important improvements to provide a sure foundation for future growth and strengthened ministries to our members and community.
The Building on a Sure Foundation Campaign represents the very best ideals of prudent fiscal management and responsible stewardship of God’s gifts. With the tangible results of renovations and property acquisitions already in place, the campaign’s rewards will be most clearly reflected in bank statements and budget printouts. As we unburden ourselves of the debt accumulated over the past eight years and replenish the Centenary Fund, we will free substantial resources for other programs and purposes critical to our mission. Money formerly spent on interest payments may be used for grants to the many worthy charitable causes we support. With the mortgages paid off, rental income from the Snavely and the Bell Davis & Pitt buildings may be used to help pay utility bills or cover other ongoing operating costs. Endowment income from the replenished Centenary Fund may be used to help keep our buildings in repair or supply new Christian education materials for our Sunday School classes.
Diverse as the ministries we pursue and varied as the spiritual gifts we offer, the Building on a Sure Foundation Campaign represents an excellent opportunity for all members of Centenary United Methodist Church to act as one church, demonstrably committed to our sacred mission of sharing the word of God and the love of Jesus Christ with all people. Through your gift to the campaign, you extend your personal ministry to embrace all Centenary is and all we do in the service of God and our fellow man.
We sincerely appreciate your thoughtful, prayerful consideration of the opportunity the campaign represents and encourage you to lend your full support.
|Repayment of Bank Loans|
|Loan for renovations, HVAC Phase I||$ 1,628,000|
|Loan for HVAC Phase II||3,400,000|
|Mortgage balances for Snavely and Bell, Davis & Pitt buildings||1,473,000|
|Repayment of Loans from the Centenary Fund|
|Repay loan for front handicapped access ramp||$125,000|
|Down-payments on real estate purchases||191,000|
|Space Utilization Study||64,500|
|Campaign Feasibility Study||25,000|
|Approved Sanctuary Renovations and Campaign Budget|
|Organ, sound and lighting systems||$300,000|
|Three 15 passenger Mini-buses||150,000|
|Pew and hardwood floor refinishing and roof repairs||458,500|
Gifts Needed to Raise $8 Million
|No. of Gifts||Gift Level (Per Year)||Total|
|1||$1,000,000 ($200,000)||$ 1,000,000|
Ways of Giving
Donors to the Building on a Sure Foundation Campaign may make one-time gifts or may fulfill their pledges over a period of five years. Gifts of cash as well as gifts of stocks, bonds, real estate and other assets of value are welcome. Centenary United Methodist Church is a 501(c)(3) charitable organization; all gifts are tax-deductible to the full extent of the law. Various options for giving are outlined below.
Current Giving Opportunities
Cash. Money by check is the easiest and most common way to make a gift. Cash gifts may be used annually as charitable deductions on your federal income tax return to offset up to 50 percent of your adjusted gross income. You may carry forward any unused deductions over the next five years.
Appreciated Securities. Gifts of appreciated securities such as stocks, mutual fund shares and bonds, which you have owned longer than six months, are fully tax-deductible charitable contributions, including the difference between what you paid for the security and its market value when donated. Such gifts are deductible annually up to 30 percent of your adjusted annual gross income on your federal tax return with the same five-year carry-over deduction provision as cash gifts. Remember that you must give the security itself, rather than selling it first and giving the cash, in order to avoid paying tax on the capital gain.
Real Estate. The same tax advantages that apply to stocks and bonds also apply to real estate. You may give acreage, a farm, a lot, a house, a commercial building or any other kind of real estate held longer than six months and receive a charitable deduction for the full market value and also avoid taxes on the profit.
Tangible Personal Property. You may give any other asset of value—for example, an automobile, a painting, a coin collection, a piece of jewelry or equipment—and receive a charitable deduction.
Corporate Gifts. Corporations are permitted by law to give away to qualified charitable organizations up to 10 percent of their pre-tax profits in any given fiscal year. This provision is a double tax saving in that neither the corporation nor the individual is taxed on the gift.
Deferred Giving Opportunities
In addition to current pledges to the campaign, alternate giving strategies should be considered. Listed below are several planned or deferred giving opportunities that will enable you to make an even larger overall response to Centenary’s Building on a Sure Foundation Campaign. The campaign consultant will be glad to review which type of planned gift is most appropriate for you.
Charitable Gift Annuities. A gift annuity is a contract between you as the donor and Centenary United Methodist Church where, in exchange for a gift of cash or marketable securities, Centenary will promise to pay you a guaranteed income stream for life. The annuity can be for one life or two, which means you and your spouse can enjoy this income stream at a percentage based on your life expectancy.
Charitable Remainder Trusts. Individuals most often use a charitable trust with low basis assets that produce little or no income. Selling the asset and reinvesting for income will generate an unacceptable capital gains tax. When the asset is gifted to a charitable remainder trust, no capital gains tax is paid so the full amount can be reinvested to provide lifetime income to the donor or the donor and spouse.
Charitable Lead Trusts. A charitable lead trust is the opposite of the remainder trust. It provides an income stream to Centenary United Methodist Church for the term of the trust. Trust assets then revert to family members—typically children or grandchildren. The primary benefit to the donor of a lead trust is that it can produce significant gift tax as well as estate tax savings while shifting assets to heirs outside of the estate.
Life Insurance. By giving an insurance policy already in force, you will receive a charitable deduction for the cash value of the policy. You may take out a new insurance policy on your life or assign one already in force, naming Centenary United Methodist Church as the owner and beneficiary. The premiums will be tax-deductible.
Retention of Life Interest Gift. You may give a personal residence or farm and retain lifetime use of the property. You will receive an immediate charitable deduction for the remainder value of the gift based on your age. The property is removed from your estate for tax purposes. The donor is responsible for taxes, insurance and maintenance. At your death or the death of the surviving spouse, the gift becomes the property of Centenary United Methodist Church.
Retirement Plan. You may name Centenary United Methodist Church as the beneficiary of all or a portion of a retirement plan such as an IRA or Keogh Plan. The trustee of the plan will help you make that beneficiary designation. Upon your death, the gift will come to Centenary without probate. Or, if you choose, you can name a charitable remainder trust the beneficiary of the retirement plan. Then your heirs can receive the income for life or a term of years with the remainder going to Centenary United Methodist Church.
A Living Trust. You may name Centenary United Methodist Church as a co-owner with right of survivorship of any savings account. Upon your death, that account becomes the property of Centenary automatically and without probate.
A Bequest Through Your Will. You may name Centenary United Methodist Church in your will, or in a codicil to your will, for a specific dollar amount, a percentage of your estate or as a final contingent beneficiary.
The Centenary United Methodist Church Board of Trustees must approve all gifts, other than cash and marketable securities. The campaign consultant will be happy to assist you by providing additional information about making various types of gifts for your greatest tax advantage.