FREQUENTLY ASKED QUESTIONS

Capital Campaign Goal and Project Cost

 

What is the current capital campaign goal and project cost?

The total current campaign goal is $33 million, which includes all construction costs and the estimated interest cost on the construction line of credit during the seven-year capital campaign period. This budget also includes a normal contingency amount to cover any unexpected changes in the plans, construction material cost increases, etc.

Did the capital campaign goal change from what was originally announced?

Yes. The original capital campaign goal was $35 million (construction costs only) or $39 million (including interest on the construction line of credit). Based on feedback from the congregation, revised project design, and updated cost projections, we reduced the total estimated cost of the project, and therefore also reduced the capital campaign goal to $33 million.

What is the timing of raising the total $33 million capital campaign goal?

The capital campaign is intended to be conducted in two phases. Phase 1 is a three-year campaign period from April 2019 to March 2022. To date we have received pledges totaling $16.5 million, with expectations to receive additional pledges during the three-year phase 1 campaign period. We then anticipate taking a one-year break, followed by another three-year phase 2 campaign period from 2023 to 2026. Based on our campaign consultant’s experience with other churches, we expect phase 2 to result in pledges of at least 50% of phase 1, or $8 million. This would result in $24.5 million of total pledges during the seven-year capital campaign. We actually expect to receive a higher amount in pledges during this period, from members who have not yet pledged, new members joining the church, and increased pledges from existing members.

Comparing the projected pledges of $24.5 million to the estimated total project cost of $33 million results in a potential funding gap of $8.5 million, and not to exceed $9 million, at the end of the seven-year capital campaign period. The potential funding gap is addressed in a separate question. As a reminder, the more pledges received and the sooner those pledges are paid, the less the potential funding gap.

Project Scope

 

Since the project cost has been reduced, did the scope of the project change from what was originally announced?

No. The project cost was reduced by revising the design but continues to include all seven of the original master plan priorities, including:

  • Worship & Arts Center
  • Gathering Space
  • Children’s Gate
  • Education Space
  • Gymnasium
  • Youth Facilities
  • Support Facilities

Did all ministry leaders have input on the project scope and design? Was there opportunity for the congregation to provide comments and suggestions?

Yes. From 2016 to May 2019, we held a significant number of meetings to solicit input from both staff and lay ministry leaders regarding their needs and preferences. We also held a number of town hall meetings with the congregation to solicit feedback.

Why aren’t we reducing the scope of the project so that the project cost will not exceed the amount of pledges received? Since the pledges are less than the project cost, is God in this project?

The project scope includes the seven master plan priorities resulting from the Strategic Vision Plan, which was developed with extensive input from the congregation and approved by the Session in 2016. The intent of the project is to provide facilities to help us fulfill our vision of “growing faithful Christians to engage and impact the culture with the transforming power of Jesus Christ,” both for training and equipping our members and for engaging and impacting our community at large. In addition, given the interrelationships among the seven master plan components and physical locations of the components on our campus, it would be extremely difficult to attempt to eliminate any one of the individual components without significantly impacting the other components.

We believe we should move forward in faith, trusting in God’s provision. Scoping the project to match the current pledges received, while on the surface may seem to be economically prudent, means our efforts would be based solely on our human wherewithal; and would therefore seem to say we don’t need God’s help. We have prayed, planned, and prepared—but now we believe that we must step forward in faith, trusting in God to accomplish His plan through our church.

When will the final plans be available for the congregation to view?

The current design drawings are included in this document. The North Campus Design and Construction Committee, under the supervision of the Session, is continuing to work with our architects to finalize the detailed construction drawings. Once complete, we will provide to the congregation final design drawings, and we may also have a model of the proposed campus.

Project Funding and Debt

 

What are the sources of funding to cover the $33 million project cost?

Ultimately, all of the funding for the project will come from the congregation. The capital campaign is intended to be conducted in two phases. Phase 1 is a three-year period from April 2019 to March 2022, and to date we have received pledges totaling $16.5 million, with expectations to receive additional pledges during phase 1. We then anticipate taking a one-year break, followed by phase 2 of the capital campaign in 2023 to 2026. Based on our campaign consultant’s experience with other churches, we expect phase 2 to result in pledges of at least 50% of phase 1, or $8 million. This would result in $24.5 million of pledges over the seven-year campaign period compared to a total project cost of $33 million, and thus a potential funding gap of $8.5 million.

Since we have a potential funding gap between the projected pledges and estimated project costs, how will this funding gap be covered? 

Given projected pledges of $24.5 million and estimated project costs of $33 million, we may have a funding gap of $8.5 million at the end of the seven-year capital campaign period. This gap would be covered by a bank term loan at the end of the seven-year capital campaign period not to exceed $9 million (rounding up from the potential gap of $8.5 million). As a reminder, the more pledges received and the sooner those pledges are paid, the less bank term loan funding will be needed.

What is the timing of incurring debt?

The projected bank loan financing is expected to be in two components as described below, with the ultimate determination of the timing and amount of debt incurred based on the amount and timing of pledges received. We are thrilled to report that we have already received pledge payments totaling over $5 million, which will fund the initial project costs and therefore defer any necessary debt financing into the future.

First, the construction of the project is expected to occur from July 2020 to January 2022, during which the construction costs will be paid. Since the pledges are expected to be paid in 2019 to 2022 (phase 1 of the capital campaign) and then 2023 to 2026 (phase 2 of the capital campaign), we will have paid all of the construction costs prior to receiving all of the pledge payments. Accordingly, during the construction period and through the end of the seven-year capital campaign, we plan to utilize a construction line of credit to fund the construction costs until all of the pledge payments are received. As is typical for construction lines of credit, interest incurred on the construction line of credit will be added to the balance of the line of credit during the seven-year capital campaign period; the estimated interest has been included in the total project cost of $33 million.

Second, at the end of the seven-year campaign period, we expect to obtain a bank term loan for any remaining balance on the construction line of credit, which we currently project not to exceed $9 million.

Will the operating costs of the new facilities and bank term loan incurred at the end of the seven-year capital campaign period impact the annual operating budget?

We are in discussions with several banks about the terms of the bank loan financing. While we have not yet entered into any definitive agreements, we expect the bank term loan to be payable over a 20-year period at a fixed rate of interest based on current historically low interest rates. We have prepared multiple projections regarding the bank term loan maximum amount of $9 million with none of the projections resulting in the principal and interest payments on the loan having more than a 10% impact on the annual operating budget. In addition, our projections include the expected operating costs (maintenance, utilities, staff, etc.) of all of our church facilities post-construction. As a result, we do not anticipate the payments required to repay the bank term loan or the revised operating costs to have a significant impact on any of our church ministries.

How will we pay off the bank term loan? Do we have other existing debt?

Ultimately, the bank term loan will be paid off through a combination of monthly payments from the operating budget starting at the end of the seven-year capital campaign period, and additional gifts from the congregation.

Over the past 10 years, the church has averaged an increase in giving of 3.8% per year. Expenses have averaged an increase of 3% per year over the same period, which includes growing several ministries dynamically. Assuming that our contribution growth rate continues at a more conservative 3% per year over the seven years of the capital campaign, the contributions in 2026 will be about $7.7 million.

Also, assuming that expense growth is limited to an average of 2% per year as has been the case for the past two years, expenses in 2026 will be about $6.9 million. This provides approximately $800,000 to service the debt payments on the $9-million term loan when payments become due. At a 5% interest rate and a 20-year repayment period, the term loan debt payments are expected to be no more than $60,000 per month, totaling $720,000 per year.

While we expect to pay off the term loan earlier than 20 years, and we expect an interest less than 5%, if the term loan requires the full 20 years to repay at 5%, total interest cost over the 20-year period would be $4 million. As a reminder, the higher the amount of capital campaign contributions received and the sooner the contributions are paid, the less debt we will incur at the end of the seven-year capital campaign period.

Currently, we have outstanding debt of $1.5 million that was incurred to purchase the Washington Street parking lot and the old printing company buildings on that property. We have been making monthly principal and interest payments on this debt through the annual operating budget, and these payments will continue.

Are the project cost and capital campaign projections reasonable? What if we have a recession during the capital campaign period?

The church is blessed to have members serving on various committees who are architects, engineers, financial experts, and construction professionals. They have thoughtfully and prayerfully reviewed the project cost and capital campaign projections. We have prepared a number of scenarios projecting these amounts and are comfortable with the projections. We have also evaluated multiple financial scenarios under a variety of economic conditions. Comparing our historical records of giving based on past economic cycles (including the great recession 10 years ago), we have concluded that the project cost and resulting debt projections are conservative and prudent.

Will we be required to mortgage the church property to secure the bank loan financing?

Probably. We are in discussions with several banks about the terms of the bank loan financing. While we have not yet entered into any definitive agreements, it is likely that we will need to pledge some or all of the church property as collateral for the bank loan financing. Under ECO Polity, any mortgage of church property must be approved by the congregation. Accordingly, we have scheduled a congregational meeting for Sunday, October 20, at 10:00am in the Sanctuary to vote on a motion from the Session to mortgage the church property for potential bank loan financing.

What is our view of debt based on what the Bible says?

While the Bible does not define debt as a sin, it warns of its perils (Proverbs 22:7). Thus, we believe we have been prudent and conservative in our project cost and capital campaign estimates to manage the potential debt amount. We will continue to remind the congregation that the more pledges received and the sooner those pledges are paid, then the less bank term loan funding will be needed.

Do most churches our size carry a debt load?

As a general guideline, churches are encouraged to have no more than three times their annual budget in debt. Our projected debt service at the end of the seven-year campaign represents 9%, and a recent survey showed that most churches carry a debt load in the 11%–16% range.

Project Timing and Impacts

 

When is the construction going to start and end? Will parking be impacted?

We expect construction to begin in July 2020 and conclude in January 2022. We are working with the architects and the construction team to address the timing, sequencing, and physical impacts of the construction to minimize disruption during the construction period. We will provide proactive communications to the congregation to publicize any impacts to programming and parking during the construction period.

Parking will be addressed as the construction begins. During construction we will continue to have some surface lot parking on our campus, as well as continued access to the Richardson Street parking garage. Once construction is complete, we will have ample parking on both the church campus and the Richardson Street parking garage. Parking on the church campus will include designated handicap parking.

What can I do to help?

Pray! Pray for the work of the Holy Spirit to continue moving in the life of our congregation, individually and corporately.

Support! Ask questions and engage members of our congregation and community with confident, positive, affirming support for the project and its transforming impact on the heart of our city.

Give! If you have not done so already, please submit your pledge card and begin making your pledge payments.

Have Additional Questions?

 

Email: campaigninfo@firstpresgreenville.org or visit the campaign website at FPCTransformingtheHeart.city.

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