History of these Issues
Of course, when the big 1994 building project was undertaken, it was reasonable to know that much of the HVAC infrastructure would need to be replaced by 2014, as most systems except for the pipes have about a 20-year lifespan. That means that, at the time of the 1994 project, there should have been a plan to start setting aside capital reserves to pay for the eventual replacement of these items. Moreover, HVAC piping, much of it original to the building, has a 65-70 year life, meaning much of it is now at end of life. (The same is true for potable water lines in the building. Anything original is now at end of life.)
So what happens when replacement reserves are underfunded? One of two things: Either deferred maintenance or cash flow problems, both of which are now happening at Grace church. Below, for example, is a photo of a leak in the church’s basement, which was ignored for years., resulting in a section of the basement wall collapsing. The actual repairs to address the leak were nominal in cost. Meanwhile, the mold and mildew in this area, which houses air handling equipment for the nave, exposed parishioners to dangerously high levels of airborne pathogens. Note, too, that deferred maintenance typically is the most expensive maintenance, with preventive maintenance typically costing a fraction of deferred maintenance.
Nor should one be lulled into a false sense of security by looking at existing bank account balances. By law, restricted solicitations cannot be repurposed absent the express consent of donors. That means that funds raised, for example, for the columbarium cannot be reassigned to cover HVAC expenses. To do otherwise is fraud. Given that much of the money in question is restricted, or “funds held for others,” there’s no plan B sitting in the STAMP or checking accounts.
Benefits of Saving
Now, let’s look at the advantages of setting aside funds over time for replacement reserves. Assuming anticipated expenses of $600,000 between 1994 and today and a 5 percent rate of return on investments, the church would have had to set aside $1,244.14 a month to cover the cost. That’s very reasonable.
Being Prepared to Borrow