Showing posts with label HVAC. Show all posts
Showing posts with label HVAC. Show all posts

Monday, March 18, 2019

More on Grace Church’s HVAC Project

With the general, HVAC, and mechanical contractors now in place for Grace Church’s HVAC project, there are two outstanding issues, both of which may affect the church for years to come. To my knowledge, neither has been satisfactorily answered, either by Bob Malm, or the vestry. Yet both warrant further thought and reflection.

First is the issue of the church subsidizing school operations by doing without pastoral and other resources. Yes, Bob Malm is wildly overpaid, particularly given his feckless job performance. But that’s besides the point. As things stand, the only way the church can cover the expenses associated with this project is to hold off on the assistant rector position for as long as possible, and to otherwise cut overhead. That is not good, especially given that Dysfunctional Bob must, under the canons, retire within the next four years. In short, this is a time to strengthen community, and shifting resources away from that goal can only have negative consequences.

Also appalling is that poorly compensated employees, including the sexton and office staff, face regressive taxation as part of these efforts at cost reduction. The church can afford to walk away from $100,000 in debt that Bob Malm owed it, but it can no longer afford to pay the total cost of health insurance for its employees? How does that work? Moreover, Pedro negotiated his compensation package based on the notion that the church would cover his family insurance. Unless the church addressed that issue in its plans, it has double-crossed Pedro and his family. So much for social justice.

Of course, that also raises the larger question of why parishioners should do without pastoral care in order to pay for the AC. The school produces no obvious benefit to the church and already enjoys the subsidy of the 50/50 split on non-fungible costs, despite the fact that it consumes the lion’s share of utilities. Overhead already is much too high with Bob’s ridiculous compensation package, as well as its penchant for full-time employees. So why are people stepping up their pledges to make ends meet, when hundreds of thousands of dollars are going in support of a quasi-independent entity that, over the years, has shown scant respect for the church?

My take on things is that asking parishioners to do without in order to air condition the school is a recipe for long-term trouble, likely to build resentment over time. For years, Chris Byrnes played her empire-building games, yet now it’s suddenly “your school,” in communications with parishioners? Hot dog—Bob must think people have really short memories.

Second is the issue of AC in the nave and undercroft themselves. Woefully inadequate and inefficient in both areas, the compressor is much too large in the undercroft, while there is not nearly enough capacity in the nave. Moreover, air flow in the nave ducts is inadequate for the space and relevant load. Yet these issues are being ignored, despite the fact that the school’s use of the nave, expressed as a percentage of total use, is commensurate with the church’s use of Merrow Hall. But the school is not planning to help fund work on these areas. As a result, the church is uncomfortable for summer weddings, funerals, and other command performances—hardly helpful when the church already is shedding pledging units and members. Thus, one must question why the church is going in debt to pay for HVAC in Merrow Hall, when no thought has been given to its own HVAC woes. And again, all within the context of a $100,000 bonus for Bob Malm—a thoroughly undeserving recipient if there ever was one. Keep in mind, too, that both compressors, the one for the undercroft and the one for the nave, are past actuarial end of life. And being 20-ton units, neither will be cheap to replace. If either fails during the life of the HVAC loan, it’s going to be a tough squeeze to find a solution.

Exacerbating these issues is the fact that financing the HVAC work in the manner currently envisioned prevents funding of issues of primary importance to the church, but secondary importance to the school. For example, neither elevator, nor the parking lot entrance, meet modern handicapped accessibility standards. While probably not a huge deal to the school, the aging population at the church already struggles to access some parts of the building. Similarly, interior directional signage is non-ADA compliant, as it does not include Braille. Thus, persons with limited visual acuity would find Grace church a daunting environment, with its long hallways, numerous doors, and multiple levels. In addition, lighting is woefully inadequate in the third floor hallway, as well as the basement-level stairs outside the church office.

In short, while the vendors chosen for the work are reputable and likely will do an excellent job on the project, the current approach to the project almost guarantees further woes for the church at a time when it’s already in precipitous decline and facing a “lame duck” and largely indifferent rector.

Not good.


Saturday, February 2, 2019

Grace Episcopal: More on the HVAC Project

One of the earliest lessons I learned was the benefit of saving. By digently putting money aside, I was able to comfortably retire more than a decade before most people, with more than enough to meet any conceivable future financial need. How did I do it? By minimizing expenses, living beneath my means, avoiding luxuries like vacations and fancy clothes, by doing without, and by working two jobs for most of my career. Yes, it was tough, especially those first few years post-law school, but very much worth it.

Today, Grace Episcopal confronts a different reality, which is that for years it has refused to save. As a result, the church plans to borrow $540,000 to pay for its half of the replacement cost of the HVAC systems in the building. The other $135,000 will come from reserves. 

The first issue, of course, is that most of the money goes to subsidize the school, which far and away uses the lion’s share of the building. At a time when the church is rapidly shedding pledging units, and the average age of church members is much older that of the surrounding population, taking on this expense is foolish, and doubly so when most of the money is borrowed.

The second issue, previously discussed on this blog, is that this day has been coming since 1994. Did the church make any meaningful effort to save? No, it didn’t, and indeed in 2014 gave Bob Malm $100,000 of church resources as a bonus, as a reward for staying too long.

Third, the church remains perilously short of reserves, even without this expenditure. To be safe, it should have 3-6 months operating expenses in reserves, or roughly $500,000. This leaves the church perilously short of cash in the event of a major expense or decline in giving. And as discussed previously, restricted funds don’t count, as repurposing them without donor permission is illegal.

Fourth, this expense is being treated from a purely reactive, tactical perspective. There is easily an additional $500K in work that needs to be done, ranging from replacing the parking lot, to replacing the new narthex roof, to dealing with rotting wood trim and the need to refurbish both elevators. (Replacing the original elevator would, however, be stupid. A metal box is a metal box.  No need to buy it twice.) To date, the church has no meaningful game plan to address these issues, and lacks the financial means to address anything beyond minor needs.

Fifth, there is the issue of this being an old building. Old buildings, regardless of architectural style or age, share one thing in common: They throw you curve balls. As a result, costs inevitably go up, and it is a safe bet that the church will discover surprises along the way. (Just wait until folks discover the leak inside one of the exterior walls of Merrow Hall. It’s plumbing-related, has been there for years, is slowly causing extensive damage, and is going to be a bear to fix. $100 says there’s not a person in the parish who knows what I am talking about.)

Sixth, assuming a five-year amortization, the church will be paying on the loan when Dysfunctional Bob retires, which he must do by age 72 by canon. Retirements can throw a monkey wrench into even the healthiest churches, and Grace is far from healthy. Just ask Holy Comforter in Vienna what happened to the numbers when Rick Lord retired. (He at least had the common sense to know when it was time to go.) Thus, I can safely say there are shoals in the waters ahead, and a real risk that the church will be unable to repay the loan.

Seventh, the observant will notice that costs already have escalated. Not that long ago, vestry members were predicting that the total project cost would come down once the project was bid out, the cost of which was then forecast at $1.2 million. Today, that forecast is $1.35 million, and knowing the extent to which existing systems are cobbled together, and the vagaries of the building, it’s a safe bet things won’t come in under budget. And this isn’t like the 1994 building project—you can’t downgrade the ceiling panels or go for cheaper light fixtures to reduce costs. Nor is it wise to cheap out on hardware—less expensive compressors, for example, typically operate less efficiently, meaning that what you save upfront, you lose over time as the utility bills come in.

Eighth, if this is anything like the 1994 project, folks will conclude nothing more needs to be done for the next 10 years, and preventive maintenance will be ignored. That both increases total costs, and leads to debacles like the mold problems in the parish office record closet, which were ignored for many years and was a hell of a mess to resolve. Ditto for the HVAC-related mold in the vesting rooms, the bird filth in the attic over the sacristy, and more.



Ninth, Bob Malm, true to form, will try to wash his hands of these issues, but he appoints the executive committee, and nowhere do we see the sort of full-court press that occurred when Bob wanted the church to buy him a house. In short, Bob talks out both sides of his mouth on these issues, but it is the church that pays the price.

In short, it’s time for Grace Church to quit following the Bob Malm live-life-large model, and start taking a prudent approach to it’s long-term financial health. Yes, the trust fund is a start, but there is much, much more to it than that.

It’s time for Grace to get its financial and governance acts together.

Tuesday, December 4, 2018

See For Yourself: Grace Parishioners Asked to Pay Half the Cost of HVAC Rebuild, Despite Almost No Benefit to the Church

At a time when Grace Episcopal is barely hanging in there financially, there’s a dark cloud hanging over things. Specifically, members of the church are being asked to pay half the cost of replacing the HVAC systems in Merrow Hall, the wing of the complex that houses the school and the auditorium. Given the limited benefit to the church of the work, this expenditure, which is estimated to cost in total $626,440, is going to prove a difficult pill for members to swallow.

The work, which is confined to the Merrow Hall wing of the complex, comprises the auditorium, myriad classrooms, the tower rooms, and two small rooms on the third floor of the building — one of which has almost entirely been taken over by the school. In addition, while the offices and sacristy are not part of the same system, they should be included in the work, as the HVAC compressor on the roof that services these areas is already past end of life.

The problem comes into sharper perspective when one examines the question of who uses this space; it overwhelmingly is the school. Yes, the church uses several classrooms for an hour a week, and the auditorium for about two hours a week (coffee hour and La Gracia). The school, however, uses all the space, and on average 40 hours per week. Yet, per the terms of the agreement with the school, the church is being asked to pay half the costs. 

Yet if one looks at the use of the nave, the church uses it about five hours a week, while the school uses it one hour a week for its weekly chapel. (School staff refers to the nave as “our chapel,” and church officers as “volunteers in our chapel.” Not surprisingly, school parents often view the church as part of the school, resulting in a certain level of disrespect.) Despite this relatively high percentage of usage, however, the school contributes nothing to the cost of maintenance, utilities, and repairs when it comes to the nave. 

Similarly, the sharing of utilities favors the school. These costs are shared 50/50, despite the fact that the overwhelming majority of utilities are consumed by the school. As a result, and as a result of the school’s effective fundraising efforts, the school is relatively flush with cash, and will be able to pay for its share of the HVAC work from savings. (Amusingly, some vestry members in 2015 were very resistant to eliminating the $9,000 annual grant to the school, under the theory that “we then would be doing nothing for the school. Hardly.)

Nor is the school content to remain within its space. Over the years, it has managed to take over the clergy office attic, space in the undercroft, the music library (which was supposed to be temporary, but certainly has not been) and more. Indeed, at one point the school was trying hard to take over one or more of the vesting rooms, but it fortunately was not successful.

Is the school responsible for the church’s relatively lackadaisical attitude towards fundraising? Of course not. But at the same time, there’s little evidence that the school benefits the church. I mean, it’s not like students later become church members, or their families become long-term members. (In the past, some joined the church in order to get a discount on tuition, but pledges to the church from these “quasi-members” often were startlingly small, and a surprising number flew the coop the instant their kids graduated from the school. This discount is no longer available.) Indeed, if even half of each year’s graduating class became members, that would add up to 60 new families every year. This clearly is not the case.

The contingency funds for the project could also be an issue. Sensibly enough, the planning phase of the project includes $200,000 in contingency funding, which is a good idea when dealing with a 70-year-old building. Yes, the asbestos has all been removed, but a building that age invariably tosses contractors some curve balls, especially given the rather shoddy construction that formed the basis of the 1994 project. So, the church could wind up on the hook for another $100K.

True to form, the church has made no effort to save for this day. Even the fig leaf of the .05 percent of annual revenue, or $5,000, was zeroed out a few years ago in order to continue to pay Bob Malm’s outrageously generous compensation package. Meanwhile, staff is being asked to contribute to the costs of their own health insurance, and outreach is being cut, but Bob continues to live life large, with his annual month at the beach, his trips “out of town,” any time he feels like a week in Massachusetts or Georgia or elsewhere, and his autocratic control over the composition of the executive committee. Yet Bob has no game plan to grow the parish, no vision for the future, and no goals for tomorrow except to keep riding the Grace Church gravy train for as long as he can.

It’s time for parishioners to put the brakes on things and demand accountability from Bob, or make clear to Bob that it’s time to get the hell out of Dodge. The church simply cannot go on with an engaging but indifferent rector whose primary goals in life are to go jogging, hang at the beach, and play golf; and who evinces zero evidence of any genuine Christian conviction. Bob’s conduct over time has damaged the church on every front, and it’s time for change.

For the record, below is the current status of permitting with the City of Alexandria, which makes clear, inter alia, that the church has nothing to do with the project except to pay its share of the bill. Note the cost of the permitting and the fact that the city apparently has rejected the church’s mechanical plans as of today due to the lack of calculations regarding refrigerant quantity. Interesting, when you consider that the project originally was supposed to have been done last summer.











Wednesday, October 24, 2018

Not Bloody Likely: Grace Episcopal Church Is Hoping to Get a Commercial Loan for HVAC Capital Expenses


There was a time, not that many years ago, when churches were every commercial loan officer’s dream come true. Flush with cash and regarded as an integral part of the community, churches were like Ma Bell — regarded as a ridiculously safe investment, and one where banks had very few questions that even needed to be asked when a loan application came across the desk.

These days, Ma Bell is dead, killed off by her greedy progeny. As a result, telecoms is a very different market environment, with much higher levels of risk. And so it is with churches, where declining attendance and giving, a dwindling role for churches in the community, and a rising tide of foreclosures makes even the most generous loan officer review church loan applications with a jaundiced eye. This, in a commercial loan market that does not have the benefit of Fannie and Freddie lurking behind the curtain.

Into this mix comes Grace Church, poster child of dysfunctional church governance and inept management, looking for more than $500,000 in loan proceeds to get the HVAC back on in the complex. My assessment: It’s going to be an uphill slog for the church, and any commercial loan it might get likely will not be on favorable terms. Here’s why:

Looking first at the numbers, things appear daunting. Since 2014, the church has shed more than 120 pledging units, and we are seeing a sustained drop in Sunday attendance, with no plan in place to address either. Troubling signs to be sure, but not dispositive. 

Things then turn to free cash flow, or source of repayment, where things don’t look good either. The church is running a deficit, despite the loss of one full-time exempt employee and the related costs of her compensation. True, December is often a lucrative month for the parish, marked by generous gifts of appreciated stock, but not all income is created equal, and a competent loan officer will ask the question, “What if those year-end gifts don’t happen?” Either way, the church will have difficulty showing how it can cover monthly loan payments. Even a commercial loan with a balloon payment at the end — a hazardous proposition, indeed, in light of rising interest rates and inflation — would require demonstrated ability to cover more than $5K a month in payments.

Banks also will look at unrestricted cash reserves, which in Gracespeak, means funds other than those held for others. (Contrary to Bob Malm’s statements in prior vestry meetings, restricted solicitations, such as those for the columbarium or altar flowers, cannot be repurposed without the express consent of the donor. To do otherwise is to commit fraud.) In this space, the target is to show that the church has enough funds on hand to cover 90 days of operating expenses; in Grace’s case, this would be $250,000. Needless to say, the church has nowhere close to those funds, but rather is periously low on cash reserves. Nor is the Trust a solution: much of the 4 percent maximum draw has already been spent on the HVAC project, and with maintenance and repair already seriously underfunded from income, there’s not much free cash.

Liquidity becomes even more pressing an issue when the church looks at the need to deal with myriad other capital expenses, including:
  1. Repaving the parking lot.
  2. Replacing energy inefficient outdoor lighting fixtures.
  3. Replacing failed double-pane windows.
  4. Addressing accessibility issues.
  5. Replacing the failing new narthex roof, now beyond actuarial life expectancy.
  6. Restoring the stained glass.
  7. Replacing rotting wood trim and rake boards.
  8. Addressing interior finish that is at end of life.
Keep in mind, too, that when depreciation and amortization are factored in, Grace Church has been running a deficit for many, many years.

Other factors also are problematic. For example, the church is not incorporated, meaning that members, including clergy, can be individually liable, both in tort and in contract. That’s not good, given the church’s penchant for imagining terrorists behind every blog post out there, as well as its propensity for trying to drag its former members into court. Nor are loan officers likely to look with favor on a prospect that claims to be the target of “domestic terrorism,” for this injects risk into an already difficult equation.

Similarly, according to the vestry’s own minutes, church management has been slipshod at best. For example, when Beth Calaman came on board, the vestry’s minutes reflected the fact that financial reporting was problematic going back at least three years. That raises the question: Why was this allowed to happen in the first place? Similarly, BB&T has repeatedly complained about discrepancies in the church’s bank deposits, but there is no evidence, prior to Beth coming on board, that the church took this issue seriously.

Banks also look at whether a church adheres to its bylaws and canons. Here, Grace Church has issues, given that Bob Malm chooses the executive committee, in violation of church canons, which require that the vestry elect its officers. (As I have said many times, an up/down vote for a single slate of candidates only counts as an election in Cuba, and these days, not even there.) Moreover, to the extent they are aware of it, banks, which are subject to the anti-retaliation priovisions of Sarbanes-Oxley and Gramm-Rudman, are likely to regard Bob Malm’s unilateral efforts at retaliation, as well as his purported authority to unilaterally remove parish officers, with a jaundiced eye. That is all the more the case when these behaviors occur in conjunction with allegations of harassment, as happened in my case.

Nor is the lack of annual audits helpful, or the inferior internal controls. During most of Dysfunctional Bob’s reign, the church hasn’t even been in compliance with the denominational requirement of a current finance manual. Even potential major expenditures, such as the restoration of the stained glass windows, demonstrate a lack of institutional memory; it is well-documented that the windows were examined by Willet-Hauser in 2014, and restoration and repair discussed at that time.

Of course, hand-in-hand with the lack of institutional memory is the church’s feckless approach to budgeting. Every year, it’s another bit of fun and games. One year, rosy predictions on the income side; next year, it’s optimistic predictions that expenses will suddenly decrease. The reality, however, is that the building is more than 70 years old, in some cases very poorly maintained, and with virtually every major infrastructure component at or beyond actuarial end of life. That’s why I shake my head and roll my eyes when people say that the surge in HVAC repairs was unexpected, or that this year’s deficit is caused by the numbers used in the current budget. The latter certainly is true, but it misses the key point, which is that the numbers in the current budget were never realistic, and there have been ample prior warnings to all involved that this was the case.

Then there’s the issue of transparency. Essential in building donor confidence, Grace Church makes far too many of its decisions either at the executive committee, or via Dysfunctional Bob. Vestry members, when was the last time you saw financials with a line-by-line breakdown, for example, of compensation? When was the last time you published financial information on the website? Why can’t the church track donor restrictions on designated offerings? How many of you knew that, in 2014, Bob Malm owed the church $200K, and that the church wrote off $100K of those funds? Parishioners, how many of you knew that the church gave Bob Malm a $100K bonus?

Same for efforts to shift health care insurance premiums back to employees. While some cost sharing is a best practice in benefits management, diocesan policy forbids shifting all costs to employees. And even if this were possible, this sort of regressive internal tax, where poorly compensated employees pay a higher percentage of their earnings for insurance, is unethical. Nor should vestry members be unduly optimistic about next year’s premiums—given the aging demographics of senior clergy throughout The Episcopal Church, it’s a safe bet that costs will continue to escalate sharply.

At the same time, the church has made no effort to save for the future. Years ago, the fig leaf of $5000 a year, or one-half of one percent of gross revenue, being set aside for capital repairs was abandoned, and the church has been drawing on management reserves for ridiculous things, such as Chris Byrnes’ retirement party. Sorry, kids, paying for parties from savings is stupid.

Similarly, the good times continue to roll with the upcoming gala to celebrate the church’s time on Russell Road and more. These are drains on the financial ability of church members to support the parish at a time when they already are stretched thin trying to cover the loss of 120 pledging units, and things are about to get much worse. Even if the church goes for a loan from the school, or borrows against the trust fund, there is reason to conclude that the church’s finances will continue to decline in light of the church’s aging demographics and the fact that Dysfunctional Bob must, as a matter of canon law, fly the coop in less than 5 years. Such a change invariably spells declining attendance and revenue, and all the more so when we’re talking about a rector who has been around since the late 1980’s. They may not have been good years in terms of growth, the quality of management, or the quality or extent of pastoral care, but still, Dysfunctional Bob is the status quo, and it’s a given that churchgoers don’t like change.

On top of everything, banks are suprisingly sensitive to reputational issues, so the wave of negative publicity that Bob Malm has engendered for the church in recent years, including his effort to drag a dying woman into court, probably doesn’t help matters much. Banks increasingly tend towards relationship banking, and wanting to work with people they know and trust, and Bob’s antics don’t do much to inspire the latter, no matter how you  parse things. And let’s not kid ourselves: The first thing any good loan officer does is to Google a loan prospect in order to get the lay of the land. Sugarland, here we come! 

In short, Grace Church is a hot mess, and there’s very little sign that Dysfunctional Bob, the vestry, or the diocese recognizes the depth and breadth of the problems the church faces. All of this will factor into the decisions banks will make when it comes to reviewing loan applications from the parish.

Below is an excellent article discussing the requirements facing churches when they apply for a commercial loan:










Tuesday, September 18, 2018

More on Grace Episcopal Church and Defamatory Accusations of Collusion

In an earlier post, an individual connected with Grace Episcopal Church suggested that I collaborated with the HVAC vendor during my time as junior warden. A copy of the post is included with this post. Such remarks are stupid, mean-spirited, defamatory, and illustrate just how very toxic St. Dysfunction is.

Several points:

  1. That is a remarkably ugly thing to say given the sorry condition of the HVAC systems at the church, the lack of preventive maintenance (including treating the water on the closed loop, a necessity when operating aluminum condensing boilers on a system with cast iron radiators and pipes), the shoddy work during the 1994 building project, and the numerous issues we had due to the age of the system. In addition, I spent hundreds of hours away from work in order to deal with these issues, and got damned little tangible support for my efforts. Or, put in crass terms, I didn’t see Bob Malm anywhere around when the AES crew and I were on site at 11 PM on several Fridays replacing cast iron HVAC pipes that had rusted out. Yet Bob is the guy earning almost 200K a year; I was the volunteer.
  2. The commenter demonstrates a complete lack of knowledge of commercial HVAC costing and pricing.
  3. Bob and others have absolutely no concept of what was involved when the outdoor loop to Merrow Hall ruptured, including safety requirements when excavating directly on top of a natural gas line and the building electrical service entrance. But then, given his disinterest in the details of the project, hardly a surprise.
  4. The vendor in question, AES, has an impeccable reputation, serving the Mt. Vernon estate, several highly classified locations, Fort Belvoir and numerous Episcopal churches. In addition, Tom, one of the owners, headed up the Fairfax County Office of HVAC licensing and is considered one of the best in the business.
  5. The prior vendor didn’t even do light commercial work and, inter alia, recommended dismantling the building control system, as it was unable to figure out how to service and maintain the system. In addition, bad moves on that vendor’s part, including opening the fresh air intakes wide open while running the HVAC, resulting in massive problems within the building, including condensation and leaks throughout the air handling system.
  6. AES dropped Grace as a client after a series of incidents, including one where the owners had made an appointment to brief Bob Malm on emerging issues with the church HVAC systems. When they got on site, however, Bob gave them the big brush-off—a gesture that was beyond rude. Additionally, the vendor had numerous negative experiences with members of the church office staff and others, and was unwilling to get involved after my successor decided to operate the closed loop without draining it following the pipeline rupture. As a result, sediment in the system caused numerous additional problems.
  7. I have alerted AES to the defamatory remarks posted earlier and told staff there that, if they want to subpoena the IP address and other relevant information needed to identify the poster and file suit for defamation, I am happy to be supportive.
Comments such as this show just how ugly, toxic and dysfunctional Grace Church truly is.




Wednesday, July 25, 2018

Reality Check: Grace Church’s HVAC Project Signals Big Trouble Ahead for the Church

One of the recent discussions amongst the vestry, clergy and staff of St. Dysfunction, aka Grace Church, is about how to fund next year’s HVAC work in Merrow Hall. As a component of that discussion, some have suggested that a capital campaign is not necessary, but that the church should borrow the funds needed for the work, and that it may be possible to pay off a loan of that sort within five years.

Those discussions illustrate three key points:
  1. The management of the church and its temporal affairs has been inept, at best.
  2. The proposed HVAC project is problematic on multiple fronts.
  3. The church’s problems extend far beyond the issues at hand.
Before we go further, some important context. 
  • Today, twenty-four years after the 1994 renovations, major HVAC system components already have outlived their actuarial life expectancy by four years. In other words, the church has been living on borrowed time for years. The failure of the HVAC system in key areas of the building now drives home the fact that this issue cannot be ignored any longer; nor can one ignore the fact that the church has done nothing to prepare for the inevitable.
  • The primary beneficiary of this project will be not the church, but the school. The school uses rooms in Merrow Hall for more than 40 hours a week, while the church directly uses the space for about four hours a week—two for La Gracia, and two for coffee hour, or  about 9% of total usage. Yet half of the projected $1.2 million cost is to be borne by the church.
In the case of the nave, however — the focal point of the parish — total usage is about 9 hours a week. Of that total, roughly 8 hours is attributable to the church, while 1 hour a week represents the school’s weekly usage. (These numbers shift somewhat in the summer, but the for-profit summer camp that has used Merrow Hall over the past few summers largely has kept the ratio relatively constant, while greatly increasing wear and tear on the building.) Thus, the school’s usage represents about 11% of the total, yet there is no cost share. This, despite the fact that school staff refer to the nave as “our chapel.”

Meanwhile, the nave’s air conditioning is inadequate on hot days, or when load is heavy, as happens with large weddings or funerals. Yet there is no plan to address the serious issues with the system, including:
    1. The inadequate airflow available via the existing ductwork.
    2. The lack of humidity control.
    3. The temperature differential surrounding the pipes of the organ, resulting in it being frequently out of tune.
Thus, one wonders why these issues weren’t addressed in 1994, and why there is no plan to address these issues now, despite the proposal to spend more than $1.2 million on an HVAC project that primarily benefits the school.

Looking at the Numbers

Now, let’s look at the numbers.

As currently envisioned, the church’s share of the costs of the project will come to $600,000. Assuming the church can raise $100,000 of that (a doubtful proposition), that would leave $500,000 to be borrowed. Assuming the five-year term presently discussed by the vestry, and the 5 percent interest rate also discussed, the monthly payment would be $9,435.62. Total cost of the loan, excluding origination and processing fees, and the full audit likely to be required by the bank (an estimated $20,000 expense), would be $566,137.01.





Given the church’s tight budget, its ability to come up with an extra $113,000 a year seems improbable. Even assuming that the entire $40,000 annual draw on the trust fund is devoted to repayment, that leaves a gap of $73,000 annually. Thus, predictions that the church could pay the loan off in five years seem optimistic, at best.

There is, of course, also the issue of interest. By virtue of borrowing the money, versus paying cash and carry or having a capital campaign, the church will wind up paying $66,137.01 in interest over the life of the loan—a bad example of interest working against you, versus saving and having interest working on your behalf. Plus, again, there are the indirect costs of acquiring a loan, including the likely $20,000 cost of a full audit (not a bad investment, though, considering the dismal condition of church records in past years), origination fees, title search fees and all the other incidentals that make borrowing money such an unpleasant experience.

Keep in mind, too, that $66K is roughly the annual cost of one full-time assistant rector. Or, put in other terms, it’s a lot of money to be giving to a bank, when it could be used for ministry, helping the needy, and more. 

As I’ve said before: Not saving for the future tells me the church doesn’t think it has a future. And given the average age of parishioners, and the relatively few whose estate plans include the church, it’s just plain foolish not to save.

Can the Church Even Get a Loan?

But would the church qualify for such a loan?

There is reason to be dubious. Consider:
  • The church has lost more than 100 of the 320 pledging units it had only a few years ago. 
  • Average Sunday attendance, or ASA (a key metric of parish health), has dropped by 17% over the past two years.
  • Pledge revenue is down sharply, and it was only year-end gifts of appreciated stock and other major gifts that kept the church from running a deficit last year. 
  • The church devotes no portion of its pledge income to savings, and, as stated previously, is dangerously reliant on a handful of major donors, some giving more than $60K annually. Loss of even one of these pledging units could throw the church’s finances into a tailspin.
  • The church has burned through much of its management and replacement reserves, in some cases drawing on savings to fund luxuries like Chris Byrnes’ farewell party. And, of course, there is the $100,000 bonus paid to Bob Malm in 2014.
There also are signs that parishioners are getting stretched pretty thin. Participation in events like the altar guild tea is sagging, as are flower donations and other non-essential expenditures. Loss of any further membership or giving well could push things to the breaking point.

Of course, to qualify for a loan, the church would need to submit a repayment plan to its proposed lender. Additionally, under Canon 14 of the diocese of Virginia, debt exceeding 20 percent of the prior year’s total receipts must be approved by the diocese. Total receipts cannot include funds from an endowment when such funds are designated for other purposes, which means that repairs paid for by the endowment in 2018 cannot be counted as revenue for purposes of the 2019 project.

Moreover, when one looks at the diocesan debt repayment worksheet available here in PDF, it asks the same sort of tough questions any good banker would ask, including growth or decline in number of pledges, as well as pro forma budgets for the next five years. The latter is problematic, if for no other reason than Bob Malm must, under church canons, retire by the time he turns 72. That will almost certainly erode revenue, as this happens at all churches when there is a change of rectors. And in Bob’s case, having lingered on for 27 congenial but ineffective years already, the effect of his retirement likely will be substantial.

There’s also the challenge that none of this occurs in a vacuum. As noted in a previous post, the faux slate roof needs to be replaced, numerous double-paneled windows need to be replaced, there is extensive deterioration of the rake boards, window trim and other exterior wood, the stained glass is due for restoration, the parking lot is due to be resurfaced, and much of the interior finish of the 1994 renovations is at the end of useful life or beyond. Thus, overall costs will continue to climb in the coming 5-10 year period. Meanwhile, given the average age of the parish population, one should expect the number of pledging units to decline during that time. Plus, there are a number of expenditures in the offing that likely will upset parishioners greatly...more on those issues in future posts.

Then there is the issue of the church, its power dynamics, and its suitability for mission. Specifically, I am not the only person to leave St. Dysfunction having concluded that the place is toxic. Whether it’s bullying, Bob Malm’s little power games, urging people to commit suicide, or disclosing confidential giving information, there is irrefutable evidence that this is one messed-up church. That does not bode well for the long-term health of the church, financial or otherwise.





Summing Up

No matter how one parses things, St. Dysfunction is in a bad way. It’s been doling out 100K bonuses, paying for lavish parties from savings, and otherwise living high on the hog, all the while not saving for the future. Even worse, it’s lost sight of its real purpose, which should be a place of healing, welcome and reconciliation for all persons. Instead, it’s become a religious-themed fraternity/sorority, in which people think it’s okay to bully others, to gossip, to shun people, and to engage in behavior few would contend is Christian or even ethical. (The gossip about an allegedly gay married man in the parish is particularly ugly. If nothing else, it’s none of your business, folks, and if I were his wife and found out about your stupid chatter, I’d be more than a little ticked off.) People aren’t stupid, and they instinctively know when a church has become toxic (look for further documentation on those issues this fall). And few want to give generously to a church that thinks shunning, bullying, and other adolescent antics are acceptable. That would be doubly the case as people increasingly realize that Bob Malm and the vestry have not been accurate, for example, in their recounting of recent events, including the false claim that I resigned from the church in 2015.

So, paying for the HVAC work is going to be a major problem for the parish, but it’s only the tip of the iceberg when it comes to the problems facing St. Dysfunction, aka Grace Church.