Bringing Back Young People to the Church

We noticed an article in USA Today on Dec 19, 2014 entitled: "How churches can attract younger people". This article essentially touts some ideas offered by Naomi Schaefer Riley, author of the new book Got Religion?: How Churches, Mosques, and Synagogues Can Bring Young People Back. As Riley researched youthful congregations, she found a few things. In many congregations, leadership roles automatically go to older people. But "most of the responsibilities associated with religious communities are all things 25-year-olds are perfectly capable of doing." Ask twenty somethings to take on the responsibility to lead most volunteer initiatives, and “you just might see more coming into the fold”. We cannot agree more. Yes older adults may be more forthright in actively volunteering, but church leaders should make a point to include younger folk as well. As a suggestion, have an older congregant and a younger congregate co-chair their respective committee. It’s likely that each one of these co-chairs will learn much from the other.
Development Advisors provides A to Z services to Christian churches seeking to expand their facility. For more information, contact Scott McLean at scott@developco.com.

40K SF Church Facility FOR SALE in Littleton, Colorado

Development Advisors, LLC is pleased to announce that The Rock of Southwest is experiencing burgeoning growth and will be relocating. As a result, we have just listed this unique and high quality church facility FOR SALE at 10393 West Alamo Place in Littleton, Colorado 80127.  This 40,264 SF church has the potential to accommodate up to 1,800 adults and kids on a typical weekend. The asking price is $3.99 million. The original building of 26,995 SF was constructed in 1983 and completely renovated in 2004; and a 13,269 SF 2-story addition was constructed in 2012.  The main auditorium seats 390 persons and the Café, in the new building, seats 175 persons for a total of 565 seats under roof. In addition, there are many kids and adult classrooms, youth areas and supporting office space. The 8.29 acres site contains 234 parking spaces. To view a brochure for this church property, you can click here.

Development Advisors, LLC provides A to Z services for churches seeking to expand and/or relocate. For more information, contact Scott McLean at scott@developco.com.

Tax Information: Nonprofits Renting Extra Space

Is your organization thinking of becoming a landlord? You’re not alone.

We see various tax-exempt organizations, especially churches, weighing that potentiality. Many churches rent out their extra space, and growing congregations sometimes acquire extra space as they expand, so they can turn a profit on the excess.

So, if your church or organization is in this boat, what do you need to know?

It is a myth that a nonprofit cannot earn a profit. But if yours does, 1) it should not be too substantial and 2) it could be taxable despite your tax-exempt status.

This article contains some basic advice to consider before you foray into using your property for rental profit. But first, note that this is not meant to be a comprehensive discussion. Tax law is complex, so it’s always a good idea to seek out the expertise of a lawyer who specializes in 501(c)(3) law on matters like this. Here, we’ll only cover a few basics at the federal level.

The Nuts & Bolts of Taxes

When it comes to federal taxes, the distinction between profits that are “related” versus “unrelated” to your declared mission is key.

To know what activities are taxable and which aren’t, you must look at whether the activity “contributes substantially” to the purposes your organization declared when it was founded to the IRS, rather than where the profits go.

Profit-generating activities that are related to your mission are not taxable; in many cases, they might be necessary for the organization to survive. But unrelated activities may incur what’s called Unrelated Business Income Tax (UBIT) on earnings.

For an organization to be charged UBIT, it must be engaging in some kind of for-profit trade on a regular basis.While engaging in unrelated for-profit activities usually does not jeopardize a nonprofit’s status—unless it becomes substantial—UBIT is designed to prevent nonprofits from exercising an unfair commercial advantage over their for-profit counterparts.
To protect your nonprofit status, we recommend:
* Keep any profitable unrelated activities small.
* Avoid spending staff time on unrelated activities.
* Don’t hire someone to perform them.

The Passive Income Exemption

The difference between “related” and “unrelated” activities can get confusing, but happily the IRS has created a list of activities that aren’t taxable, regardless.  These include things like the sale of donated property, work by all-volunteer labor and commerce provided as a “simple convenience” to members, students, patients, employees, etc.—such as a hospital or school cafeteria or perhaps a church café.

They also include income from “passive investments.” Income from renting real estate is generally considered one of those.

To qualify for this exemption an organization must only rent out space and not provide any personal services. (Rental of parking lot space or boarding rooms would likely garner taxable income due to the additional services provided). Also, income from renting out personal property does not fall under this exemption; nor does income tied to the success of the renter, which could be considered a joint business venture.

Basically, if you provide only basic landlord services and nothing more, your rental income may therefore be tax-free under the passive income exemption.

However, there’s an important wrench in the gears here. If your facility is debt-financed (this means by a mortgage or even a loan for remodeling), rental income is generally considered taxable.

It bears mentioning that if you rent to a for-profit organization, things could get trickier. (Many nonprofits seek to rent only to other nonprofits, because that’s simpler—and then there’s the church-and-state issue, one reason why many churches nowadays rent extra space to other churches.) If you rent to a for-profit organization and your property is exempt from local real estate tax, there’s a chance you could lose that property exemption.

In such cases, you might consider passing the additional tax cost on to the tenant. Of course that’s a state tax issue, and each state has its own regulations. Another discussion for another time.

Development Advisors does not provide counsel on specific legal or tax issues but recommends that you consult with professionals for this advice. Advisors provides A-Z services for Front Range churches looking to expand. For more information, contact Scott McLean at scott@developco.com.

Taking the Offering: Dos & Don'ts

Hate talking about money? Many church leaders shy away from this tricky topic because they’re concerned it may reinforce negative impressions people have about the church.

But congregational giving is important in many ways—and not as common as you might think.

According to our friends at Kardia Consulting, who’ve been coaching church leaders on stewardship/generosity issues for more than 16 years, Christians give to the church at about the same rate non-Christians give to their charities of choice.

Per capita giving by churchgoers today is at 2.5 percent—nearly 1 percent lower than it was during the Great Depression!

Those who give anything comprise about 33 to 50 percent of church members. Yet if all Christians tithed, there would be an additional $165 billion to educate kids around the globe, eradicate hunger-related deaths, establish clean water and sanitation for all, and fund missions worldwide.

Jesus made it clear that treasure is a heart issue. Indeed, he’s quoted in the Scriptures talking about money, possessions and giving seven times more often than he talks about love.

How we use our money clearly matters in our faith journeys and our relationship with God. So instead of shying away from this topic, the church should be addressing it creatively and consistently, encouraging and empowering people to align their money matters with God’s heart.

But how? Kardia Consulting suggests a number of great, practical steps, including these:

Do

Instead of the offering as being an apparent afterthought thrown into a service wherever it fits, it should be timed, rehearsed and integrated with the messaging for the day.
Leaders should connect the offering with the church’s “reason for being.”

• Connect giving with the church’s mission
• Connect giving to God’s Word
• Connect giving to immediate “glocal” opportunity/need
• Connect giving to specific stories of life change and ministry impact
• Connect giving to God and his great faithfulness

Keep offering talks between 90 seconds and 2-minutes. Unique opportunities throughout the year may merit special emphasis and longer talks, but this should be the norm.

Don’t

Use tired, religious phrases like...

“It’s time to take the offering”

“The ushers are coming forward to receive our tithes and offerings”

“Let’s pray for the offering (the offering doesn’t need prayer; our hearts 
do!)”

In short, Kardia advises church leaders to build cultures of generosity in their churches through intentional consistency and excellence in messaging, preparation and execution of all things giving-related.

We’ve seen the success of this approach. Good planning and effective, meaningful communication are especially helpful when planning for a special project, such as a facility remodel or expansion.

Development Advisors provides A to Z services to Front Range churches looking to expand. For more information, contact Scott McLean at scott@developco.com.

How To Look at Debt Part 2: Debt is a Resource

In our last blog, we talked about how debt is a tricky subject in church circles but it’s an important one for pastors to be able to explain to their congregations. This is especially true when the church itself is taking on debt, as churches often must to complete expansion projects.

We explained that debt must be viewed in two ways: as a burden and as a resource. This can be a difficult tension to hold as these two things may seem like opposites, but it truly is a “both-and” situation.

Since we’ve already explained the drawbacks and realities of debt as a burden, we’ll now discuss how debt is a resource.

We believe characterizing debt as only “bad” is simplistic and ignores the great opportunities that access to credit, loans and the like, afford in today’s world. Yes—you have to pay it back. But taking on debt allows you to get where you’re going faster.

A church wishing to expand may have to wait years and undertake more than one capital campaign to raise enough money. And we’ve found that most givers don’t want to wait that long. They don’t want to give their precious resources to a project that won’t be completed for another decade or so. They want to see results. Plus, if a church is bursting at the seams it doesn’t have that much time to wait.

In more extreme cases, debt enables you to do things you never could have done otherwise. It’s an investment in a future hope that, if it becomes reality, makes the amount borrowed a lot easier to pay down after the fact than it would have been to accumulate in the first place. For example, many churches we’ve worked with have grown the minute they move into their new, improved facility.

As an easy theoretical (and admittedly oversimplified) illustration of this point, consider student loans. A student who borrows a manageable amount to finance his or her education should earn more after college and therefore able to pay back the loans much faster than he or she could have saved the same amount of money working at McDonald’s.

Of course, we have to be careful with this line of thinking. The future is never assured or perfectly controllable. Remember that there is wise debt and unwise debt. Wise debt is manageable even if reasonable unforeseen circumstances pop up. It’s within our capacity. Unwise debt is that which stretches us to our outer limits so that any bump in the road sets us in a ditch.

One more thing to consider along those lines: Having a denominational lender, like National Covenant Properties for Evangelical Covenant churches, for example, provides a slightly different reality for a church taking on debt. Should a huge storm arise that might challenge your ability to pay, these lenders have been known to soften terms during hard times. Many growing churches don’t have this resource but if you do, it could be a benefit. 

Development Advisors provides A-to-Z services for expanding churches in Colorado, including advice on financing options and strategy. For more information, contact Scott McLean at scott@developco.com.

How to Look at Debt Part I: It is a Burden

Photo by Steve Johnson

A large church expansion project is no joke. Many of our clients take on financial obligations worth millions of dollars.

But “debt” can be a dirty word in church circles. After all, many churches have embraced and promoted financial management advice from the likes of Dave Ramsey, who insists that “debt is dumb” and everyone who carries it is essentially “a slave.”

Of course, not everyone agrees with Dave Ramsey. But the question deserves attention: how should church leaders conceive of and explain debt to their congregations? What is the proper view of debt—a view that’s practical, wise, strategic and God-honoring?

Before we answer that, a caveat: It isn’t our purpose here to address the issue of personal debt. We’re talking specifically about the collective debt assumed by a church-wide community undergoing a capital building or renovation project.

In these cases, our role is to coach church leaders through their financing decisions. Each project is unique and so the particular advice we give varies. But two general principles always apply:

1. Debt is a BURDEN.

2. Debt is a RESOURCE.

These principles may seem at first glance to be opposites. But both are equally true, and it’s important that church leaders recognize that to avoid an overly simplistic view of debt.

In this blog, we’ll discuss the burden of debt and how churches should approach it. In our next blog, we’ll discuss debt as a resource.

Debt As Burden

Churches should understand the full implications of the debt they accrue and take them seriously. First of all, borrowing money is a responsibility over time—a long-term commitment by the community. Second, borrowing money costs money. To hold interest totals to a minimum, churches should seek to pay off their loans as soon as possible. That requires strict planning and fiscal policies. So church leaders should plan carefully how they’ll deploy these policies.

Another consideration is the percentage of total project costs that a church needs to borrow. Most lenders today allow up to an 80-percent loan to value or loan to cost ratio. Leaders should think about current properties and budget, and whether ongoing debt service at a particular rate will cut into the church’s “buffer” capacity in case something unexpected happens.

In other words, a church should be reasonably able to weather anything that comes its way. It’s not wise to play too close to the line in that regard—a church that cannot pay its bills due to unwise financial management or overdone debt is not representing God, its leaders or attendees well.

All of that said, debt need not make slaves of those who carry it. The key for any church is to carefully identify a workable amount of debt, and then create policies to manage it wisely.

Questions to consider:

-How much will this loan cost us, including interest and fees?

-What is a feasible payoff timeframe?

-What are the risks?

-Is it reasonable to expect increased revenues due to expansion?

-How much does the church plan to save?

-What percentage of our total costs are we borrowing?

-Will we receive any benefit, such as the sale of old property, when the project is complete?

-Will debt service cut into our buffer and create a problem if our budget experiences an unexpected downturn?

Development Advisors offers A to Z project management services, from strategic planning to moving in to a new building, to Front Range churches seeking to expand. For more information, contact Scott McLean at scott@developco.com.

Read our next blog for more about debt!