To liberate funds for ministry and position Faith Lutheran Church for long-term stability, a major goal of the RenewingFaith capital campaign is to reduce Faith’s current debt by $300,000.
Faith currently has approximately $1.9 million in long-term debt on its property and land that values more than $6 million. Due to the recent recession years, interest rates for the loans are relatively low at 4 percent, and fixed until mid-2017. Approximately 14 percent of general giving goes to pay this debt, an amount that has been manageable in recent years.
Although impossible to predict, Faith’s finance committee believes that interest rates will likely increase at some point in the future. Increased debt cost would greatly impact our operating budget, our ability to pay for deferred maintenance, our ability to expand programing and ministry, and our ability to ensure a solid financial foundation for future generations.
With this in mind, the following outlines objectives & options for reducing Faith’s debt by $300,000 (note: reflects fiscal year-end on June 30 of each year):
|FY 2015||FY 2016||FY 2017|
|Projected mortgage balance||$1,892,627||$1,820,609||$1,745,657|
|Estimated annual principal reduction||($72,018)||($74,952)||($300,000)|
|Ending mortgage balance||$1,820,609||$1,745,657||$1,445,657|
(15-yr mortgage) $12,199*
|Annual debt service||$146,400||$146,400||
(15-yr mortgage) $146,388*
*Assuming a 50 percent increase in borrowing costs from 4 to 6 percent
With either financing scenario (15-year or 20-year mortgage), the portion of our operating budget earmarked for debt service will decline (assuming annual general giving increases of 4%-5%). If interest rates remain low or relatively flat with today, the reduction in payments could be even greater. This in turn will allow additional funding for programs and/or necessary maintenance of the facilities.
Commonly-asked questions include “Are we aiming high enough with this campaign?” and “What would we do if we exceeded the $1,100,000 goal?” While there are multiple options of how additional funds could be used, it is easy to see how further debt reduction would positively impact the ability of Faith Lutheran Church to proactively maintain property and grow ministry programs. Reduction or elimination of this debt would also allow us as a congregation to focus more attention on long-term financial stability through the building up of Faith’s endowment fund.
In summary, the debt reduction portion of the capital campaign fulfills three major goals:
- Continues a tradition of good stewardship and positions the congregation to have a solid financial foundation as a legacy.
- Gradually reduces the amount of weekly/monthly congregational giving that is earmarked for debt service, allowing for repurposing those funds into programs and facility maintenance.
- Recognizes the economic realities/risks of today and that future borrowing costs will likely be higher in future years.
If you have a question or comment regarding Faith’s finances and/or the RenewingFaith campaign, please contact one of Faith’s Council members, capital campaign co-chairs, or the church office.