Get out of debt!

One of the best things to come out of the economic downturn of the last four years is that consumers are working hard to get out of debt.  The Federal Reserve reported that last year the amount of debt held by the average household in this country shrunk to its lowest level since 1993.

And I have had no fewer than six experts tell me in recent months that church debt is now a hot topic for church capital campaigns.  Debt had long been the red-haired step child project for capital campaigns, with members preferring more attractive options like renovation and new construction over debt.  But as opinions about personal debt have changed, so has the view of church debt.  I think we saw the recent financial struggles and realized no matter how much the offering had shrunk or how strong a need there was for more compassionate programming, the mortgage was still sitting there needing to be fed.

One dimension that needs to be researched as opinions change is new members’ interest in paying off debt.  The thinking historically has been that a member who joined the church after the debt was assumed has no “ownership” of these payments, perhaps taking the position, “I didn’t vote for the debt, why should I have to pay for it?”

So how much debt can you raise the money to pay off?

This is a rule of thumb, so, as they say, your mileage may vary, but we generally think in terms of a capital campaign raising 1.5 to 3 times a church’s annual giving.  So if your giving is $500,000 you would normally expect to be able to raise $750,000 or $1,500,000.  Note that this is giving, not your total budget.  If your budget is padded by things like endowment proceeds, rent from a day care center or similar support, you would need to factor those out.

Where you land in that 1.5 to 3 range will depend on two key factors:  if your congregation has the resources to fund a campaign, and if they have the inclination.  If your congregation is full of tithers who are completely stretched to the limits of their ability to give, your potential may be limited.  similarly, if your membership has a lower income or if your membership has dwindled significantly, all of these things can push you lower as you set your goal.

A lot will also depend on the project.  If the mortgage is a result of a renovation that was badly-needed and has significantly added to the life of your church, this is a good sign.  But if the original project had poor support to begin with, then the effort to retire this debt may not be very popular either.

As I have written about shifting your church’s focus from stewardship (the church’s need to receive money) to generosity (triggering what makes someone wish to give) we need to remember to always talk about how a project will change lives.  You may look at a debt retirement and figure it doesn’t change lives.  But I encourage you to think down the road.  Take what your church is spending on mortgage payments and insert it into your budget.

Your vision for debt retirement cannot be debt retirement.  It must be how having that money available to you can help build programs that change people’s lives.

If such a campaign is right for you, the Foundation is more than happy helping you get started.

One Comment on “Get out of debt!

  1. Good, helpful information, Brian. I have found that “debt-only” campaigns typically range more in the 1 to 1-1/2 times the annual giving level… UNLESS it is a campaign that will result in “burning the mortgage.” Even then, it is helpful to have a new component (or at least a vision for some new ministry) that will excite people’s imaginations and interest.

    But you are right on target when you say that we need to see the vision of how retiring the debt can be “translated” into ministries that will touch people’s lives with the gospel.

    Brad Call, Church Stewardship Consultants, LLC

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