Stewarding Capital Resources | Plante Moran
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Stewarding Capital Resources

How shall we care for the needs of our aging, infirm, or disabled members? Where should this care be provided? Do we have enough resources to meet these needs and sustain our ministries? Difficult questions. Difficult choices.

In this article, we discuss how to make those choices in a thoughtful and planned way that respects the traditions of the congregation and recognizes their long-honored commitment to steward their capital resources effectively.

The prospect of the increasing life expectancy among congregation members presents financial challenges. The desire of many members to live in the community at large is creating excess capacity in existing congregation-operated long-term care and housing facilities. The ability to meet the range of care needs within existing structures is becoming increasingly difficult. These issues are leading communities to seek both internal and external solutions to address their current reality.

Proactively planning and addressing these challenges with full knowledge and much courage can allow for thoughtful and careful stewardship of limited resources. Such planning can meet long-term care needs while making more resources available for mission and ministry. There are three primary questions that need to be addressed in the planning process:

  • What is the scope of long-term care services that is needed by the community members?
  • What resources are available to provide for these services?
  • Where should those services be provided?

Long-term care services can be provided in many settings and can vary in intensity. The settings range from congregate living to skilled nursing, and the level of service ranges from home and community-based services to post-acute rehabilitation. Services can be provided through internal mechanisms, (e.g., wellness coordinators and infirmaries) or by accessing public programs and facilities (e.g., Medicaid waiver services and licensed nursing homes).

In determining the scope of services needed by members, there must be an analysis that includes:

  • The size of the population that will need the service currently and within the planning time frame
  • An understanding of the progression of members through the levels of care
  • The number of members projected to be at each stage at particular points in time
  • Where the members will choose to receive the services needed
  • The community support and facilities available to sustain the individual member in the setting of choice
  • The focus of this article is on the real estate component of the analysis.

Most religious communities hold a variety of assets, including land and buildings. A common tendency is to assume that using these existing assets will be the most cost-effective alternative, as well as being the most acceptable to the community. For example, a community may consider converting a motherhouse or monastery to a retirement facility to provide a range of services within a building that has emotional significance. Many such buildings however, were designed in an era not sensitive to energy efficiency and handicap accessibility and, also, lack the infrastructure necessary to provide a safe and secure environment. Further, room size and floor layouts are typically not readily adaptable for the new functionality.

The inclination to use existing facilities, while understandable, must be approached with great caution. The analysis should consider whether:

  • The reinvestment costs to adapt the building to its new purpose would be greater than if constructing anew facility.
  • Services could be purchased more cost-effectively from an outside source.
  • The proceeds from the sale of the existing property would be sufficient to substantially fund a new project elsewhere.
  • The resources exist to fund the new project as well as continuing operating costs.
  • Evaluating the real estate options for providing care should,therefore, be conducted in the context of the community’s entire complement of assets and its ministry priorities.

Asset positioning is a process through which an organization can evaluate its current and future capital requirements within the framework of its mission and ministry. This process begins by determining present and future retirement needs while concurrently evaluating the community’s financial capacity — its ability to meet its near and long-term objectives. As the housing and care needs are quantified,serious consideration should be given to where and how these services should be provided. Should the community adopt a philosophy of care that promotes supporting members in their local communities or one that promotes a more facility-based care model?

It should also be considered whether the community should seek to:

  • Partner with another community
  • Enter into a joint venture with several other communities
  • Place members in public facilities
  • License its existing infirmary, if allowed

After program needs and financial capacity have been clearly defined, alternatives can then be modeled to determine their impact on the community’s financial well-being. The community should develop a pro forma budget for proposed renovations or new facilities and seek to understand the annual and long-term financial impact. This modeling should occur before significant investment is made in designing new facilities. Feasibility studies at this preliminary level can provide insights into the range of funds that may be required to support the various alternatives. “Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?” (Lk. 14:28). If warranted, planning can then proceed to architectural studies and design of new space.

In cases where financial projections indicate that funding levels are not sufficient to support ongoing retirement needs, the community may need to evaluate the potential value of its real estate holdings. A comprehensive analysis of the real estate holdings would include a determination of highest and best use and general marketability. In cases where a community owns several assets in different geographic locations, the outcome of this analysis should assist in identifying which assets may be best suited for disposition. This exercise begins with a real estate analysis and would also include a thoughtful evaluation of the impact of the loss of an existing location, particularly when that location supports active ministries. Asset dispositions need to be carefully managed to maximize return to the community; retaining the wrong assets can result in a continuing commitment of resources that could be more effectively used elsewhere.

Proceeds from the divestiture of real estate can be used to acquire other land and/or facilities that meet the needs of the community but are not as expensive to maintain. The proceeds, alternatively, may be added to the community investment portfolio in order to enhance its financial future. A decision to divest from real estate can be emotionally challenging but can also provide the sense of direction and comfort that a community’s long-term needs will be addressed.

In summary, form should follow function. Determining program needs for addressing the long-term care of members begins with a vision, followed by good planning; implementation of a well-defined plan will result in a sound and prudent outcome. Quantify the need, measure its cost, evaluate community resources, align assets to support mission and ministry, and implement prudent decisions to provide for the long-term sustainability of a strong community.

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Jerry Gumbleton