Diocese
of PennsylvaniaStanding Committee Open Forum
Sunday, October 14, 2007
St. Mary’s Church, Wayne
Welcome by Glenn Matis, President of Standing Committee
Welcome by Dean Michael Pearson, Rector, St. Mary’s Church, Wayne
Opening Hymn
Introduction of Members of the Standing Committee
Introduction of Members of Finance & Property
Acknowledgement of Wapiti Board
Acknowledgement of Diocesan Council
Ground rules
Peter Wilmerding, Chair of Finance & Property, acted as moderator and opened the meeting with a brief overview of the current financial situation.
Fiscal situation – recent history:
• Finances are not as stable as in the past and there is clear evidence that stewardship has changed
• At the close of 2006 we had paid only 1 of 12 months of our pledge to the National Church
• The 2006 Convention delegates made a decision not to use UNA’s (unrestricted net assets)
• There has been a shortfall in pledging needed to cover budgeted and unbudgeted expenses
• Some parishes have withheld their pledges
• Our Treasurer, Keel Jones, made a forecast in early spring of a $500,000 cashflow deficit and Program Budget was required to reduce spending
by this amount between June and end of the year
• There is a lack of fiscal discipline in the Diocese. For example:
• 20 churches have not yet paid any assessment by September 30, 2007
• Only 44% of pledges have been paid through September
• The Bishop’s Revolving Loan Fund is no longer available to the diocese because so many churches that received help through the Fund simply
haven’t been repaying their obligations
• Some Churches are not paying insurance or property taxes which requires a Diocese bailout
• In some ways, the Wapiti situation is similar to “The Perfect Storm”, with both the operations shortfall and the property issue of the State of
Maryland backing away from their expected financial involvement happening within the same two month period, at the very time that the
Diocese is financially very weak
• Wapiti has cashflow issues including funds needed for capital improvements in order to operate the camp in 2007. Approximately $145,000 was
needed for capital items (septic, tents, etc). The Wapiti Board raised $100,000 amongst themselves and friends, but the remaining capital expenses
had to be covered by the Program Budget funds allocated for running the camp.
• In 2006, $269,000 was granted by the Diocese for Wapiti expenses and there was a $100,000 loan from Standing Committee which was to have
been paid in June, 2007
• There was $165,000 allocated for fiscal year 2007 in the Program Budget
• $145,000 was needed for capital expenses in the spring, 2007 and $100,000 was raised by the Wapiti board.
• The second request to Standing Committee for an additional $145,000 was refused.
Chronology of Pertinent Wapiti Events through October 14, 2007
May-June, 2007
• Wapiti Board requests $145,000 from Standing Committee for capital expenses (septic, tent and related expenditures to open camp)
• Request is denied
• Wapiti Board raises approximately $100,000 within Board and contacts
• Wapiti Board authorizes spending a portion of Program Budget allotment for under-funded capital projects to meet code and other camp requirements
• Agreement signed with The Conservation Fund on terms to settle ownership of Wapiti land parcels after five years of negotiation. Agreement presumes the State of Maryland’s Department of Natural Resources (DNR) purchasing 183 acres for annexation to neighboring Elk Neck State Park and purchase of conservation easement on remainder of property (433 acres)
July 31, 2007
• The Conservation Fund is notified by Maryland’s DNR that the State will not purchase the 183 acre parcel and will not purchase an easement on the remaining property. TCF notifies Bill Bullitt who in turn advises members of Diocesan lay and clergy leadership. TCF and the State urge confidentiality for a period of time
August-September
• Bullitt convenes informal strategy meetings with members of Wapiti Board, Church Foundation, Finance and Property and Standing Committee and a small team meets at Wapiti with TCF
• Finance and Property has special meeting on September 5. Inviting Diocesan Council’s Executive Committee and Standing Committee. F&P deliberates on the following options available under the agreement with TCF
1. To abandon and walk away from the Wapiti transaction and allow TCF to dispose of the property to regain their investment ($3 million plus related expenses). Were TCF to sell the land, DIOPA would have a right to any funds in excess of TCF’s costs. At risk was DIOPA’s investment to date of $3 Million for property, $3 million-plus for improvements and other expenses.
2. To purchase 616 acres for $4.5 million and own all property without restrictions.
3. To purchase 433 acres for $2.7 million. TCF acknowledges responsibility for the smaller parcel if this option is taken.
• Finance and Property approved a resolution to offer $3.5 million for all of the acreage under current zoning density subject to ability to finance (commercial loan) and subject to a business plan to eliminate such debt within five years or, if such an offer was refused, to purchase the 433 acre parcel for $2.7 million. The offer was made to TCF. (See attachment)
September 19, 2007: Regular Meeting of Finance and Property
• F&P had no cash to allocate to maintaining operating deficit at Wapiti. Recognizing there would be significant closing costs, F&P approved closure of operations on October 15, 2007.
• For Wapiti to maintain a camp program in 2008, Wapiti’s Board was asked to build a business plan for F&P to consider and for Convention to approve and fund.
September 30, 2007: Wapiti Board invited to meet with Standing Committee at St. Christopher’s Church, Gladwyne
October 2, 2007: Wapiti Board of Directors meeting.
• Board approves steps to close operations, subject to visits by Bishop Bennison and The Rev. Christine Ritter.
• Board endorses F&P’s offer and asks it be kept open through October 10.
• Board will consider a proposal for Mark Retz to continue operating of the Retreat function.
• Board to prepare a business plan for camp to be considered by F&P
• Wilmerding advises that F&P must be confident of full funding for a camp operation before reconsidering continuation of camp operations.
October 11, 2007: Bill Bullitt notifies TCF that time has expired on DIOPA $3.5 million offer and that DIOPA formally acts on option for 433 acres.
Options: If the Diocese is going to consider an assessment, we need to consider the pledge and assessments historical comparison spreadsheet (insert)
• A Canon change would be required to add another assessment and it is unknown what another assessment would do to other giving.
• Finance & Property and Standing Committee want to recover funds spent on Wapiti so far as much as possible ($3 million for original option, $3 million for capital improvements and $2+ million for operations and other expenses)
• The Diocese is now seeking a commercial loan which requires current appraisals of the property
• There was concern expressed by Wilmerding that a mandatory assessment added at this time could possibly have a negative impact on other diocesan budgets or simply might not be paid at all by some parishes.
Q&A Period:
All answers that do not have a responder’s name associated with it are answers and in some cases opinions of the moderator, Peter Wilmerding
Q: what money is required in order to purchase and operate the camp?
A: Total amounts are not yet known, but will include debt service of:
• Approximately $200,000/annually for debt service
• Taxes $40,000 (estimated)
• Insurance TBD
• Cost of running the camp to be estimated by the Wapiti Board
• Fixed costs before sell off any land to be determined
Q: It seems as though the decision has been already been made; if not, what are our options?
A: Finance & Property had been considering an additional assessment, but this would have potential negative impact on other payments and would require a canon change
Q: What is the cost per camper since several numbers have been quoted ($1300/$1900) A: It is uncertain but $1300 was given at the 9/30/07 Wapiti Board meeting
Q: What ever happened to the exit strategy that was given to us years ago?
A: Several people have asked the same question, but the moderator was unable to respond since he was not part of the initial camp planning. Assuming the diocese purchases the land, any debt acquired from such a purchase would be retired within five years by the sale of parcels or all of the land.
A: Bill Bullitt: the exit strategy was always to acquire and sell the property if the project did not work out.
• The Wapiti Board is developing a business plan to reduce the carrying costs to $125,000 for holding the property plus the cost of running the camp. The current exit strategy is to borrow $2.7 to own; sell off all or part of pay down the debt. Have not had the land study done yet to provide information on how much land would have to be sold to allow us to maintain the camp. This is needed ASAP.
• A challenge is that the best part of the land is that where the camp is. It is also an issue that some neighbors and others will not allow high density housing.
Q: Please clarify what the Diocesan ownership status is? Why did we invest $3 million for property we did not own?
A: Bill Bullitt: TCF was a facilitator with a relationship with the state of MD. They put up the initial $3 million with $3 million from Diocese for an option. We have also put in $3 million for capital improvements plus $1-2 million for other expenses.
A: Jack Henn indicated he had visited with the State representatives and neighbors. This is an extremely complex transaction, but the $3 million option held by the Diocese should have been closed 3 years ago. The $3 million in capital improvements were a business risk with the expectation that we could close the business obligation. We should consider exiting right now; we would not recoup $6 million but would not have ongoing carrying costs. There has been speculation about the value of the land.
If Convention wishes to continue with the camp, the delegates must understand the financial implications to the Program Budget and to the Diocese going forward.
Q: Why can’t we take ownership to the land equivalent to the $3 million we already invested?
A: Bill Bullitt: the original agreement indicated that the Diocese could be forced by TCF to buy them out at $4 million (which we expected from State of MD). There also would have been a restriction on use of the land due to the easement. With the new agreement, the Diocese would have unrestricted use of the land. There is no incentive for TCF to sell the land for more funds than their expenses.
Q: Delegates and members of key committees voted based on forecasts and facts that have not turned out. Recently, Standing Committee indicated they would not consent to a mortgage unless the property was sold and funds were restored to the endowment funds. Is this still the case?
A: Glenn Matis: our statement of September 5, 2007 was that the consent would occur providing the property was sold and that this position was based on the information Standing Committee had as of that day. The committee will consider any new information received.
A comment was made that consistency of adherence to the ground rules is needed.
Q: Was the State of MD in violation of an agreement when they wouldn’t purchase the land?
A: There was no written agreement that they would purchase the land or the easement. Through July 30, the Diocese had every reason to believe that both of these transactions would be achieved.
Q: The funds already expended are sunk costs. How do we minimize the cost of getting out?
A: The Diocese needs finality related to Wapiti and Convention needs to make decision.
Q: Given the financial situation within the Diocese, could we secure a commercial loan and has there been a written appraisal?
A: Conversations with two banks have taken place in a preliminary form and updated appraisals are required before further negotiations. Diocesan collateral for the loan would have to be worked out, either with the underlying land and/or other assets as collateral options.
Q: Are we going to consider at all being able to salvaging the potential of the property? Have we approached any other Diocese about a joint venture with other Diocese? For example, Diocese of Easton has not been approached. This does not change the financial situation, but allows realization of the property.
A: The Wapiti board needs to consider this option within their development of the business plan ASAP and other solutions if they can be found.
Q: How this will affect the children and youth and how they will be hurt if the property is sold. If sell, what plans and provisions are in place to have camp next summer?
A: Finance & Property is dealing with the current financial problem and the options. This is the committee’s responsibility. There is $145,000 in the proposed program budget for the camp next year.
Q: Why can’t we force churches to pay for Wapiti and other assessments?
A: Assessment cannot be added this year. Currently churches are not paying assessments as it is.
A: Bill Bullitt reminded everyone that several years ago, the Diocese tried to implement the Fair Assessment model, but was defeated at Convention. Maryland’s decision was based on politics.
Q: What happened to the idea that the Diocese was committed to having a camp for kids?
A: This is not about not wanting to have a camp for the kids, but the Diocese needs to step up and support the kids and the youth financially.
Q: Why have we not considered some of the options mentioned here tonight?
A: Some of the options were not brought forward for discussion the leadership Groups and others were not considered good options.
Q: How can we take a look at the longer term vision of Wapiti and its potential? What about having a capital campaign and development of an endowment just for Wapiti?
A: We did not do a capital campaign in the past because we did not own the land. The same goes for not looking for partners.
A: We can talk about a capital campaign, but believe it would be a hard sell at this time.
Q: I understand there have been offers made by outside parties to purchase the property in the past?
A: Bill Bullitt: there was a proposal by a local developer to purchase for $4 million and allow us to lease for 10 years and then negotiate. This was turned down because it was a bad deal with funds available only to TCF with no guarantees to the Diocese. This was not seen as a viable offer at the time when the State of MD was still in the picture. Another group wanted to purchase the land and build a large conference center. This too was not as desirable as the MD, but can be considered now.
A: Glenn Matis noted that none of these potential offers were known by the Standing Committee.
Q: Is it possible to put something forward at Convention that allows us to take the time to do the study and make a good decision in order to avoid having a “war” over this emotionally charged situation or making a really bad decision? What is the timeframe for the purchase?
A: We have 90 days and the clock began ticking on October 11 or 12, 2007. A representative from Holiday House in Cape May provided information about their location and offered her business card.
Q: Who owns the property; who owns the buildings?
A: The Title is held by TCF with 51% interest to 49% for the Diocese
A: Bill Bullitt: we have a lease with TCF ($1) and have capital improvements in our leasehold interest. Assets are held on the Diocese books.
Q: Does the Diocese really want Wapiti to keep going?
A: Yes, if we could afford it. We are unable to afford it at this time.
Q: What can the young adults do to help?
A: No answer to this beyond the money but later Ike Miller commented that the youth need to organize to do what is important to you, but we as adults need to tell you the truth about the struggle that you face.
Q: How many campers were served/week
A: An average of 23 per week
Q: Why weren’t other alternatives considered earlier?
A: As late as the Spring of this year, Finance and Property had been advised that Wapiti was on track for a breakeven year if wedding plans worked out to Mark Retz’s expectations. As it turned out, events didn’t take place as hoped even with the hard work of the staff. We realized in June the significance of the financial problem.
There was a call for prayer from every pulpit quite specifically for Wapiti.
Q: There is confusion in the talk about the camp and retreat. We needed to have focused on what was important – the camp for the kids – can we get back to the basics and a single focus – does this make it less complex and more affordable?
A: Roberta Torian: the initial involvement was because of desire for a camp; the retreat idea was a way to fund/subsidize the camp and the use by the churches at a reduced price. If we are able to proceed, would have it as a camp.
Q: Are the parishes impoverished, involved with other projects of more importance to them, stingy or have they had a loss of confidence in the leadership?
A: Recommendation to read Financial Meltdown in the Main Line? By Loren Mead and published in 1998 by the Alban Institute. Moderator suggests in his opinion this is a different Diocese in terms of stewardship, how we operate, and the discipline that we have compared to twenty years ago. This book helps us to understand complexities of the issues we face along with other main line denominations from a financial standpoint and hope that next year we can meet and come together with a new paradigm.
Please send letters to Rob Rogers at Church House robr@diopa.org
240 S. 4th St, Philadelphia, PA 19106 Phone: (215) 627-6434 Fax: (215) 627-7550
Peter Wilmerding will respond.
Closing prayer by Ike Miller
Closing hymn