As you may know, I come from a background in planning and building ministry facilities. I have been blessed to invest over 30 years of serving churches to develop new and renovated ministry facilities. While this role has brought me much fulfillment, it has also burdened me to see the millions of dollars spent each year without a clear understanding of the real cost of ownership.
I recently hosted a live webinar about the real cost of owning a church facility. In case you missed it, here are the cliff notes:
Zoom Out: Actual Costs of Church Facility Ownership
I want to start by digging into the real costs and ownership associated with our church facilities as an overview. For this demonstration, let’s assume that our new church facility is 30,000 SF for $6,000,000 (initial cost). Let’s assume we borrowed $4,500,000 to pay for a project through a 15-year loan at 4%. However, we paid it off in seven years. In this scenario, you will have paid approximately $1.76M in interest (cost of ‘money in this scenario).
How much is a church?
Based on our research and bench-marking provided by International Facility Managers Association, the average church in America will spend $5.25 to $7.50 per square foot annually for janitorial services, utilities, and general maintenance (cost of operation). It will also spend an additional amount on capital improvements in the $2.00 to $3.00 per square foot range. Therefore, for the sake of this exercise, let’s assume we will spend $8.50 per square foot on operational and capital reserve costs.
Let’s assume a 40-year life cycle at 1.5% per year of inflation. Since operational costs are perpetual and paid using inflated dollars, this is going to increase. So, $255,000 per year multiplied by 40 years at 1.5% per year without compounding equates to $19,970,500
Zoom In: What Do The Costs Mean
So, what do these costs actually mean? Here’s a summary from the above:
- Initial costs: $6,000,000
- Cost of money: $1,760,000
- Cost of life cycle operations and capital reserve: $12,210,000 ( aka $407/SF, ouch
- The total cost of church facility ownership: $19,970,500
Wow, that is a lot of money. But that’s not even the shocking part. The combined cost of the construction and design is only about 3% of the total cost of ownership. The construction costs, including the design, are only about 22% of the total cost of church facility ownership. The interest paid is about 6% of the total cost of ownership. Therefore, this leaves about 71% of the total ownership cost in operation costs and capital expenditures.
What Costs More: Building a church or operating a church?
So, what costs more: the initial cost or the cost after you gain ownership? I think the numbers speak for themselves. Therefore, that leaves us questioning whether we invest the same amount of time and energy in planning our operational costs as we did when we developed our master plans and floor plans?
Some facility owners become frustrated when they see 7% instead of 5% for design fees or if the construction partner charges 6% instead of 3%. The fees that comprise only 3% of total costs of ownership seem so important at the time, but the decisions and directions suggested and put in place are what will be a part of your building for a long time. All that to say, it’s essential we fix our focus to the actual cost of facility ownership – not the initial.
Church Facility Stewardship and Ownership
If facility ownership is really about being wise stewards of all God has entrusted, then I think it is fair to say that most of us have our priorities upside down. Facility stewardship must include the following:
- Purposeful facility planning: Taking the time to evaluate the “genetic code” of the church, reviewing the vision, determining if facilities are needed to accomplish the church’s vision and mission, and evaluating the potential financial implications.
- Proper facility development: This is not just about construction but also encompasses the financial stewarding of the resources God has entrusted to us by planning facilities that meet the ministry objectives.
- Proactive facility Management & long term care: This is where we too often fall short in our facility stewardship initiative.