FAQs

The contractor required Third to demonstrate its ability to pay for the project. This meant Third needed pledges and a bank commitment for the total project costs before the contractor would sign a construction contract.

As a result, Session recommended and the congregation approved a $7 million loan in the spring of 2022. As discussed at the meeting, this loan accomplished two things: first it helped provide funds in advance of when the pledges would be collected, and secondly it covered the projected pledge shortfall of $2.2 million. Also discussed at the meeting was the need for a second Renew fundraising campaign to cover the projected pledge shortfall.

Shortly after the meeting, the bank responded by approving the loan at a favorable rate of 4.75% providing up to $7 million in bridge financing during the construction period that converts, if needed, at the end of the construction period, to a long-term loan, not to exceed $3 million.

However, in 2023, with the increase in the pledge shortfall growing to $4.8 million the bank required Third to commit to raising additional pledges of $2.5 million by May of 2024. Session agreed to this change in terms with the bank, thereby committing to the second Renew campaign.

Once Session officially committed to the bank that there would be a second Renew Campaign a fundraising goal needed to be set. The question became: should the goal be the minimum number set by the bank ($2.5 million) or should it be for the balance of the full project costs ($4.8 million)? Session unanimously voted that there should be no long-term debt on the project. The congregation has been consistent for more than 25 years in its aversion to debt. By setting the goal at $4.8 million and not taking on long term debt, Session honors the commitment made when Third started the original campaign and building project.

It is good stewardship and biblical to avoid financial obligations. It is also biblical that if we do have debts, we must meet all of the obligations under the debt. Therefore it is important to pay off the debt as soon as possible and live within our means. Debt service is the monthly principal and interest payment on the mortgage. Every penny paid toward debt service means less resources available for the basic services of the church (Worship, Local & Global Missions, Discipleship & Parish Ministry, Student Ministry, Children's Ministry, Adult Christian Education, Young Adult, College, Men's and Women's Ministries, Personnel & Payroll, Facilities & Grounds, and Technology). It would take a 5% across-the-board cut in all operating expenses and departmental programs to pay for more than $200,000 of annual debt service on a $3 million loan.

Another way of saying it, is this: if Third borrows the full extent of the $3 million long-term debt allowed by the bank, then total debt service costs of Third will equal the average annual tithes of 37 families.

Session determined that Third should fully pay for this project with a second $4.8 million fundraising campaign, and not borrow any long term funds from the bank. This second Renew campaign goal aligns with the congregation’s biblical aversion to debt and it is good stewardship of the Lord’s tithe.

First, the increase in interest rates will not impact the interest expense on this project. Third locked in the interest rate on its loan with the bank at 4.75%, in the spring of 2022. Today, that rate would likely be 6.25%. That rate lock avoids more than $100,000 in interest cost during the construction period.

Secondly, the increase in interest rate is good news on the interest income side of the project. The funds received on pledges have been invested in US Treasuries, CDs and many bank money markets, to manage the FDIC insurance limits by bank. What was a relatively meager expectation of income in a low interest rate environment has now grown significantly to a projection of more than $500,000 of interest income.

Thirdly, a financial expert might ask about the benefit of having a long-term mortgage commitment from the bank at 4.75% when current rates are 6.25%. Third’s decision to fully pay for the project with the second Renew campaign means that the bank would likely be grateful if we paid off the loan during the construction period instead of converting to a long-term loan. Third’s aversion to debt is working to the advantage of the bank in this rising rate environment.

When one summarizes the above items: the project has had good interest rate risk management, Third has benefited by more than $500,000 due to an increase in interest rates, and the bank has benefited by Third likely choosing not to convert to a long-term mortgage.

While we would have been able to fix all the infrastructure problems with the funds from the first campaign, those changes would have diminished the functionality of the current space and the HVAC improvements would have been the only noticeable accomplishment. We would have returned to a “renovated building” with hallways that would be more confined than before, and a space that is less accessible and hospitable than we were used to. Ultimately, this plan would only have achieved one of our five campaign priorities at a very high cost (using the majority, if not all, of the raised Renew funds) and another significant delay.

It truly would be a blessing if there were no surprises during construction. The amount of the contingencies were established according to the recommendations of the construction professionals due to the complex nature of a renovation project of this size and the age of our facilities. Any use of unspent funds would have to be approved by Session. One proposal they would consider in this scenario would be to pay down the current mortgage loan on the 500 Forest Administration Building of $0.9 million. It would be an answer to prayer if we were able to exit the project with even this existing debt paid off.

While starting from scratch would have been easier from an architectural standpoint, it would not have been less expensive. Our general contractor and construction manager made sure to explore this option for us, and concluded that it would be more expensive than our current renovation designs by a significant amount. Furthermore, it wouldn’t have protected the historical value and character of our building, something that we greatly value, and something that the architects worked hard to protect and preserve throughout the design process.

We’re looking for commitments to be fulfilled by the end of 2025, so this means that commitments can range from one to two years. We encourage everyone making a commitment to prayerfully consider fulfilling pledges as soon as possible, as our current cashflow projections indicate we will need to begin drawing on a construction bridge loan around May 2024. If we were to receive pledge money earlier though, we would incur less financing costs than those currently assumed as a part of the total project budget.