Wednesday, November 27, 2013

George Washington's Thanksgiving Proclamation




We at Omega Church Consultants wish you a joyful and memorable Thanksgiving Day as you gather together with family and friends to give thanks to the Lord for His favor and innumerable blessings.

To commemorate the day, we wanted to post this Thanksgiving Proclamation from George Washington in 1789. May we all live with a spirit of gratitude, not only today but throughout our lives.


WHEREAS it is the duty of all nations to acknowledge the providence of Almighty God, to obey His will, to be grateful for His benefits, and humbly to implore His protection and favour; and Whereas both Houses of Congress have, by their joint committee, requested me "to recommend to the people of the United States a DAY OF PUBLICK THANKSGIVING and PRAYER, to be observed by acknowledging with grateful hearts the many and signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness:" 
NOW THEREFORE, I do recommend and assign THURSDAY, the TWENTY-SIXTH DAY of NOVEMBER next, to be devoted by the people of these States to the service of that great and glorious Being who is the beneficent author of all the good that was, that is, or that will be; that we may then all unite in rendering unto Him our sincere and humble thanks for His kind care and protection of the people of this country previous to their becoming a nation; for the signal and manifold mercies and the favorable interpositions of His providence in the course and conclusion of the late war; for the great degree of tranquility, union, and plenty which we have since enjoyed;-- for the peaceable and rational manner in which we have been enable to establish Constitutions of government for our safety and happiness, and particularly the national one now lately instituted;-- for the civil and religious liberty with which we are blessed, and the means we have of acquiring and diffusing useful knowledge;-- and, in general, for all the great and various favours which He has been pleased to confer upon us. 
And also, that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech Him to pardon our national and other transgressions;-- to enable us all, whether in publick or private stations, to perform our several and relative duties properly and punctually; to render our National Government a blessing to all the people by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed; to protect and guide all sovereigns and nations (especially such as have shewn kindness unto us); and to bless them with good governments, peace, and concord; to promote the knowledge and practice of true religion and virtue, and the increase of science among them and us; and, generally to grant unto all mankind such a degree of temporal prosperity as he alone knows to be best. 
GIVEN under my hand, at the city of New-York, the third day of October, in the year of our Lord, one thousand seven hundred and eighty-nine. 
(signed) G. Washington

(Source: http://www.leaderu.com/humanities/washington-thanksgiving.html)

Monday, November 25, 2013

Bond Funding for Your Church Expansion

The financial crisis of 2008 precipitated an overhaul in lending regulations and practices.  The free flow of capital was disrupted and risk management caused lenders to greatly curtail construction financing.  Some lenders quit lending to churches altogether.  All lenders tightened their underwriting standards, making it much more difficult for churches to borrow for any purpose, including refinancing, new construction, land acquisition or renovation of existing facilities.

One funding option that may be attractive for churches at this time is bond financing.  Some of the advantages of bond financing compared to a bank loan include:
  • The underwriting standards may be more flexible and lenient, allowing the church to raise more funds in a quicker timeframe compared to qualifying for a bank loan. 
  • Bonds have long-term fixed interest rates.  Bank interest is either variable, or fixed for only a few years.  After 3, 5, or 7 years the church often needs to refinance a bank loan at the current interest rate.  Bond payments and interest rates can be fixed for 20 to 30 years.
  • No personal guarantees are required.  Some bank loans require the Pastor and/or board members to personally guarantee repayment of the loan.
  • No pre-payment penalty is required.
  • Church members can receive a return on their investment if they choose to purchase any of the bonds.  This gives church members the opportunity for involvement in the expansion of church facilities and ministries, while at the same time providing future income for the church member as the bonds are repaid with interest.
  • All of the bonds need not be purchased by the congregation.  Any funds not purchased by the congregation will be sold to the public.
  • The bond contracts allow the church more freedom to control the timing and amount of repayment.

While bond funding may not be a solution for every church, it may prove to be the best option for allowing your church to expand now.

Before Buying Land for Your Church

One aspect of the church design and construction process has become increasingly problematic and costly in recent years.  We often see building codes that dictate to the church how they can develop their land in such areas as landscaping within and around the parking lots, entry drives and passing lanes, pedestrian and bike paths, and site lighting.  Because some towns suffer from inadequate storm sewer systems and other infrastructure problems, they are forcing developers to build private stormwater filtration systems and elaborate sewer treatment facilities on their sites.  Churches are not exempt from these commercial requirements.  

All of this adds an element of uncertainty to the budgeting process as churches plan for new construction.  The same building plan built at two different sites could have dramatically different costs.  Therefore, it’s a good idea to get your architect involved before buying land.  A conceptual site development plan should be developed and presented for review to the local permit agencies even before closing on a new land purchase.  The church should acquire as much information as possible, with the help of their architect and civil engineer, in order to avoid any costly surprises later.  Make the closing on any purchase agreement for new land or buildings contingent on a satisfactory due diligence review and feasibility study.  Your architect and civil engineer will work closely together with you and your permit agencies to design your site in a way that meets all the current codes, and then help you determine what your site development construction costs may be.  Closing on a land purchase without first understanding the feasibility of developing at that location, and the cost of satisfying all of the demands of the local permit agencies and utility regulators, could put the church at great risk.

A Due Diligence Clause in a purchase agreement may call for a period of 60-90 days for the buyer to review the following:
  • Zoning restrictions
  • Soil conditions
  • Wetlands and environmental concerns
  • Traffic control and vision distance from the exit drives
  • Availability of utilities
  • “Buildable” acreage versus unusable acreage on site

The Due Diligence Clause may be worded as follows:  “Buyer will, at Buyer’s expense and within 90 days from acceptance of the Purchase Agreement (“Feasibility Study Period”), determine whether the Property is suitable, in Buyer’s sole and absolute discretion, for the Buyer’s intended purposes.”  The Clause should further contain language to the effect:  “If the Property is unacceptable to the Buyer and written notice of this fact is timely delivered to Seller, this Contract will be deemed terminated as of the day after the Feasibility Study period ends and Buyer’s earnest deposit(s) will be promptly returned.”

The architect and civil engineer can help the church determine the feasibility of the property to meet the current and long-term needs of the ministry.  The church should consider the following:
  • Buy enough buildable land to meet long-term needs as the church grows
  • Avoid odd-shaped, steep, or heavily wooded property
  • Avoid land in a flood plain or wetlands
  • Avoid land that is low in relation to roads and utilities
  • Avoid land with unstable soil, especially land that has been filled 
  • Look for easements and setbacks that might hinder development
  • How will storm water drainage be controlled and filtered?
  • How far from the land are the electric, gas, sewer and water utilities?

Remember that two properties of the same size may have dramatically different development costs.  Count the costs and determine the feasibility before you close the deal on the purchase of land or existing buildings.  

One aspect of the church design and construction process has become increasingly problematic and costly in recent years.  We often see building codes that dictate to the church how they can develop their land in such areas as landscaping within and around the parking lots, entry drives and passing lanes, pedestrian and bike paths, and site lighting.  Because some towns suffer from inadequate storm sewer systems and other infrastructure problems, they are forcing developers to build private stormwater filtration systems and elaborate sewer treatment facilities on their sites.  Churches are not exempt from these commercial requirements.  

All of this adds an element of uncertainty to the budgeting process as churches plan for new construction.  The same building plan built at two different sites could have dramatically different costs.  Therefore, it’s a good idea to get your architect involved before buying land.  A conceptual site development plan should be developed and presented for review to the local permit agencies even before closing on a new land purchase.  The church should acquire as much information as possible, with the help of their architect and civil engineer, in order to avoid any costly surprises later.  Make the closing on any purchase agreement for new land or buildings contingent on a satisfactory due diligence review and feasibility study.  Your architect and civil engineer will work closely together with you and your permit agencies to design your site in a way that meets all the current codes, and then help you determine what your site development construction costs may be.  Closing on a land purchase without first understanding the feasibility of developing at that location, and the cost of satisfying all of the demands of the local permit agencies and utility regulators, could put the church at great risk.

A Due Diligence Clause in a Purchase Agreement may call for a period of 60-90 days for the buyer to review the following:
  • Zoning restrictions
  • Soil conditions
  • Wetlands and environmental concerns
  • Traffic control and vision distance from the exit drives
  • Availability of utilities
  • “Buildable” acreage versus unusable acreage on site

The Due Diligence Clause may be worded as follows:  “Buyer will, at Buyer’s expense and within 90 days from acceptance of the Purchase Agreement (“Feasibility Study Period”), determine whether the Property is suitable, in Buyer’s sole and absolute discretion, for the Buyer’s intended purposes.”  The Clause should further contain language to the effect:  “If the Property is unacceptable to the Buyer and written notice of this fact is timely delivered to Seller, this Contract will be deemed terminated as of the day after the Feasibility Study period ends and Buyer’s earnest deposit(s) will be promptly returned.”

The architect and civil engineer can help the Church determine the feasibility of the property to meet the current and long-term needs of the ministry.  The church should consider the following:
  • Buy enough buildable land to meet long-term needs as the church grows
  • Avoid odd-shaped, steep, or heavily wooded property
  • Avoid land in a flood plain or wetlands
  • Avoid land that is low in relation to roads and utilities
  • Avoid land with unstable soil, especially land that has been filled 
  • Look for easements and setbacks that might hinder development
  • How will storm water drainage be controlled and filtered?
  • How far from the land are the electric, gas, sewer and water utilities?

Remember that two properties of the same size may have dramatically different development costs.  Count the costs and determine the feasibility before you close the deal on the purchase of land or existing buildings.  

"For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?"  Luke 14:28 (ESV)


Tuesday, April 16, 2013

Inflation and Your Construction Project: Should We Start Now or Wait?


Inflation. 

It doesn’t sound like such a big, bad thing.  

“So what if prices go up a small percent each year.  So do my wages”, we might say.  “It all evens out.  There has always been inflation.  It’s just a fact of life.”  And so it would be… if all things rose equally all the time.  However, we often see that costs do not rise equally and our wages often do not keep pace with inflation.  

In fact, recently we have seen the cost of gasoline, medical care, certain foods, electricity, and college tuition, among others, rise faster than wages.  Many building materials continue to rise in cost faster than the consumer price index (CPI).  Depending on how it is measured, over the past twenty years inflation (the increase in the cost of all goods and services) has averaged 2.5% -4.7% per year.  Since 2006 real wages (adjusted for inflation) have not kept up with the cost of goods and services.  

Since 1978 the CPI has risen 325%, while medical costs have risen 600%, and college tuition costs have risen 1,000%.  Building materials such as steel and aluminum have also risen greatly, as have gypsum board, and many materials made from oil.  From 1990 to 2005 both the Lumber PPI (Producer Price Index) and the Steel PPI rose about 11% per year.  In 2008 alone steel prices went up 150%.  Copper prices (think electrical wiring and plumbing pipes) quadrupled from 2004 to 2008!

Inflation is certainly of concern to anyone planning to expand their ministry facilities.  The pernicious nature of inflation is that any delay in starting a building project, will result in higher costs later.  For example, a $3,000,000 building project that is delayed a year might conservatively be expected to cost $3,100,000 next year, and $3,204,000 the year after that.  

So, any plans to delay the construction start date in order to raise money must take into account that a delay will increase the cost of the project.  In the example cited, the first $100,000 raised in your capital campaign will go toward covering the effect of inflation.  

There are, however, times when a delay in starting a project can benefit the church.  If the church does not meet the minimum equity contribution to qualify for a loan, then the church may need to delay construction until a sufficient down payment can be raised.  

Also, in an environment where interest rates are falling, the church may find it can obtain a lower monthly payment (or qualify for a larger loan) even if inflation pushes the total cost of the project higher.  For example, if the church delays a year on the project cited above, and assuming the church has no equity in existing real estate, the cash needed might look like this:

$3,000,000 project requires 25% down payment =  $750,000 down and a loan of $2,250,000.

Assuming the loan terms are 6% amortized over 20 years, then the monthly payment would be $16,120 per month.  At a 1.2 cash flow coverage, the church would need to show the lender that it has $19,343 per month of surplus cash to make the new mortgage payments.  (This $19,343 would include any current expenses that will end when you occupy your new building, such as rent or mortgage payments on your present building).

Now let’s assume that the church waits a year, raises $100,000, and the interest rate has fallen to 5%.  The construction cost is now $3,100,000 but the church has $850,000 to put down (the $750,000 it had plus the $100,000 it raised), so the LTV (Loan-to-Value) Ratio has improved to 72% rather than 75%.   The loan amount is still $2,250,000 because the fundraising covered the inflation.  If the interest rate has fallen to 5% , then the monthly payment is $14,850.  If the cash flow coverage ratio required by the lender is 1.2 then the church must show $17,800 per month of free cash at the end of each month available to make the new mortgage payment.  These assumptions might represent a best case scenario but the result is a savings of $1,270 per month on the mortgage.

At this time, April of 2013, it would be difficult to convince anyone to expect interest rates to fall further since the Federal Reserve has few tools remaining to keep rates this low.  Likewise it is difficult to see how inflation will remain this low as the Treasury Department continues to print money and the National Debt continues to rise.  

Given these conditions, it is probably wise to lock in these historically low interest rates and reasonable construction costs while they are available.

Jeff Thomas is President of Omega Church Consultants,
Church Designers and Builders, located in Indianapolis.


Monday, January 23, 2012

How the ADA Affects Your Church Building



The Americans with Disabilities Act (ADA) was signed into law by President George H. W. Bush in 1990. The ADA was created, in part, to ensure that a person in a wheelchair is able to move from their car into a building, and access all public areas of the building without assistance. Most churches constructed prior to 1990 did not meet the design requirements of the ADA. Virtually every church, therefore, will need to consider the ADA when renovating existing facilities or building a new church.

Churches are finding that when they plan a building addition or renovation, local authorities will require the church to upgrade most, if not all, of their existing facilities to the ADA codes. Let's look at an overview of some ADA requirements.

All required emergency exits must be wheelchair accessible with sidewalks out to the parking areas. Doors must be at least 3' wide with lever handles or panic bars. Any changes in elevation must be made by means of ramps of specific design or approved elevators. About 2% of the parking spaces should be 8' wide with 5' access lanes between spaces. Reserved space must be provided in the sanctuary for wheelchairs equal to two percent of the total seating. Restrooms must have a 5' x 5' stall with out-swinging door, grab bars, handicap toilet and sink.

Some of the ADA is subject to local interpretation. Some states interpret public areas to include the platform and baptistery areas. In some states, all restrooms must meet ADA codes, including those in nurseries or classrooms. Some states require fire alarms to be visible as well as audible.

Some jurisdictions are requiring ramps or lifts to the platform, choir and baptismal areas from inside the building. Access to a raised platform from an outside entrance may not be approved in some areas. The maximum slope of ramps is 1" in 12" with a rest landing every 30 feet. A platform 36 inches high would require a 39' long ramp. The ramp should also have a handrail. An elevator is usually required for access to upper floors and basements; with a possible exception for a second-floor that contains only balcony seating.

Every restroom should have at least one handicap accessible toilet and sink. The restroom should have a 5' diameter clear area for turning a wheelchair. All doors should be at least 36" wide and corridors should be at least 5' wide, with 16" of wall area adjacent to the door handle. A sanctuary seating 500 should have six designated areas for wheelchairs plus one additional wheelchair space for each additional 100 seats.

Any church will benefit by making their building more accessible to the elderly and disabled. Remember, however, any renovation work involving the structural, electrical or mechanical systems of your church will probably require a building permit.

Thursday, December 29, 2011

On Omega's 20th Anniversary


by Jeff Thomas,
President

In 1991, my father, Kent Thomas, and I, incorporated Omega Church Consultants to provide design and build services to churches throughout the nation. Today I am looking back over the past 20 years and offering thanks to God, and to you, for all the blessings we have received. Here are 20 things that I am grateful for at the end of our first 20 years serving churches.

On Omega's 20th Anniversary, I Am Grateful For:

1.   God’s calling in our life that gives us purpose and joy.

2.      God’s provision and favor. He alone has enabled us to serve, survive and thrive. Business survival is never guaranteed. In the U.S., the 10-year survival rate for a new business is about 29%. It is even rarer for a business to survive for 20 years. We give God all the praise for His keeping power.

3.      The health and strength that only God can give.

4.      Our church clients. It has been a privilege and a blessing to serve pastors and congregations with counsel, design, and building services for 20 years.

5.      The trust those pastors, boards, and church members have placed in us to help them through some of the most important decisions that a church body will ever make.

6.      All the friendships we have developed with our clients and associates.

7.      The referrals we have received over the years from those we have served.

8.      My godly wife Cheri of 27 years who has encouraged me through the entire journey, with equal faith and joy in the valleys as well as on the mountains.

9.      The fourteen years I was blessed to partner with my father in this business before his retirement in 2005.

10.  The blessing of two sons, Andrew and Brent, who now work with Omega after earning their bachelor's degrees in Business Administration.

11.  A mother who still faithfully and skillfully serves as our office manager after twenty years.

12.  Each of the wonderful, expert, talented associates who have been employed by or served with Omega over the years.

13.  The service opportunities that Omega has offered our family. This business has given our family the resources and time to give financially to others and to volunteer to help individuals, churches, and our community. We have been blessed to serve as Boy Scout leaders, youth sports team coaches, Bible Quizzing coaches, church youth and men’s leaders, board members, and more. It is difficult to imagine how much of that would have been possible without the flexible schedule and resources Omega offers us.

14. The many opportunities to integrate the operation of the business and travel into the home education of our five sons.

15.  The technology that is constantly improving and helping us to serve our church clients and pastors throughout the nation. Just think about the improvements in computers, software, and cell phones over the past 20 years. Not to mention all of the new inventions such as GPS, email, and digital cameras. (Or digital anything for that matter.) Two newsworthy events happened in 1991: the forming of Omega in the U.S. and the introduction of the first digital cell phone (available only in Finland). Just think—Omega was formed four years before the Internet became available to the public!

16.  Our office space at the Eagle Creek Airpark on Eagle Creek Reservoir, a convenient and beautiful place to work with a great view of the runway and the lake.

17.  Each of you who subscribe to our newsletter.

18.  Each of you who forward our newsletter to your friends.

19.  Each of you who have partnered with us to expand your ministries, bless your community, and save lives as you labor to spread the gospel of Jesus Christ to a fallen world.

20.  And for each of you who have ever prayed for us... thank you!

Have a blessed 2012! Make the most of all that God has given you. Happy New Year!!


Tuesday, December 6, 2011

When Hiring a Church Builder

If there is one area in the church building expansion process that must receive the utmost attention of the church leadership, it is in the selection of a construction team. The risks to the church are far too great for this matter to be handled on a "lowest bidder" or "friend of the church" basis. We probably all know of churches that have had nightmarish ordeals with their builder. Most of these horror stories can be traced to a builder with one or more of the following deficiencies: lack of experience, integrity, commitment, financial strength, communication skills, organizational skills, or qualified personnel.

The church building committee should do its homework before selecting the builder that they will be relying on to fulfill the expectations of their congregation, their lender, their architect, and many others. A "due diligence" review of prospective builders should include recommendations by previous clients, a track-record of successfully completing similar construction projects, a review of contracts and operating procedures utilized by the builder, as well as face to face meetings with key personnel.

A CASE STUDY

The church should not hire a builder simply based on cost. The "lowest bidder/general contractor" method of selecting a builder greatly increases the odds of a disaster. The church should look to hire a construction management (CM) team rather than a general contractor (GC). The differences between the two types of contract relationships have a profound effect on reducing the risk and the potential cost of the construction project, as well as the psychology of the relationship between the church and its builder.

We once designed a church that was too distant from our home offices for us to build ourselves. We suggested the church interview local construction managers and explained the benefits to the church of CM over general contracting. We informed the pastor that there are two predominant methods of contracting with a builder for any church construction project. These two methods have the same end result: a completed church facility built in accordance with the architectural plans. However, the means of arriving at this end will differ greatly.

A general contractor will offer the church a lump sum total cost to build the church project-subject, of course, to any changes to the design, or any surprises during construction that may result in change orders. The GC probably will not share with the church the bids he has received or how much profit he hopes to make. The GC hires subcontractors (subs) and works with suppliers he is comfortable with, and he may not be interested in managing the work of volunteer laborers. Usually, the church pays the GC each month with one check for the amount of work the GC claims has been completed that month. The GC in turn pays the subs and suppliers at his discretion. Therefore the GC increases his profit by keeping his costs as low as possible while charging the church as much as possible. The GC keeps any cost savings realized from lower sub or supplier bids that he may receive after his GC contract is signed, as well as any savings from substituting less costly materials.

In the construction management system that we recommend, there is absolutely no incentive for the builder to cut corners on the construction costs or quality of the project. In a CM relationship, every dollar saved is a dollar that the church did not spend for its facility. The church actually receives full value for its dollars at the same time it is reducing its financial risk.

A construction manager will bid the project from the architect's plans and offer the church an itemized construction budget, and share all of the bid information with the church. The CM will manage the project for a fixed fee and handle all paperwork, record keeping, and all communications with subs. The CM will work with subs and suppliers suggested by the church and take bids from other qualified subcontractors. With the assistance of the CM, the church contracts with these companies and pays them directly. The CM prepares all monthly billings, distributes the checks to the subs and exchanges those checks for a signed receipt and waiver of lien. The church keeps all savings from donated labor and materials, and any bids that may come in under budget. By utilizing a construction management contract, the church is always assured that all labor and materials have been paid for at the end of each month (less 10% retainage to be withheld until all work is satisfactorily completed). The CM also receives a monthly fee paid at the end of each month's services. The CM is therefore a team member with the church, rather than a potential adversary.

After explaining the construction management system to that pastor, he later informed us that he had hired his good friend who had built his last church to be their general contractor. You probably can guess the rest of the story. About halfway into the construction project, the pastor and his wife began to receive calls at home from irate, unpaid subcontractors and suppliers. The pastor informed each of these callers that he had paid the GC for all the work that was billed, and he was not inclined to pay twice for his church project. The GC had apparently run into some financial difficulties and had used the church's money to pay for other debts and to pay for work on other projects. The GC went out of business, and the angry subs walked off the job. It was obviously no small task to inform the congregation of what was happening and try to create a new construction team to take over a half-finished project with unpaid bills and liens.

THE MORAL OF THE STORY

The church should look for a CM who has a fine professional reputation, and someone that you will be comfortable working with for many months to come. The CM should be able to supply daily hands-on project supervision by personnel who have ample experience with projects of the type and scope that you are building. The church should appoint one authorized representative of the church to communicate directly with the CM during the construction process. This reduces the chance of communication errors and streamlines the decision-making process. The CM should have experience with church operations as well as national vendors of church materials, equipment, and supplies. Bids should be solicited from subcontractors that the CM chooses, as well as from subs and suppliers suggested by the church. The CM will analyze the proposals of the bidders and share them with the building committee or its representative. The CM offers its best advice on which contractors the church may want to select, but ultimately the church must make the decision on who is awarded the contracts.

All subcontract agreements will be prepared by the CM and will be between the successful bidder and the church. This system allows the church to pay only what the labor and materials actually cost. The CM continues to take bids on the project until the work needs to be contracted. Often, better bids are obtained than those originally received when the budget was established. All savings realized from lower bids accrue to the church. A fixed management fee, rather than a percentage fee, should be paid to the CM so there is no incentive for the project to cost more than it should, nor a disincentive for the project to cost less than the original budget.

As a church leader, you should strive to receive value for the money sacrificially offered by your congregation and to show good stewardship and wisdom throughout the planning, design, and construction process. Surround yourself with experienced counsel and reputable professionals whom you can trust, and solicit and listen to their advice. Enter into agreements that are clearly written and will protect the interests of those who have placed their trust in you.