Looking at the Cost of Ownership.....Big Decisions for Trinity

I am posting one final post by Tim Cool....this one is an article found in Church Executive magazine and deals with the difference between purchasing a building vs. leasing a building.  I thought, given our current situation and the decisions we are facing as a church family, it would benefit all of us to look at this more closely.  Hope this article helps explain some of why we are considering the options we are currently exploring. 

http://churchexecutive.com/archives/what%E2%80%99s-the-real-cost-of-ownership

Cost of ownership

Posted by admin LEADERSHIP Monday, August 1st, 2011

 
What’s the real cost of ownership?
By Tim Cool
I come from a background of planning and building ministry facilities, having been blessed to investing 23 years of my life in serving churches to develop new and renovated ministry facilities. That phase of my life brought me great joy and fulfillment.
But now I am very burdened by the millions, even billions, of dollars that are spent each year on religious construction without a clear understanding of the “real” cost of ownership. I also think that most ministry leaders do not understand that the ongoing costs eclipse the initial costs and do so in a much larger way than you would imagine.

Look at the real cost of ownership of our ministry facility:
1. INITIAL COST. Assume that our new ministry facility is 30,000 square feet and we can have it built for $125 per square foot; of that, the construction partner’s fee was 9 percent and we paid the design professional a fee of 7 percent of the construction value. We will also assume that the land has been paid for and is unencumbered of debt. So what do the numbers look like?

INITIAL COST: 30,000 SF x $125/SF = $3,750,000 plus design fees = $4,012,500
Construction Partner Fee: $3,750,000 x 9% = $337,500
Design Professionals Fee: $3,750,000 x 7% = $262,500

2. COST OF “MONEY.” Assume that we borrowed $3 million to pay for the project and we did so based on a 15-year loan at 6 percent; but we paid it off in seven years. In this scenario, you will have paid about $1.1 million in interest.

3. COST OF OPERATION. Based on our research and benchmarking provided by the International Facility Managers Association, the average church in America will spend $4.50 to $7.00 per square foot annually for janitorial services, utilities and general maintenance.  In addition, a church will spend an additional amount in capital improvements that will be in the $1.50 per square foot range (if the capital reserve account is started at the time construction is complete). This number grows significantly higher if you neglect the capital reserve account during the early years of the building’s life cycle.

For the sake of this exercise, let’s assume that we will spend $6.50 per square foot for operational and capital reserve items.  This may be low, but we want the calculations to be realistic.
30,000 SF x $6.50/SF = $195,000/yr.

Assume a 40-year life cycle (which is not that long) at 1.5 percent per year of inflation.  Remember, that operational costs are perpetual and paid for with inflated dollars, so this is going to increase, and 1.5 percent is probably too low.

$195,000/yr x 40 years = $7,800,000 + 60% (1.5% per year inflation for 40 years…without compounding) = $12,480,000

So look at this:
1.Initial costs including design – $4,012.500

2.Cost of Money – $1,100,000

3. Cost of life cycle operations and capital reserve – $12,480,000 (that is $416/SF…OUCH)

TOTAL COST OF OWNERSHIP = $17,592,500

Wow, that’s a big number. But here is the shocking part:
1. The combined cost of the construction partner and the design professionals ($600,000 in this example) is only 3 percent of the total cost of ownership

2. The construction cost is only about 20 percent of the total cost of ownership

3. The interest paid is only about 6 percent of the total cost of ownership

4. Leaving 71 percent of the total cost of ownership in operation costs and capital expenditures.

So what costs more: the initial cost or the cost after you occupy? I think the numbers speak for themselves. Do we invest the same amount of time and energy in planning your operational costs as we did when we developed our master plans and floor plans?

The fees that encompass only 3 percent of the total cost of ownership feel so important at the time we hire them, but the decisions, direction, means and methods that this team suggests and implements will be with you for the life of your buildings. Do we have our eyes on the real cost of facility ownership?

Tim Cool is the vice president of comperio C3 and founder of Cool Solutions Group, Charlotte, NC. www.coolsolutionsgroup.com

A Critical Change for Trinity....

Trinity is definitely in a time of transition and going through a lot of changes.  If you have been around us at all, you would know that our life as a church has been turned upside down and the Lord is really shaking us out of our comfort zone...but that is not a bad thing!  We are truly excited about all that is going on and are looking forward to whatever He has in store for us.   We have joked about being blessed as one of the "richest, homeless churches in America."

Our Strategy Team and Building Teams have been reading Tim Cool's book, Why Church Buildings Matter and it has helped us evaluate what we should be looking for in terms of facilities for our church body in the days ahead.  This is a fantastic book and I would certainly recommend all of our church members read it as we seek the Lord's will for where our church should move.  While certainly the location and type of facilities we will have are forefront on everyone's mind at this time, I want us to use this time of transition to look at the health of our church and other changes that need to be made.  After reading Tim's recent blog (below), I can't help but think that if we are going to be all that God has called us to be, then we have to change one very important thing about our church - and I believe it is this same thing that all churches struggle with today....

http://coolconversationslive.com/if-i-could-change-one-thing-about-church/

IF I COULD CHANGE ONE THING ABOUT “CHURCH”

Cool Conversations Live>>Blog>>If I Could Change One Thing About “Church”

I was recently leading a workshop for a conference in Texas on Organizational Culture and how it communicates a story…similar to how our facilities communicate a story.  As part of the Q & A time, I was asked a question I have never been asked before.  It caught me a little flatfooted, but got my mind racing.

The question was – “If you could change one thing in ‘church’ today, what would it be?”

Wow…what a loaded question.  I paused while my mind tried to function like Tianhe-2, the worlds fastest super-computer.  The bytes were flashing through my head so fast you could almost see smoke coming from my ears.  I was processing things like:

• Stop world hunger
• Stop all wars
• Stop injustice
• Stop bickering on Bible Translations
• Elimination of red carpet and purple pews in churches
• The unification of denominations
• etc, etc, etc.

My thoughts ranged from altruistic to humanitarian to downright outrageous.

But then it hit me with clarity I have rarely experienced.

We had just completed a discussion on being contextual…abandoning the unproductive rhetoric of “contemporary vs. traditional”. That discussion, about contemporary or traditional, is really a treatise on personal preference…which is actually a form of an “ism”….“me-ism”.

That was it!!!!  That is the one thing I would change if I could.  I would eradicate me-ism.

According to Wikipedia, me-ism is defined as “a focus on, or obsession with, oneself”.  Another website says it is “the error of exaggerating the value of one’s own point of view”.

My response became crystal clear and intentional.  Whether we are debating guitars and drums vs. an organ, or the KJV vs. the NIV or NLT, or if a steeple is more spiritual than a shopping center sign, or whether we should wear ties vs. flip-flops, it is all me-ism. These all represent personal preferences. Some based on our past experiences and others based on our current context….but they are about ME!

Can you image what a different church (and world) we would live in if we could abandon our me-ism for “you-ism”, “other-ism” and “Christ-ism”?

Next time you get embroiled in a silly debate about hymnals, pew color, instrumentation, when the offering should be received, tattoos, dress codes and which day to worship, step back and determine if it is merely me-ism.

Step out and be a me-ism killer!

PS:  This is as much for me as you. Like Paul, I am the greatest of sinner.