Real Estate

PAY ME NOW, OR PAY ME LATER

There was a commercial in the 1970s that showed a mechanic working on a car. He was saying that if the car owner had come to the mechanic for routine oil and oil filter changes, he could have saved money. At the end of the commercial the mechanic shrugs his shoulders and says, “You can pay me now or you can pay me later.” The implication was that if you spent a little money on routine maintenance, you could avoid spending more money on costly repair costs in the future.

Church facilities are no different than cars in this regard. Tim Cool, chief stewardship officer and founder of Smart Church Solutions estimates that every $1 spent on maintenance and minor repairs can save, or at least delay, the need to spend $4 on capital renewal. We will discuss the need to plan for and have a reserve for capital renewal in the second part of this series, but for now we are going to focus on the importance of planning and budgeting for routine annual maintenance and repair.

There are three inescapable facts about buildings:

• All Buildings Deteriorate: According to a study by the International Facility Managers Association, the annual rate of deterioration is 1-4% of the current replacement value of the building.
• Deferred Maintenance Accelerates Deterioration: Left unaddressed, the rate of deterioration will accelerate and can even increase exponentially, which means that ignoring routine maintenance or the need for minor repairs can be the root cause of a significant issue later.
• Costs of Facility Operations Exceed Cost of Acquisition and Construction: We spend a lot of time planning for and raising funds to purchase/construct a church facility, but that is typically only 20-23% of the cost to own that facility over a 40-year period. In comparison, the operating cost of a facility over the same period is typically 71% of the overall cost of ownership.

At National Covenant Properties (“NCP”), we believe that church buildings are simply a tool that helps the church to live into the ministry and mission they feel called to do in their community. Just like a master builder, we need to make sure that we maintain our tools so they serve our needs for a long time. NCP likes to remind churches that your building is an asset that needs to be cared for and maintained well. It is not a commodity that can be used up and then replaced.

We advocate that churches have an annual plan for preventative maintenance and repair. This means doing maintenance on a regular schedule, with the goal to detect, delay, or prevent the breakdown of a system due to deterioration and extend the use life of a system.

Preventive maintenance also helps to keep your systems running smoothly and efficiently, which can also lower your energy costs. Preventive maintenance is compared with reactive maintenance, which waits until the problem can no longer be ignored due to a total failure of a system. Reactive maintenance saves money in the short run but always ends up costing more money in the long run. David Tod Geaslin in an article titled “Inverse-Square Rule” says that if a necessary repair is deferred and allowed to remain in service until the next level of failure, the resultant expense will usually be 30 times more than the cost would have been for the initial repair.

NCP recommends that a church have a line item in their annual budget for preventive maintenance and repair. There are a couple of different methods of budgeting for this line item and if you reach out to NCP, one our vice presidents of Real Estate Services can connect with you and help to coach you through this matter.

In Part 2 of this series, we will discuss the need to establish a capital reserve to help your church to plan for the cost to replace items when they reach the end of their useful life.