How Much is Your Congregation’s Space Worth?
Many congregations have spaces that are not needed for the liturgical, educational, and social life of the parish. It is perfectly all right to make such spaces available to outside groups, but in order to make a rational decision about how much to charge for the use of your space, it is necessary to have the answers to three questions:
- What does similar space cost in your area? You need to do some real checking with local real estate agents.
- What does it cost us to operate our space? The purpose of this piece is to give you a tool to come up with this answer, so we will return to this discussion.
- What can the prospective user afford to pay, and is that amount sufficient to cover your costs?
Too often parishes think only of the third question and this may lead them to make space use arrangements on which they actually lose money.
The first thing to do is to check how much similar spaces are renting for in your area. Real estate prices are local and they fluctuate often. You need to find out what the current rates are in your locality.
This link will take you to a spreadsheet you can download and save that will help you find the answer to the second question above. You can add or delete lines and copy the formulas wherever you need to in order to reflect your situation.
The basic concepts are these:
- Measure every space in your facility.
- Enter the name of the space in Column A and square feet of every space in Column B.
- Enter the number of hours per week the space is used by the congregation in Column C.
- On a separate line enter the number of hours per week in Column C that each space is used by outside groups.
- In Column D enter the number of weeks per year each space is used by the congregation and by outside groups.
- There is a formula in Column E that will calculate how many square-foot-hours each space is used.
- In Columns H and I enter all the costs of maintaining and operating your plant, including the amount you are setting aside every year in your capital reserve. (If you aren’t funding a capital reserve now, please start to do that. This is a separate, but very important, discussion that I would be happy to have with you. My email address is at the bottom of the article.)
- If you pay for services that are only for the outside users, enter those costs under the heading Direct Costs for Outside Users Paid by the Parish.
- There are formulas that add up the total square-foot-hours and divide that total into the total it costs you to operate your plant.
- This results in what it costs you to operate one square foot of your space for one hour.
Using the spreadsheet as described above will allow everyone to be satisfied that the congregation is not losing money when letting outside groups use your space.
Of course, this spreadsheet reflects only your current costs. If you are contemplating an arrangement that allows an outside group to use spaces that are normally not heated and cooled during the week, your utility costs will go up significantly. You will want to think about negotiating a way of having the user pay the excess utility costs.
It is one thing to allow 12-step groups and other users make use of spaces shared by the congregation. Such arrangements are called licensing agreements and rarely have any legal or canonical ramifications.
It is quite another thing to lease portions of your space to an outside group for their exclusive use. It is perfectly all right to do that, but, the lease may need the approval of the Bishop and Standing Committee of your Diocese. There may be property tax implications for a lease arrangement. You will not lose your tax-exempt status as a charity, but part of your property may need to be put back onto the property tax rolls. There is nothing wrong with that, but you need to write the lease so that the tenant has the responsibility of reimbursing you for any taxes that result being due.
When you know the answers to the first and second questions posed above, then you can have a reasonable discussion with prospective users of your space. If what they can pay is less than what it costs you to offer the space, you need to make a careful, prudent decision about whether it is in the parish’s interest to subsidize their operation. There may be compelling reasons to do so, but you need to consider whether such a subsidy is an effective use of your resources.
I encourage you to read Chapter 5 of Remember the Future: Financial Leadership and Asset Management for Congregations for a fuller discussion. Please feel free to be in touch with me if you have questions.
If you have any questions, please contact me: firstname.lastname@example.org or 347-713-2218.
Jerry Keucher, an Episcopal priest, is the author of Remember the Future: Financial Leadership and Asset Management for Congregations (Church Publishing, 2006) and Back from the Dead: The Book of Congregational Growth (Church Publishing, 2012). He serves as priest-in-charge at St. Mary’s Episcopal Church in Brooklyn, New York, and works with ECF as a consultant. Jerry has served as chief of finance and operations for the Episcopal Diocese of New York. He has held similar positions in financial leadership, including Staten Island Botanical Garden and Staten Island Institute of Arts and Sciences. A gifted linguist he has taught Greek and Hebrew at Princeton Theological Seminary and Yale Divinity School.
(This ECF article is part of a series designed to help clergy and lay leaders address the economic challenges of congregational ministry in the 21st century and is made possible through a grant from Lilly Endowment’s National Initiative.)
- Calculating the cost of operating your space worksheet for congregations to decide how much to charge for space rental
- Partners for Sacred Places, a non-profit that helps congregations make the most of their facilities as civic assets
- Remember the Future: Financial Leadership and Asset Management for Congregations by Jerry Keucher (Church Publishing, 2006)
- A Ministry of Space by Louise Fortuna, Vestry Papers, July 2016
- Tenants and Friends by Anna Olson, ECF Vital Practices Blog, March 3, 2016
- Church Building Use by Annette Buchanan, ECF Vital Practices Blog, May 31, 2017