SFA Recommends Immediate Pay-off of BPF Loan from Fire Insurance Funds

After careful analysis of the long-term financial impact on the church’s financial health of the Berkeley Pilgrimage Foundation (BPF) loan, the Stewardship Finance & Administration (SF&A) Ministry recommends immediate pay off of the BPF loan from the fire insurance settlement funds. Our church currently has a $1.4 million, 14-year loan from the Berkeley Pilgrimage Foundation. This loan, extended to the church in 2014, was used to fund the reconstruction of the Plymouth/Durant street side of the campus. The project allowed essential accessibility, restrooms, and other major improvements to be made on the Plymouth side of the campus – creating a new improved structure suitable for the East Bay School for Boys, and improved spaces for our church activities and community groups that rent our sanctuary. In essence, the loan from BPF allowed us to transform this large portion of our campus into a positive source of rental income.

The loan was taken at a time when our church income from pledge commitments and other income sources such as outside facility rental use were at a higher level; thus our operating income could easily cover the debt service on the loan. The reality for the past few years is that our pledge income and other outside facility rental income have decreased (the latter in significant part due to the 2016 fire); thus, while annual EBSB lease income is greater than the debt service on the loan, other sources of income in our church have diminished, and we have thus experienced overall budget deficits in the past few years. More and more of our pledge and other income is applied to servicing the loan. 

The church renegotiated the loan to enable interest-only payments of $56k in 2019-2021. However, the loan, which has a 4% interest rate, has principal plus interest payments of approximately $146k that resume in 2022 through 2033.  Under the current amortization schedule running through 2033, the church would ultimately end up paying a total of $2,655,450 to repay this $1.4 million loan.  Paying the remainder off now would result in significant savings.

SFA has carefully studied the short term and longer-term impacts of the $1.4 million loan on our church finances and will be mailing out a more detailed informational piece to all church members next week.  At its April 2nd meeting SF&A members unanimously recommended to Council that the BPF loan be paid off as soon as possible from the fire insurance settlement investment account. The fire insurance settlement funds are invested in a Vanguard short-term bond account which is earning interest of about 2%; the fund is currently valued at $10 million. SFA recognizes that this will reduce the pool of funds available for rebuilding our campus; however, we strongly believe this loan repayment will be in the best interest for our church finances and sustainability. Click here to read SF&A’s recommendation to Church Council.

Church Council will take up this recommendation at its earliest convenience. SFA members welcome questions and conversation on this recommendation.  Members are: Nick Kukulan, co-chair; Amy Hiestand, co-chair; Felicia Bellows; Diana Graham; Tim Specht; Becky Smith; Charles Taylor; Pam VandeKamp; and Moe Wright