Thursday, October 19, 2006

Some Questions for the Board of Directors

In preparation for our Diocesan Convention on Saturday, I've been reviewing the "Guide to Convention" packet, including the various reports. I noticed that the Board of Directors' report refers to an attached financial statement, but no such statement is included. I hope that one will be provided on Saturday, because I have some questions about the management of our diocesan assets.

The Board of Directors' report refers to the fact that the Diocese, appropriately and per prior agreement, purchased Bishop William and Mary Swing's interest in their Lyon Street home in San Francisco, which was slightly less than 50% of the value of the property. The Report doesn't indicate what the actual value was, but I've been told it was appraised at about $3 million dollars. This would mean that the Diocese paid a little less than $1.5 million dollars for the Swing's share of the property.

So, I wonder: is this amount accurate? How was the purchase financed? It was entirely appropriate for the Diocese to purchase the house so that the Swing's could retire comfortably and so that we could maintain a residence for future bishops of California. It also is entirely appropriate to have a complete public accounting of the transaction.

This is particularly true, given that the Board of Directors also report that they decided to "diversify" the Diocese's portfolio by investing in real estate: investing, in fact, in the Swing's new retirement home! In the discussion of the retirement home investment, the Report indicates that it was "no more than 50% of the valuation of the property." So, how much was 50% of the value? Turns out it was approximately $927,000, although we are not told this figure in the Report. Did the Board consider any other real estate investment opportunities?

Evidently not, as they claim that, had they not invested in this retirement home, the Swing's would not have been able "to reside suitably in the Bay Area." They claim that this "investment" was "important as well as prudent," given the "future value of Bishop Swing's work on behalf of [the] United Religions Initiative" and "the benefits of having Bishop Swing remain a part of this Diocese . . . " I have three responses to this:

1. The nearly $1.5 million dollars from the purchase of the Lyon Street property was more than enough to provide for a comfortable retirement home. In fact, half that amount would provide for a comfortable retirement home, even in the Bay Area; though maybe not within walking distance of the Burlingame Country Club.

2. Plenty of bishops end up retiring to dioceses different from those they served. To date, all of those dioceses have survived.

3. Last time I checked, the United Religions Initiative was an indepedent nonprofit. It is not a ministry of the Diocese of California. It isn't even an Episcopal Charities partner agency. Since when is the Board of Directors, whose responsibility is to manage our assets for the benefit of the mission and ministry of the Episcopal Diocese of California, under any obligation to underwrite the housing for the founder of another nonprofit, however laudable its work may be?

This is what I believe is called a "golden parachute."

No wonder Bishop Marc Andrus, our new diocesan, has charged the Standing Committee with implementing a thorough governance review of the Diocese. No wonder we are having a contested election for the open seats on the Board of Directors for the first time in many people's memory.

I could imagine any number of ways to invest the more than $900,000 that is now tied up in a lovely house in Hillsborough. I sincerely hope I've gotten my facts wrong, or that there is some other compelling justification for the Board's action. If not, the Board of Directors has some explaining to do.

Addendum: I think it is important to add that, to my knowledge, the Board of Directors made this "investment" decision (which was really a decision to extend a generous retirement benefit to Bishop Swing) without consulting the Standing Committee or Diocesan Council. Upon reflection, I'm also struck by the incongruity of thinking it necessary to diversify the diocesan portfolio by purchasing additional real estate, when $3 million dollars or about 15% of the value of the $20 million dollar portfolio is already invested in the Lyon Street property; but then, what do I know. I'm just a simple parish priest.


Joseph Lane said...

“The financial statement attached to this report shows in rough numbers the Endowment’s balances.”

Like John, I also could not find such an attachment included in the Convention booklet.

“Because the cost of housing exploded during Bishop Swing’s Episcopacy, if the Diocese had not made this investment Bishop Swing would not have been able to reside suitably in the Bay Area after his retirement …”

I wish they’d define what they mean by ‘suitably’. I can’t imagine that with the approximately $1.5 million they got from the sale of their equity in the Lyon Street house (or so I’m told), the Swings couldn’t make a down payment on or even purchase outright a ‘suitable’ dwelling in the Bay Area if they desire to stay here.

“…Recognizing the future value of Bishop Swing’s work on behalf of United Religions Initiative...”

I honor and support Bishop Swing’s work with URI, but I wish the Board of Directors would explain why it is appropriate for the Diocese of California to invest in ensuring the Swings stay in the Bay Area in order to continue this work. This argument is totally out of sync with Bishop Swing’s own comments over the years that none of his URI work was done on Diocese of California time.

“…and the benefits of having Bishop Swing remain a part of this Diocese,…”

Bishop Swing is retired. At the clergy conference in September 2005, he made it clear that he does not intend (nor would it be appropriate for him to) stay engaged in the life of the Diocese of California.

“…the inequity of forcing him to leave the Bay Area after 27 years of devoted and effective service, the Board decided that the investment was important as well as prudent.”

This argument, while understandable in some sense, in not in sync with the reality of many other clergy who have served many years in this Diocese, many of whom have not or will not able to retire in the Bay Area. Even without the Diocese’s investment in their new home, the Swings would be better prepared than most retired clergy to stay in the Bay Area.

I’m told the Diocesan investment in the Swings’ new Burlingame home is +/- $1 million. If real estate is such a good investment, why has the Diocese not made a similar investment in loans to allow other clergy to make down payments on ‘suitable’ dwellings. A $100,000 loan to a rector or vicar being paid diocesan minimum could go a long way toward enabling that clergy person to purchase and build some equity in a home – perhaps a condo – an important nest egg toward retirement. Ten such loans could’ve been funded for the same amount being spent to help the Swings live ‘suitably’.

The recent Jubilate Deo initiative included a task force working on clergy housing issues. Were possibilities similar to the help given the Swings considered? If the Diocesan Board of Directors is looking for ways to diversify the portfolio, why not consider doing so through equally safe investments that would offer a helping hand to some of our truly strapped clergy?

Joseph Lane

Anonymous said...

Like Joseph Lane, I have to wonder what standard the Board of Directors applies when deciding what are "suitable" living conditions for a retired bishop. I wonder whether it is the same standard Jesus had in mind when he told the rich young man to sell everything he had, give it to the poor, and follow him.

As a lay person and vestry member at a small inner-city parish, I'm well aware of how little we have to offer our rector in terms of financial remuneration and housing security - a decent pension, good benefits, the diocesan minimum salary, and no help at all in one of the most expensive housing markets in the country.

I also think Joseph's point about diocesan investment strategy is well-taken. If the diocese wants to move some of its investments into real estate, why not spread that investment around so it can benefit presently serving clergy - and their parishes.

If think that if the Board of Directors wishes to reward Bishop Swing for his years of service to the diocese, they should state that honestly, rather than describing it as a change in investment strategy. Likewise, if the diocese wishes to support the United Religions Initiative, it should do so directly, with a contribution to that organization, not by opening a golden parachute over a retired bishop.

Rodsberg said...

I'm not part of the Dio of Cal so I should stay out of this but I can't help but be taken back to a recent opportunity to join the diocese. We couldn't make it work because the parish did not have the minimum resources required for me and my family to acquire housing. The diocese said they acknowledged the problem but couldn't help us. We went to another diocese where the cost of living and the cost of housing are within reach. What message does that send to potential clergy, and to parishes struggling to find clergy?