Megachurches need a bailout too!

The Wall Street Journal ran an article today on the rising number of defaults and foreclosures in churches.

During this holiday season of hard times, not even houses of God have been spared. Some lenders believe more churches than ever have fallen behind on loans or defaulted this year. Some churches, and at least one company that specialized in church lending, have filed for bankruptcy. Church giving is down as much as 15% in some places, pastors and lenders report.

The financial problems are crimping a church building boom that began in the 1990s, when megachurches multiplied, turning many houses of worship into suburban social centers complete with bookstores, gyms and coffee bars. Lenders say mortgage applications are down, while some commercial lenders no longer see churches as a safe investment.

And therein we see the problem. Two things jump out at me. First, if churches are running their budget in such a way that a 15% drop in giving is putting them into receivership, that indicates that they are spending way too much money and not being terrible smart about their finances. Second, the reason these churches are in such trouble is that they are carrying way too much debt in an effort to keep up with the market. Church A has a kewl espresso bar, so we need one. Church B has a phat youth entertainment complex, so we need one. Thus we have these huge edifices with multi-million dollar mortgages that require a high level of cash flow every week to service their debt and pay the salaries and benefits of their staff. Bigger buildings=bigger budgets=more attendees=more paid staff=a need for more and more giving. Quite frankly simple Gospel preaching and teaching probably isn't going to generate enough interest to pay the mortgage, staff, utilities, etc so you are in a position to try to do something different to draw in people to put money in the plate.

Not every church is in this pickle. I would have guessed that most mid- and small- sized congregations worship in older buildings that are paid for, and the numbers provided by the WSJ bear that out...

Churches were long considered good credit risks, lenders say. Weekly collections tend to be steady, even during recessions, and churches feel a moral tug to pay debts. Most of the nation's 335,000 churches carry little or no mortgage debt, and are based in buildings that were paid off long ago.

But some churches, especially those not affiliated with major denominations, borrowed briskly to build or expand in recent years. Spending on construction of houses of worship rose to $6.2 billion in 2007 from $3.8 billion in 1997, according to the U.S. Census. Now, churches are seeing congregants lose jobs and savings.

The 125-year-old Mount Calvary Missionary Baptist Church, of Jacksonville, Fla., borrowed about $2.6 million in 2002 to add a new education wing, reflecting pool and tower. In addition, the church's 1,200 members pledged $1 million to the building campaign, but two-thirds of that money was never actually donated, according to the church's pastor, the Rev. John Allen Newman.

A quarter of the congregants soon stopped attending church, says Mr. Newman, so weekly collections started to dwindle. He and the church leaders cut staff and electricity use to save costs, but in January, facing a foreclosure judgment of $3.3 million, the church filed for bankruptcy protection. Mr. Newman says the church hopes to settle its debts and emerge from bankruptcy proceedings in the coming months.

I would suggest that with a few exceptions you are more likely to hear the Gospel preached in a small church without a mortgage than you are in a huge church with a $5 million note. Where in Acts 2:42 do we see the church spending $2.6 million on an education wing, a tower and a reflecting pool? The church mentioned, Mt. Calvary Baptist, went into bankruptcy proceedings after defaulting on a $3.3 million note. From a former banker standpoint, what do you do with a multi-million church facility that you suddenly own? It is pretty hard to shed those assets. It is hard enough to resell a foreclosed house, much less a multi-million dollar church in an environment where nobody is lending millions of dollars to buy a church. When you need to service a $3 million debt, you need a ton of money in giving every week and it goes without saying that many of those giving are not Christians in these huge churches, so when the times get tough they go find their entertainment somewhere else and the church (and the bank) are left with a mortgage that cannot be paid.

When you begin running and marketing your church like a corporation you are inevitably going to have the same problems as corporations: competition, market cycles, constant restructuring. If you want to be a CEO, you go to business school and work your way up the corporate ladder, but that is not the model of ministry we see in the New Testament. We have lost sight of the purpose of the church and in doing so have become indistinguishable for the world we are trying to evangelize.