Plus, commercial real estate considerations of prime church properties
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Detroit—February 20, 2020—Daniel P. Dalton, a religious property attorney, co-founder of Detroit-based Dalton + Tomich, and author of a new eBook about protocols for the United Methodist Church separation entitled, What the Proposed UMC Separation Means for Your Church, says there will be more than emotional costs to pay for local churches who opt to leave the United Methodist Church after the May 2020 General Conference. Moreover, there will be new costs to stay, as well.
“Stay or leave, there are costs that local churches must consider in the exploration of the life of their local church after the United Methodist Church General Conference in May 2020,” Dalton said. “The proposed Separation Protocol provides that a local church leaving the denomination for one of two new Methodist denominations, conservative or progressive, must pay for any outstanding pension obligation, even if the pension is fully funded, as well as the cost of preparing new governing documents and real estate deeds that remove the Trust Clause. The Separation Protocol also requires local churches who wish to become independent to pay a pension obligation, twenty-four months of apportionments, and anything else the conference wishes to impose on a departing local church that keeps its property.”
What is not spelled out though, is the cost to remain with the denomination. Dalton explained that the proposed budget to be voted on at the May 2020 General Conference calls for a 23% reduction in spending based on 2017 giving levels, a major budget adjustment prompted by the staggering number of people fleeing local Methodist churches over the past decade due to the internal denominational schism.
“The loss of local members has resulted in less donations to the local church, which in turn, has resulted in lower apportionments to the annual conferences,” Dalton said. “Rather than eliminate or restructure programs and agencies, the annual conferences have pressured local churches to pay more in apportionments.”
Dalton added that the only proposal in the budget to raise cash outside of apportionments is to evaluate the $70 million dollars of real property assets owned by the denomination in the red hot real estate market of Davidson County (Nashville) Tennessee, and determine whether to sell the property and secure more funding for the denomination now, or retain it for future needs.
“Selling the real estate, especially in Nashville, makes sense because there is so much attractive, vacant Methodist Church property throughout the country that can be repurposed; but convincing a Bishop to give up a beautiful building in a vibrant downtown and move somewhere less desirable can be difficult at best,” Dalton said.
Dalton also identified a fatal flaw in the proposed budget: with the income set at 2017 giving levels, there is no consideration of the exodus of local churches in the past three years, nor the anticipated loss of thousands of additional members and donors after the May 2020 General Conference.
“There will be a substantial loss of churches if either one of two likely scenarios occur. Under the first scenario, the Separation Protocol passes and thousands of progressive and conservative churches leave the denomination and fold into a new denomination, leaving the UMC without future funding. Under the second scenario, no separation plan passes, and local churches will immediately leave, either to become independent, or to form a denomination with others. The remaining local churches within the UMC will be left with no cash to continue, coupled with a collapse of future donations. Under either scenario, the local churches who remain in the United Methodist Church will end up paying substantially higher apportionments,” Dalton said.
History has shown that annual conferences and agencies don’t engage in wholesale restructuring or eliminating agencies that no longer serve the local church. Hence, a local church may wonder why it should remain in the denomination when apportionments they already can’t afford will increase, services will decrease and the agencies they fund will provide little or no benefit.
Dalton outlines short-term and long-term considerations for local churches weighing their options to separate or stay from the United Methodist Church:
- In the short term: Staying within the denomination is a low-cost option and, if the local church does not care about its property, the impact on the enforceability of the Trust Clause may not matter. But in the long term? If the local church does nothing, or decides to stay in the denomination, it will pay the most over time through apportionments, increased pension and health care costs, and additional costs if the denomination fails. Further, if they wish to leave down the road, such churches will be forced to either buy out their own property that they solely paid for, or litigate the enforceability of the Trust Clause, should they wish to retain their property.
- In the short term: The local church leaving for a new Methodist denomination is the second-best financial option, as the costs may be limited to the pension obligation and some miscellaneous expenses related to new governance materials and real estate related matters. In the long term? The local church that joins a new Methodist denomination will likely pay apportionments and other fees to the denomination, which historically tend to increase over time.
- In the short term: Local churches leaving to become independent may pay the most in the short term under the separation protocol. In the long term, however local churches who become independent will pay nothing related to the Methodist Church or another denomination, as they will have no remaining liabilities.
What the Proposed UMC Separation Means for Your Church is available for complimentary download on the Dalton + Tomich website.
About Dalton + Tomich
Detroit-based Dalton + Tomich PLC is comprised of land use, denominational trust law, and business law attorneys. Serving as a partner to religious organizations, Dalton + Tomich is a national leader in religious property law land use, notably with cases related to the Religious Land Use and Institutionalized Persons Act (RLUIPA) and denominational splits. Learn more about our services for businesses and religious organizations at https://www.daltontomich.com/.