Congregations turning to non-traditional sources for survival and growth
Churches and denominations are turning to nonprofit foundations to fund projects and structures that have traditionally been the responsibility of members and denominational leadership, according to Aaron Renn’s Newsletter (September 17). Renn cites the recent arrangement of the Archdiocese of Detroit signing a $1-per-year, 200-year lease to rent one of its own churches, after transferring ownership to a nonprofit controlled by a major donor. The Basilica of Ste. Anne de Détroit and the Archdiocese of Detroit turned to the Pulte Family Foundation, which has committed over $50 million for restoration and an endowment under the condition that the archdiocese could not own the buildings and its grounds. The Vatican approved this arrangement, which stands in contrast to the Catholic Church’s longtime opposition to lay ownership and control of church property (the “trusteeism” model). Renn notes that this is not limited to the Catholic Church, as he is “aware of multiple cases in which evangelical donors funded a building, but structured it such that the building would be owned by a captive nonprofit rather than the church.”
This trend is driven by a hesitancy to invest in churches over fears of money getting redirected to cover liabilities or otherwise mismanaged, the possibility of congregations’ theological drift and a major asset being controlled by people who don’t share the current theological convictions of the church members, and denominational factions’ imposition of changes from above, which can lead to situations like a church building being sold off. “The fact that some of their own devout and highly committed members increasingly don’t trust churches or associated institutions enough to donate money to them for long-lived asset is a sign something is going very wrong here…” Renn argues that this development is an “example of how legal structures are starting to replace trust as the basis of relationships with institutions, even churches.” He concludes that the solutions being pursued, unfortunately, only “relocate or postpone the problem rather than fixing it. The captive nonprofit is an attempt to create a legal structure to substitute for lost trust in churches. However, this only temporarily solves the problem. Eventually, even a family foundation type structure will have to pass on to heirs or successors…Nonprofits and family foundations are institutions too, and they will not be immune to the trends affecting legacy organizations like churches.”
Meanwhile, an increasing number of churches, usually African American, are filing for Chapter 11 bankruptcy in order to reorganize and streamline their operations to keep properties and ministries, according to Pamela Foohey (University of Minnesota Law School) in the Canopy Forum (August). Foohey’s article, based on her book Forgive Us Our Debts: How Black Churches Use Bankruptcy to Survive, notes that churches consistently make up the majority of nonprofits seeking to reorganize. “These churches are not the Catholic diocese that may readily come to people’s minds. They primarily are small non-denominational or congregationalist churches.” Most of them, over 60 percent, are black churches (congregations with at least 80 percent black members). Between 2006 and 2021, based on Foohey’s analysis, over 1,000 churches filed Chapter 11 bankruptcy. Among these churches, over half emerged from reorganization either still owning their spiritual home or capable of continuing to worship nearby. Foohey was puzzled that most of these churches submitted financials that showed solvency, with their assets worth more than the debts they owed. “Some churches filed even after it seemed that they had recovered from operational and financial hiccups,” she writes.
Although a success rate of half may seem low, Foohey writes that it was higher than she expected to find. In interviewing over 150 church leaders and bankruptcy attorneys, she found that loans and lenders shaped their decisions to reorganize. “Some Black churches were sold the equivalent of subprime home loans to purchase, renovate, or expand buildings. These loans often came from financial institutions that would be more likely to sell churches expensive loans. Black churches sometimes approached these lenders after mainstream banks had turned them away. And Christian-based lenders sold some churches loans with high interest rates and expensive terms.” Foohey argues that black churches fall back on bankruptcy law and the reorganization process because laws and regulations meant to remedy racial discrimination and a long history of predatory lending to black churches remain “blunt instruments” that have not resulted in lasting change.