New Construction and Deferred Maintenance

It’s never too early to plan for long-term facility costs

Whether you’re a school raising endowment funds for new construction or a church holding special giving opportunities, new construction can be exciting and challenging. When a major donor designates funds for a specific expansion or new building project – a practice gym or fellowship hall, for example – it’s easy to focus on your immediate needs. However, there’s much more to consider than the upfront construction costs. Planning for the long-term facility needs can help prevent costly deferred maintenance while stewarding ministry finances. 

When looking at long-range budgets, consider everything from utilities costs to janitorial needs. You should even factor replacement costs for roofs, HVAC equipment, and other big-ticket items. Budgeting for these items ahead of time allows you to gradually build up funds for their repair or replacement, which also helps alleviate future budget shortfalls.

Total Cost of Ownership

Now that you’re thinking about long-term facilities costs for your new construction, you need to know how much capital to set aside. In his book, Entrusted, Tim Cool, founder of Smart Church Solutions, breaks down the cost of operating a typical ministry building. Based on research performed by Smart Church Solutions, the average ministry in America should spend about $5.50 to $6.50 per square foot annually for janitorial services, utilities, and general maintenance, including staffing. Add to that $1 to $3 per square foot every year for capital improvements, with one catch. If the capital reserve is not started when a building is new, the dollar amount can rise significantly, according to Cool.

The amount of money needed can add up quickly, and without accounting for it from the beginning, budgets can become strained, which can lead to deferred maintenance, especially for items like roofs, HVAC, and parking lots.

For churches and other ministries, it’s important to account for ownership costs in your facilities budget. For schools and colleges, adding enough Provision for Plant Replacement, Renewal, and Special Maintenance (PPRRSM) to your budget when a building is new can help you not only steward your finances but can ensure the long-term success of your physical plant. Cool explains that “the construction costs for a new building are only about 30% of the total cost of ownership.” What begins as an exciting church or campus expansion can quickly lead to financial difficulty if not figured into the budget at the very beginning.

Building Materials

Building material choices can impact long-term budget needs. As a senior risk control specialist with Brotherhood Mutual, Ward Durant advises ministries to consider the lifecycle costs for building materials. For example, “building cladding systems that require crack sealant and paint applications every 8 to 12 years, such as External Insulation and Finishing Systems (EIFS) or stucco, can be a significant cost exposure over their life cycles. Materials like brick or stone cladding will require minimal sealant replacement during their longer life cycles,” he said.

Other materials can have a significant impact on your budget, too. For example, while a metal roof may have a higher up-front cost, it can last much longer than other roofing materials, potentially reducing the total cost of ownership.

It’s never too early to plan for the long-term needs of your facility. Starting the process when the building is new enables Christian organizations to steward their finances by slowly building up their capital reserves. When the inevitable equipment failure happens, you’ll be in a much better position to care for it without a big impact to your budget.

Related Resources

The Deacon's Bench Online - Roofs

Posted April 8, 2022

The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We encourage you to regularly consult with a local attorney as part of your risk management program.