Why does St. Nicholas Church’s capital budget contain an operating/debt service contingency fund?
St. Nicholas Church has built into its capital budget a set-aside for use in meeting its cash flow needs during its start-up period, when a deficit in anticipated, until its growing income meets its fixed expenditures. As one lender put it: Financing a church is no different from financing a restaurant, in that neither has its full clientele on opening night. So it is advisable for them to set aside sufficient funds to draw upon to meet expenses in the months between opening night and breakeven day. In fact, without such a contingency fund to cover the anticipated deficit period, a new congregation would likely be forced to make ends meet by cutting staff and advertizing, the very things that it should be increasing if it wishes to grow. That is why St. Nicholas Church budgeted a roughly 15% operating/debt reduction contingency: enough to cover about 18 months of gradually reducing monthly deficits during the pre-construction, construction, and post-construction periods.
