When Do We Break Ground?
During most capital campaigns there comes a time when a few major donors and volunteer leaders may press earnestly for commencement of construction of the featured buildings; well-intended pressure but too often overlooking related costs of "financing the delta", i.e. borrowing cash required, over and above cash gifts received and pledge payments due, to pay for construction, furnishings, equipping the building and surrounding landscaping.
A wise institutional policy to establish before a campaign is launched, before predictable impatience leads to imprudent financial decisions, is defining specific criteria for commencement of construction. A policy guideline we encourage clients to consider is as follows:
Construction of the campaign's featured building objectives will commence when no less than 70% of the total costs of the project has been received in cash and confirmed cash pledges, and with no less than 30% received in cash and with pledge payments due within 3 years from commencement of construction.
Percentages applied in such a policy will vary based on an institution's access to construction funding and financing; consideration of escalating construction costs; and, revenue generating aspects of the new building and facilities.
As an editorial aside, I have become increasingly concerned with the proliferation of tax-exempt bond issuances and other sources of financing for worthy projects; financing to hasten completion of promised buildings which may bear a donor's name, the amortization of which will be borne by future generations of governing boards, donors, and development officers.
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This article has been authored by Gary W. Phillips and must not be reproduced, in whole or in part, or otherwise distributed without prior written approval to do so. 08/08
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