wfn.org | GAC Approves $1 Million Capital Contribution to PILP

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24-February-1999 
99083 
 
    GAC Approves $1 Million Capital Contribution to PILP 
 
    by Evan Silverstein 
 
LOUISVILLE, Ky. - When the Rev. Kenneth G.Y. Grant asked the General 
Assembly Council for a capital contribution so the Presbyterian Church 
(U.S.A.) Investment & Loan Program (PILP) can meet state securities 
standards, he got more than he bargained for. 
 
    Some raised questions during the GAC's annual winter meeting here about 
the operation of PILP and its place in the future mission of the church. 
 
    "I see every mission dollar as having been given sacrificially, like 
the widow's mite ... and I'd like to let go of that grudgingly," said GAC 
member Bruce Kennedy, an elder at John Knox Presbyterian Church in suburban 
Seattle, Wash. 
 
    The three-year-old corporation, which Grant heads as president and CEO, 
received approval for a one-time capital contribution of $1 million from 
the GAC on Feb. 13. The money will be allocated from mission dollars and 
will, according to Grant, permit Presbyterian congregations, governing 
bodies and related mission agencies to borrow more than $50 million. 
 
    The contribution enables PILP to continue meeting guidelines of the 
North American Securities Administrators Association, Inc. (NASAA), which 
require that it maintain a capital ratio (net worth divided by total 
assets) of at least 3 percent. Projections indicated that PILP's ratio 
would drop below that level in the year 2000 unless it received an infusion 
of new capital. 
 
    "As our investments increase, as the program becomes more successful, 
the capital contributions will be more and more needed," Grant said. 
 
    Even with the additional $1 million, PILP's capital ratio will drop 
below the required 3 percent sometime in 2002, unless additional capital is 
secured, because of anticipated growth of its total assets. 
 
    Council members told PILP to prepare a plan outlining how the 
corporation intends to meet capital requirements of NASAA for the years 
2000-2004. This is required in order for PILP to maintain the ability to 
sell investments throughout the United States and the District of Columbia 
and Puerto Rico. 
 
    "We just need to be able to tell the states' securities administrators 
there is a plan in place," Grant said. 
 
    The plan is due to be presented to the GAC in September. 
 
    PILP offers Presbyterians investment notes that pay rates comparable to 
those earned on CDs. The invested funds are used to provide loans to 
congregations for new church development, renovation of existing church 
buildings and the construction of new buildings. PILP lends construction 
money to churches at rates generally lower than those charged by commercial 
banks. 
 
    PILP initially sought a capital contribution of $3 million to be doled 
out in $1 million increments over the next three years, but since "we had 
not identified the source for those dollars in the future we agreed that we 
would ask for $1 million at this point in time," Grant said. 
 
    Meanwhile, on the floor, Kennedy was concerned over the likelihood that 
future funding will be necessary on top of  the $1 million capital 
contribution and the millions originally utilized to start the corporation. 
 
     "That doesn't mean that we should therefore belly up to the bar, again 
and again, with additional money. Especially when the performance of PILP 
to this point, I don't think, has been that sterling," said Kennedy, a 
former Alaska Airlines CEO. "In terms of attracting additional money, I 
think it's off to a slow start." 
 
    GAC member David P. Greer of Omaha, Neb., voiced similar concerns. 
 
    "How much more," he asked, will be needed to fund PILP? 
 
    In the end, however, Council members decided by approving the 
contribution that PILP does fit into the denomination's ministry portfolio. 
"The conclusion was that it was a priority as far as mission. It's not just 
a financial decision," said GAC chair the Rev. Cathy Chisholm. 
 
    The Mission Support Services (MSS) Committee, which oversees the 
financial affairs of the church, recommended that GAC members approve the 
action. 
 
    "This is largely a recommendation from [GAC executive director] John 
Detterick, and I concur with him," said John A. Rodgers, MSS Committee 
chair. "From what we can tell from reviewing the history of PILP, this was 
identified in 1995 as a significant commitment by the denomination, and GA 
affirmed that. Right now I think we're on the course that GA put us on in 
1995." 
 
    PILP operates coast to coast. It has 26 loans outstanding for a total 
of about $9 million. PILP offered its first general securities offering on 
May 1, 1997, with an offering in most states of $100 million, according to 
Grant. 
 
    Today, 1,000 investments have been sold with an average individual note 
of slightly more than $10,000. Total investments of all sources equal about 
$19 million and total assets are about $21 million in short-term 
investments and loans. 
 
    "Yes, we are performing on the business plan and we are meeting a 
portion of the church growth needs of the denomination through selling 
investments and offering mortgages," Grant said. 

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