Prudent Investing

A longtime congregant passes away and leaves your synagogue $500,000.

Death is always sad. But the bequest is a good thing, right?

But what if there were stipulations in the legal documents that specified how the funds were to be invested? That the $500,000 was to be kept in accounts at the local bank and invested in CDs? The synagogue has an endowment fund of approximately $1 million invested conservatively and generated a return of 11% last year. Current 1-year CD rates are 1 ½ %. What should you do?

I read a story recently where a church member passed away in 1999 and left his church $460,000. The funds were to be held in trust and invested only in insured bank accounts and government securities, and the net income was to be used for maintenance of the physical property of the church.

A few years ago, Mike, a synagogue president had called me and shared a similar story. The synagogue was in a vacation area. During the 1990s, the Goldbergs would come each year and spend several months in the community, attending services frequently. They set up a trust of $600,000 to benefit the synagogue. The legal stipulations were similar as the church above. The funds were to be housed at the local community bank, and could only be invested in Bank CDs.  And the local bank officer was to be the administrator of the fund. The Goldbergs had both passed away during 2000.

In 1995, the return on a 1 year CD was 5.40%, and just over 6% for a 5-year CD. Today, such rates are 1.50% and 2.25% respectively.

Mike said as CD rates plummeted, they had asked the bank officer if the funds could be invested in a similar way as endowment funds for universities and other not-for-profits, with a mix of equities and fixed assets such as bonds or government securities. The return to the synagogue from the CDs was minimal. And after paying bank fees, very little was left for use by the synagogue. The would make this request every year. And the bank officer always insisted that the donor’s intent regarding investment be followed.

UPMIFA, The Uniform Prudent Management of Institutional Funds Act, is the official governmental guide for how not-for-profit boards are to invest endowment funds. Being prudent is key. The synagogue board is the ultimate authority regarding the management of all synagogue funds, and this includes investing. In 2017, having such a substantive amount of money invested in CDs, or even just in government securities is not prudent.

The church leadership filed a lawsuit in order to invest these funds prudently, in the spirit of UPMIFA, with the desire for a bigger return.  When the New York Trial Court denied their request, the church leadership appealed. The Appeals Court agreed with the church leadership noting that such restrictions “have become impracticable and frustrate the trust’s purpose of generating funds to assist in church maintenance” (In re Estate of Chamberlin, 135 A.D.3d 1052-NY App. 2016).

No one wants to go to court, especially members of a synagogue board. But there are times when such legal action is warranted.

Importance of “Being”

Measurement is a big part of our lives.

How tall are you? How much do you weigh?

What were your grades in school or your GPA in college? Or even your SAT scores?

As adults, measuring continues. The number of square feet in your home – and even how much you paid for your home, or how much it sold for – your salary, the size of your IRA.

We do this a lot, too in synagogues.

How many people attend Shabbat evening worship?

How about at the High Holy Days?

How many students are in religious school, or pre-school? How many B’nai Mitzvot in a given year?

How many people attend an adult education program?

How many member families, or units, belong to the synagogue?

How many likes does the synagogue have on its Facebook page?

How many people open up the weekly email or monthly newsletter, and click on any of the links that might be shared?

I could go on. You get it, I am sure.

Of course we have to be focused on some measurements, namely related to the budget. We have to raise the necessary funds, through dues, fundraising, tuition, or other means, to cover the budgeted expenses.

Recently, I read an interesting article about the demise of the small church throughout America.  The premise is that the major Christian Church denominations are focused on measurement and small churches really don’t operate in such a metric centered philosophy.

The author was making the case that small churches matter because their primary focus is on “being”.

Of course in small churches – and small synagogues – it is not as if there is no focus on measurement. At least when it comes to finances. You have to pay the rabbi, the electric bill, even the website hosting fee. But the premise here is that such measurements are not as significant in both size and priority.

The lone synagogue in a small town today doesn’t have to be so concerned about competition.  Of course they have other challenges – few, if any, new congregants, people moving away to be with nearer to family, and people passing away.

But measuring any of the stuff listed above is secondary to “being” – to relationships, building community, and touching lives Jewishly and helping people learn and grow.

Jewish denominational leadership, synagogue thought leaders – I like to think that I am in this group – all contribute to the focus on measurement. I have written blogs about membership, the importance of websites, High Holy Day Campaigns, dues/annual commitments, and utilizing Facebook and other social media platforms. Maybe too many. My blogs have been about areas of synagogue life that we constantly measure.

While all are important and necessary tools for the synagogue of the 21st century, it is easy to forget about what is most important: they are just tools to help you build a more vibrant sacred community, where through personal relations, people feel a deeper connection to each other and to their Judaism.

Summer

Is there ever a slow time for synagogues?

There are certainly intense times of activity around the various holidays – especially the High Holy Days, Hanukkah, and Pesach. And there seems to be a natural finality, or break, with the end of the school year. Religious School and Pre-School mark the close of another academic year in various ways. The end to the public and private school year follows very quickly. Soon children are off to camp and many people are in vacation mode, a mindset that extends from Memorial Day and Labor Day.

The end of the academic year is also a time when people move. For a new job or just because they want to. And some will be looking for a synagogue. Children are of an age for Religious School. People are looking for community.

How will these seekers find your synagogue? Maybe they will ask a realtor, a neighbor or a friend. Not that long ago, synagogue leaders were encouraged to buy ads in local newspapers – outmoded today when a growing number of people get their news on their smart phones.

Social media is perhaps the most important element today to any synagogue marketing strategy. And in particular, your website, Facebook, and even Snapchat.

Does your website present the synagogue how you want it to? Does it convey the special sauce of your synagogue through copy, pictures and videos?

Is the synagogue website up-to-date? I can’t tell you how many times I have been on a synagogue’s website and clicked on the link to the “Blog” and saw that the most recent posting was from 12-18 months ago. Sometimes, this is even true for event listings.

Your synagogue’s communications plan should call for ongoing website calendar updates. If no one has interest in continuing a blog, maybe it is best to simply archive past blogs and have a message that “this page is down for maintenance”.

Seekers today will be accessing your synagogue’s website from their smart phones. So your website needs to be mobile compatible. Otherwise, they will seek elsewhere.

Your synagogue’s Facebook page is also another social media platform where seekers will find you. Here, too, you need a plan that involves posts of articles, events, pictures and videos. If a really great event happens at the synagogue, post a video using a smart phone on Facebook. If you think Shabbat worship is a part of your synagogue’s special sauce, post a 2-minute video of people singing. Some might take issue with photos and videos on Shabbat. I get that. But for many synagogues, with a Shabbat band and a streaming service, this shouldn’t be an issue.

I have to admit, that I don’t know a whole lot about Instagram. Other than the other members of my family use it a lot to post pictures. A synagogue’s Instagram page certainly will tell a story about what worship and programming through pictures. Seekers may imagine themselves in the pictures, and if this is a community that they can be a part of.

“Bread & Torah”

Years ago, it was pew fees that was the funding mechanism of synagogues. Where one sat at the High Holy Days was the determinant as to how much you were to contribute to your synagogue. The closer you sat to the Bima, the more you were obligated to donate. There are a handful of non-Orthodox – in addition to Orthodox ones, I guess – synagogues today which still utilize this annual funding method.

Post World War II, annual dues became popular. There was fixed dues, fair share dues and hybrid models.  Along with what families were paying for religious school tuition, any of these various dues models seemed to be enough to cover the synagogue’s annual expenses. There would be the obligatory building fund one began to pay over 5 years when you joined to cover building expenses. And perhaps an occasional building campaign to renovate, expand or even move and build something new that targeted those with capacity and interest.

During the 1990s, many synagogues began to look to other streams of income. Traditional fundraising efforts such as a High Holy Day Appeal and fundraising events; facility rentals whether it be for a Bar/Bat Mitzvah or wedding celebration, or a long engagement to a school program. Looking to a university model, synagogues were encouraged to create and grow endowment funds in order to utilize a portion of the annual return for operating expenses.

Today, the mantra “if you build it, they will come” is no longer a guiding principle for synagogue leaders to follow. Many Baby Boomers and Generation X leave the synagogue once their children have had their Bar/Bat Mitzvah. Experience and research tells us that Millennials are not joining synagogues in the same way that their parents did.

The synagogue funding model continues to evolve. In recent years, a number of synagogues have adapted a Voluntary Dues Model.  60 synagogues is the current number, double the number from a few years ago. Remember, there are more than 1400 Conservative and Reform synagogues in North America, not counting Reconstructionist, Renewal, Orthodox and unaffiliated.  And I am sure that there are leaders of several congregations that continue to ponder whether making such a change would be better operationally and philosophically.

The straight numbers might not make one overly enthusiastic about the voluntary dues model. The average increase in membership was 3.6 %. Average income from dues/annual commitments was 1.8%. From reading the report, though, and a recent article, leaders of synagogues that have made such a change are certainly feeling good about it.

No matter the dues model – fixed dues, fair share dues, voluntary dues, or even pew fees – focusing on engaging people through worship, relationships, and programming to build community is more important than the funding model.

The experiences of synagogues who have adopted the Voluntary Dues model highlight that former congregants are returning. And there is no longer a need for dues relief where congregants had to have uncomfortable conversations with the synagogue treasurer or executive director about their financial situation.

The new voluntary approach, or any dues model, does not take away the need for synagogue leaders to continue to raise funds.  For synagogues of all sizes, dues and tuition from Religious School, and Early Childhood programs are still supplemented by the various streams of income: whether that be through traditional fundraising activities like a High Holy Day Appeal or special events; renting out the facility; or growing your synagogue’s endowment fund to generate additional income.

Website Strategy

Communication today is so immediate. An email, a tweet, a Facebook post – write it, hit send or return and you have reached your target audience. Of course they have to open it and read it. And there are also the tricks of the trade that you do to have a catchy subject line in an email or heading on Facebook to encourage people to read it and click on the links.

Think about how synagogues inform congregants about someone’s passing. We send an email to the membership, create a post for Facebook and/or the website, maybe even send a group text. I can recall when we would receive pre-fabricated post cards where someone would handwrite (many times – their hand must have hurt!)  the information about the grieving congregant, the person who died, and Shiva information.

Or there was a phone squad to be sure that everyone in the synagogue was reached. And this was before answering machines and voicemail.

Spoken communication may be a lost art.

Today, synagogue websites are really a powerful communications tool. Congregants look there for all kinds of information – upcoming events, dates and times, contact info for staff. When people new to a community have even a thought about synagogue membership will probably do a Google search of synagogues in a particular town or geographic area.

I read an interesting article today about websites for not-for-profit organizations which certainly is relevant for synagogues as well. I have visited numerous synagogue websites – including my own sometimes – where information is outdated. Newsletters and Facebook posts are also important, and should serve as a way to give people a snapshot of information.  And then articles and Facebook posts should drive them to the website where they can find all of the details. And links to RSVP, purchase tickets when necessary, and other important information.

Websites also need to be smart phone friendly, or to speak in the vernacular “mobile compatible”. More and more people today are accessing websites on their smart phones. Especially Millennials. Websites that aren’t mobile compatible are at a disadvantage. If the viewer can’t easily maneuver throughout your synagogue’s website, they will loose interest and move on. And this experience will color their view of your synagogue, no matter how “warm and welcoming” and “special” your synagogue is for people who come through the door.

Does your website incorporate SEO – search engine optimization? Basically, there are things that you can do to insure that when someone does a google search using specific terms like “synagogue” and the name of a specific city your synagogue is high up on the list that appears on the screen. Central Synagogue in New York City is incorporating SEO as a part of its internet marketing strategy to insure that when someone does a google search for “synagogue” and “New York City”, its placement is very prominent on the listing of links that is generated.

To create and implement such an internet strategy incorporating SEO, it is best to seek advice from congregants involved in marketing. Especially Millennials.

 

 

Income: Out of The Box Thinking

I am often asked about non-traditional ways that synagogues can generate income.

Beyond dues and more traditional fundraising efforts like the High Holy Day Appeal or even a Gala. And “beyond the Bake Sale” thinking that I attribute to such efforts as importing corned beef sandwiches to sell to the community.  And beyond the nights staffing the food concession stand at the new baseball stadium that after a while gets old and a pain – to find volunteers and that income can be unpredictable if the game is poorly attended to do weather, or just by having a home team in a rebuilding year.

Years ago, Bingo was the way. In the 1980s and 1990s you would drive by numerous synagogues and see signs advertising Bingo on Wednesday nights. Of course Bingo, as we know it, is a form of gambling. This raises all kinds of issues for a lot of people. Today, I am startled in my travels, particularly in New Jersey, when I do see a Bingo sign in front of a synagogue.

And there are synagogues who rent out their building as it sits empty on weekdays to a pre-school or even a private school.

What some might consider “out of the box” thinking is what I am talking about:

  • Like entering a lease agreement with a cell phone company for them to place a cell phone tower on the synagogue’s property.
  • Like entering into an exclusive agreement with a caterer who will advance the funds to make improvements in the social hall and kitchen with the hope of attracting more B’nai Mitzvahs, weddings and other celebrations of members and non-members to the synagogue.
  • Or even the large synagogue that received a bequest of a 50% share in a downtown hotel in its city in an area going through redevelopment and an economic boom. Rather then sell their share in this endeavor and deposit the proceeds in the endowment fund, the synagogue’s leadership decided to form a for-profit organization, market investment opportunities of zero coupon bonds in $50,000 allotments with the goal to further the development of the hotel.

The cell phone tower raises community and environmental concerns. We all want better cellphone reception. We just don’t want a cell tower in the back of the parking lot or on the roof of our synagogue. You might be interested to know that this is a hot topic for churches. There are a number of churches who enter into an agreement to house a cell tower within the bell tower on the church, or that put a cell tower on the property that is disguised as a Cross.

Partnering with a caterer sounds like a good idea. I don’t know if there is any qualitative data on this, but weddings seem to be more likely to be held at venues like hotels or country barns than at churches or synagogues. Same is true for B’nai Mitzvah celebrations. For parents, it just seems easier to do it at a place where the details are taken care of. And besides, I have heard some awful stories of lawsuits between caterer and synagogue when the initial expectations, while well intended, don’t pan out.

And the synagogue’s hotel redevelopment: while well intentioned, I think it goes a bit far afield of the mission of the synagogue. Besides being a bit questionable about how the very significant bequest that should end up in the synagogue’s endowment fund is being used, according to investment best practices.

I would love to hear about any “out of the box ideas” that are working for your synagogue, or are ones you are considering.

Fistfight or Celebration

I love telling this story about an annual congregational meeting.

At the first one I ever attended more than 20 years ago, my friend Lanny Katz, who was the synagogue’s president at the time, prevented a fistfight from occurring. I doubt that “Fight Referee” is found in any synagogue president’s job description that might exist.

Jonathan was the Treasurer and was presenting the budget for the next year. And Max, an older gentleman, had some questions regarding the Rabbi’s salary. It didn’t seem to bother him that the Rabbi was among the 80 or so people in attendance. The questions and answers between these two grown men became a little heated, and Lanny asked Max to leave. On his way out, Max, standing in a boxer’s pose with fists clenched, asked Jonathan if he wanted to step outside. Lanny encouraged Max to move along and go home.  And the meeting continued.

Certainly an eye-opening experience for a new congregant. Whatever happened after that would be a bit of a let down. And some people might not feel so enthusiastic about coming again next year

Most congregational Annual Meetings are held due to legal requirements. The By-Laws often state that an annual meeting must be held by a certain date – within 30 days of the start of the new fiscal year. And that a quorum of the members of the congregation be present to vote on a new budget for the coming year. The specifications for what determines a quorum are also detailed in the By-Laws.

Our synagogue’s fiscal year starts on June 1st. While May is kind of a crazy time for everyone with end of year school activities, sports, and everyone’s anticipation of summer and vacation plans, our Annual Meeting is most often held during the week before Memorial Day.

Maybe we should rethink this?

Getting a quorum is often a challenge. We have tried ice cream as an enticement. Held the meeting during Religious School.  It takes an hour and several phone calls to congregants to reach the magic number so the meeting can be held so we remain in compliance with the laws of the Garden State.

To me, celebrating accomplishments and sharing excitement for the plans for the future should be the goals for any annual meeting. Recognizing leadership for the time they have devoted to the board and other committees, projects, and programs is also right up there in importance. This is a time for special recognition of the outgoing President as well as long time serving board members. Such acknowledgement might bring out friends and perhaps some family members who might not normally attend. It is also an opportunity to have a well-known speaker who again might appeal to a segment of the congregation’s membership that wouldn’t normally make attendance at the Congregational Annual Meeting a priority.

And good food – even ice cream – always helps, too!

Be In The Last Will

How many Wills will you have during your lifetime?

Well, according to one recent survey by USLegalWills.com, 63% of all Americans, adults 18 and up, have no will at all. And another 9% have a will, but it is out-of-date. And only half of those 65 and over have an up-to-date will in place.

But back to my original question: Probably 3 or 4. When my wife and I had our first child, we went to a lawyer friend to write our first will. We updated it a few years later when we had our second child. Recently, we consulted another lawyer friend and wrote our second will. Our children are on their own and we are at what is certainly a different stage of life. We also included Living Wills and medical directives, which is more common when one consults an attorney about a Will today then it was 25 years ago.

While that is where we are, I can share my parents’ experience for what might be coming. By their early 60s, they, too were on their second Will. Then, after several years of retirement in Florida, and with health and aging challenges, they consulted a Florida attorney to write a third will talking into account their evolving situation.

And what does my family’s Will history have to do with anything related to synagogue life?

Well, firstly to illustrate to you the number of wills people might have. And for those synagogues with Legacy Societies and active bequest programs, to emphasize the importance of being sure to be in a congregant’s last will.

According to actuarial tables, many congregants in their 50s and 60s who join the synagogue’s Legacy Society will live into their 80s, and some into their 90s. I often say that everyone should live and be well to 120 and beyond. But the same actuarial tables tell us that some people will also pass away.

Hopefully, as congregants age, they will remain engaged in synagogue activities throughout their life.

But what happens when they are no longer engaged in synagogue life? Friends move away, or pass away. Synagogue leadership changes. The people who asked them to name the synagogue in their will are no longer a part of synagogue leadership. There are new clergy – much younger. You go at the High Holy Days, and a few times for Shabbat when there is a Yahrzeit, but that is it. You recognize a few people with whom you exchange pleasantries, and the rabbi, cantor and a few others always say Shabbat Shalom. But that is the extent of the conversation and it doesn’t feel like the warm heymish place it once was.

This is a problem at so many levels.

Aging and medical challenges are now in the forefront of your life, and in conversations with your adult children. When you meet with your lawyer to redo your will and she asks you whether the charitable organizations you named in your last should be included in the next one, will the synagogue still be among them?

It shouldn’t just be about the money. Regardless of age, you want people to not only feel “warm and welcoming”, but that people at synagogue are interested in what is going on in their lives.

If this is the normative synagogue experience for everyone throughout their lives, being in the last Will won’t be a concern.

Tax Changes-Maybe

Do you think the proposed changes to the tax law will affect contributions – and dues/annual commitments – to synagogues?

Probably not.

In 2016, U.S. taxpayers earning between $50,000 and $75,000 in Adjusted Gross Income (“AGI”) averaged $2,970 in charitable contributions.

For those earning income between $75,000 and $100,000 AGI, average contributions were $3,356.

Those earning between $100,000 and $200,000 averaged $4,130 in charitable contributions.

And for those earning between $200,000 and $500,000 AGI, charitable contributions averaged $7,426.

There is of course no way to know this, but I will bet the income categories described above cover more than 90% of synagogue members.

President Trump’s proposed changes really focus on lowering the tax rates. Regarding charitable deductions, he is proposing to limit total deductions to $100,000 for individuals and $200,000 for couples. The proposal from the House of Representatives limits deductions to just mortgage interest and charitable deductions.

As an aside, today I read an interview with Steve Ballmer, the former CEO of Microsoft. He is funding a project to track all government spending. He felt that deductions for employer provided health insurance, state and local taxes or mortgage interest deductions are really subsidies for the affluent.

For another day.

Currently, there is no limit on overall deductions, but a person can only deduct charitable deductions up to 50% of their adjusted gross income. The “1%” that is always talked about, those at the very top of the income pyramid, in theory, might have some disincentive regarding charitable donations due to such limits.  But I think they contribute because they are asked and because they want to.

“Donative intent” remains the most important reason why a person makes a contribution. At all levels of giving. Regarding the synagogue, people make a contribution for a host of reasons, mainly because they are obligated to fulfill their dues/annual commitments. And hopefully, they believe in their hearts and in their heads that the synagogue is important to them as an institution is meaningful in their lives.

Don’t get me wrong. Deductibility of charitable contributions is certainly helpful to those who itemize their tax returns. If the tax code was to change so that contributions were no longer deductible it would certainly have some effect on contributions.

But let’s not be so concerned about this hypothetical situation. Churches and synagogues, hospitals, colleges and universities as well as human service organizations, and their representative advocacy and lobby organizations, would fight this tooth and nail.

13 Questions About Synagogue Finance*

Most synagogue leaders are immersed in budget preparation for next year. For others, this process is just a few months away and will be here before you know it.

And too often, the budgeting process is simply to add funds – 2 to 3% – to the budget lines from last year and move on.

Here are 13 questions for you to ponder which I know will help your budget planning for the coming year:

  1. If you were to start your synagogue from scratch today, would the budget look differently than it has in recent years?

The biggest expense is personnel. Do you have the right staff to best fulfill the synagogue’s mission and vision?

  1. Do you have programs that, if they were discontinued, would have little negative impact on the synagogue or the community?

No congregation will get rid of Shabbat Worship. But maybe there are other programs that are poorly attended that are worthy of an evaluative conversation about effectiveness and impact. And maybe it is worthwhile to think about new programmatic offerings to better engage congregants.

  1. How much of the synagogue’s expenditures reflect “the way we have always done it”?

Increase the budget by 2-3 percent and be done with it. Would you do it this way in your business?

  1. Are there clear lines of accountability for spending at every level?

Of course people should be accountable for each expense by getting approvals beforehand as well as receipts. More importantly, are staff setting goals and creating work plans for the year to achieve such goals? Do they have a performance evaluation? If the synagogue is spending $15,000 for a part-time youth engagement staff member, how do you measure its effectiveness?

  1. How much of the synagogue’s funds are used to impact the community?

Social Action, interreligious activities with local churches and mosques. Are you having a conversation about the impact of such work?

  1. Is the synagogue spending its personnel dollars in the most effective way?

This relates to the mission and vision of the synagogue and the goals you have to carry it out. And whether you have the right staff to do such work.

  1. Who are the true decision makers as to how synagogue funds are spent?

Is there a full review and discussion of the budget by the synagogue board? Or does the board just rubber-stamp the budget that is created and offered by the synagogue president, rabbi and a few others?

  1. Is debt hindering your congregation from doing programming you would like to do?

Check out my recent blog about debt. The $90,000 a synagogue is paying annually towards a mortgage would certainly be better spent for a youth engagement person, executive director, or even just a $200 reduction in annual dues.

  1. What are the potential unintended circumstances of making significant changes in the budget and its expenses?

A significant budget change might be uncomfortable to some congregants. This is where transparency helps.

  1. Does your synagogue spend too little or too much on facilities?

Keeping up with capital improvements is an integral part of the budgeting process.

  1. Do you share the state of the synagogue’s finances once each year at the time of the synagogue annual meeting, or is there ongoing transparency by sharing budget updates periodically?

This is self-explanatory. The more on-going transparency there is regarding the budget, the better.

  1. Does the synagogue have adequate funding for training and development of staff, board members and other volunteers?

Providing funding for training for everyone has short and long term benefits to the synagogue.

  1. Does the synagogue budget reflect faith (Jewish values), futility, or foolishness?

A budget that directly relates to the mission and vision of the synagogue and its goals reflects Jewish values.

(*Adapted from posts at ThomRainer.com)

Top