The next round of closures might not be car dealerships.
Since 2009, there have been an estimated 2,000 car dealership closures, costing an estimated 100,000 people their jobs. Especially daunting is whether anything can be done with empty showrooms surrounded by sprawling lots. But this might be a prelude to the next round of closures—shrinking mega-churches surrounded by sprawling parking lots.
In October of 2010, Robert H. Schuller’s Crystal Cathedral Ministries filed for bankruptcy protection, citing declining donations and debts totaling $48 million. The survivability of the 55-year-old church is now at stake. Founded by Mr. Schuller at a drive-in theater, the church owes $12 million to creditors and holds a $36 million mortgage.1 But it’s not alone. The Crystal Cathedral is often cited as progenitor of the American mega-church. Over the last few years, declining donations and mounting debt has hit many mega-churches. Growing numbers of them are closing their doors.
Since 2008, nearly 200 religious facilities have been foreclosed on by banks, up from eight during the previous two years and virtually none in the decade before that, according to real-estate services firm CoStar Group, Inc. Analysts and bankers say hundreds of additional churches face financial struggles so severe they could face foreclosure or bankruptcy in the near future. “Churches are the next wave in this economic crisis,” says Reverend Jesse Jackson Sr., whose organization PUSH helps struggling churches negotiate better terms with their bankers.2
Bankruptcy problems are rooted in four realities: bonds, balloons, boomers, and big boxes. Many churches for example used bond financing to build bigger houses of worship to accommodate forecasted growth. With a “Build it and they will come” mentality, churches bought compound-interest bonds, where they pay nothing until the bonds come due years later, but then have to pay both the principal and accrued interest, which often doubles the debt. Other churches took out loans requiring interest-only payments in the initial years with balloon payments later on. With bonds and balloons, churches hoped growth would outpace debt. In most cases, the forecasted growth never occurred but the bonds and principal are still coming due. “In 2011 and the next couple of years, we’re going to see a big maturity wall hitting these churches,” said Scott Rolfs, head of investment bank Ziegler and Company.
Boomers and big boxes compound the bankruptcy problem. Before boomers, most American churches were urban, local, and small—around 100 to 150. With the mushrooming of suburban life and automobile use after World War II, boomers morphed “local” to mean anything within a day’s drive. They demanded big malls and big churches. “The mega-church mirrors the big-box retailer,” writes Dave Browning in Deliberate Simplicity: How the Church Does More by Doing Less. Mega-churches are one-stop stores featuring visitors’ centers, coffee bars, professional bands, counseling services, and multi-level age-segregated ministries. Running an operation of this size requires a large physical plant as well as significant numbers of staff incurring outsized expenses. But as debts come due and growth doesn’t happen, boomers are becoming disillusioned and heading for the door.
Research by George Barna indicates there may be as many as 20 million Americans—most of them boomers—who no longer view the church as the locus for their spiritual experience. They’re leaving, but subsequent generations lack the financial means and inclination to pay for big-box expenses. In her book, The New Faithful: Why Young Adults Are Embracing Christian Orthodoxy, Colleen Carroll Campbell studied young people and discovered many leaving big-box churches for smaller, more traditional expressions of faith.3 The net effect is big-box facilities that become unaffordable.
In the past, when urban car dealerships or churches went under, their facilities were converted to shops, condos, or art galleries. Mega-church facilities occupy sprawling parcels, much like suburban car dealerships. It’s the paradox of ambitious pastors wanting to achieve high growth, warns Larry C. Farrel in his book The Entrepreneurial Age. He writes how high growth “produces a burgeoning bureaucracy and slower growth.” Farrel has studied how pastors become “professional managers” instituting high growth programs where “streamlining and controlling the enterprise becomes the new order” and “meetings, reports, and bureaucracy proliferate on every front.” These ministers unwittingly assume the mantle of Coleridge’s ancient mariner: “Instead of the cross, the Albatross?, about my neck was hung.”
The lethal brew of bonds, balloons, boomers, and big boxes suggests the next round of closures might be mega-churches. “There is a growing sense that the mega-church ladder is leaning against the wrong wall,” warns Browning. He suggests smaller churches. As Christian Schwartz reports in his book Natural Church Development, the evangelistic effectiveness of smaller churches is statistically 1,600 percent greater than that of mega-churches. This is why Browning, Schwartz, and many others, including Malcolm Gladwell, say that the most effective church caps growth at around 150 congregants. “The Rule of 150 says that congregants of a rapidly expanding church…banking on the epidemic spread of shared ideals need to be particularly cognizant of the perils of bigness,” writes Gladwell in his book, The Tipping Point. “Crossing the 150 line is a small change that can make a big difference.”4
“Bigger is better,” Peter Drucker warns, “turned out to be another 20th century myth.” The church is called to make a big difference, so the next time you pass a shuttered car dealership, consider the legacy of baby boomers and ask yourself whether returning to smaller churches might be the better way to make a big difference.
1 Tamara Audi, “Crystal Cathedral’s Cracks Show in Bankruptcy Filing” Wall Street Journal, October 10, 2010.
2 Shelley Banjo, “Churches Find End Is Nigh,” Wall Street Journal, January 25, 2011, A3.
3 Colleen Carroll Campbell, The New Faithful: Why Young Adults Are Embracing Christian Orthodoxy (Chicago, IL: Loyola Press, 2002).
4 Malcolm Gladwell, The Tipping Point: How Little Things Can Make a Big Difference (Boston, MA: Little, Brown, and Company, 2000), pp.182-183.