Church Bonds Solid As A Rock Proceeds Build Churches, Help Unite Congregations

“The borrower is servant to the lender.” Proverbs, 7:7

Pastor C. Allen Hulten does not have to search far into the Scriptures to explain why his parishioners bought up $700,000 in bonds that will help finance a new sanctuary.

The Valley Assembly of God and its underwriter had taken the trouble and expense to register the securities for public sale last month.

The bonds pay interest at attractive rates ranging from 7 percent to 9.5 percent, depending on maturity.

Hulten said he and Bryan Mangum, a broker for Houston-based Security Christian Finance Inc., were not certain church members could absorb the entire issue.

But coming off a Saturday dinner to launch the offering, Hulten said, the securities were sold in-house by Wednesday noon.

Many church members, including himself, invested funds they had socked into mutual funds or retirement programs, Hulten said.

Although the church probably could have turned to a bank or other institution for financing, he said church officials thought selling bonds would give members a greater feeling of ownership.

“There’s a much greater motivation to succeed,” Hulten said. “Who do you want to be servant to?”

The church’s existing quarters on East Broadway were also paid for with bonds, he noted.

But the Valley Assembly of God offering was a relatively rare one in Washington. Only 22 church bond issues were registered in the state last year, and almost all financed construction outside Washington.

Yet brokers for the offerings said defaults are almost unheard of. Underwriting guidelines are strict, they said, and almost all are secured by first mortgages on the church property.

“No one ever lost money investing in church bonds,” said Jerry Harris, vice president of the California Plan of Church Finance.

Although affiliated with the California Baptist Foundation in Fresno, the plan has completed $650 million in underwritings for all denominations in the last 48 years, he said.

Until recently, the plan restricted its underwritings to notes, which are exempt from registration requirements in some states. Harris said adding bonds will expand the market for the plan’s offerings.

Mangum said he likes to take offerings public not only because the pool of buyers is greatly increased, but also for the opportunity to talk about the church.

Mangum said the process of building a new church can test a congregation. Buying bonds is one way members can rally to the cause and at the same time make a solid investment for themselves, he said.

Valley Assembly of God is the first Eastern Washington church Mangum has worked with in the two years he has been under contract with Security Church Finance.

Before, the certified public accountant and M.B.A. sold resort property and acted as a consultant.

“I’ve been pretty close to the Lord and he just led me into this,” Mangum said.

He said he was very impressed by the strength of the Valley church.

He had been reluctant to look beyond the Puget Sound area, Mangum said, but now is working with a church in Western Montana as well as others around Spokane.

The largest underwriter of church bonds is B.C. Ziegler and Co., which does about $100 million in church construction and refinance loans each year, according to Assistant Vice President Scott Rolfs.

He said the Wisconsin-based company sells its offerings through 24 offices - the closest is in Beaverton, Ore. - and by mail solicitation to a clientele established over 80 years in the business.

Although Ziegler makes a secondary market for its offerings, Rolfs said church bonds are not as liquid as those issued by major corporations.

Bonds are usually resold within a church, said Mangum and Harris.