“Those who cannot remember the past are condemned to repeat it.”

By Jennifer Haselberger
Canonical Consultation
February 02, 2015

http://canonicalconsultation.com/blog.html

One of the many legends that is told about the first Archbishop of Saint Paul and Minneapolis, John Ireland, is that he rose up out of his death bed in order to burn his papers, including the list of donors, donations, and other acts of procurement that facilitated the building of the Cathedral of Saint Paul. His sister, Sister Seraphine, CSJ, was entrusted with completing the job, but as any historian can tell you both brother and sister were only partially successful. Therefore, I can only imagine the thoughts of the illustrious Archbishop Ireland if he happened to be looking down from heaven last Friday when his former Archdiocese submitted its financial schedules to US Bankruptcy Court.  ‘Did I teach you nothing?’, would probably have been first and foremost.

For, in providing what it described as a ‘good faith best effort’ to account for its financial assets, the Archdiocese may have fallen into the old Ireland trap of having produced more documents than it is possible to account for in the eleventh hour. Local and national newspapers and media outlets are already having a field day identifying those areas in which the Archdiocese has apparently significantly underestimated the value of its assets, as well as attempts to shield those assets by transferring them out of church control. From my perspective, however, what the schedules demonstrate is abysmally poor bookkeeping and administration. In other words, from where I stand the schedules simply don’t match the current situation of the Archdiocese.

For instance, Schedule A is the list of real property owned by the Archdiocese. It lists the Chancery complex on Summit Avenue and Kellogg Boulevard, the Cathedral, the Hazelwood property which was the retirement home of Archbishop Flynn prior to his move to the University of St Thomas, the land on which three Catholic high schools sit, and the Indian Ministry building in Minneapolis (listed as Gichitwaa Kateri although she was canonized in 2012 as Saint Kateri Tekakwitha, a ceremony which Deacon Joseph Damiani attended despite accusations of child sexual abuse) . 

I find it interesting that the Archdiocese chose not to list its current value interest in the high school properties in the Schedule, but only gave an estimated land market value in the notes. I also question whether such numbers truly represent a 'good faith best effort' to assess the value of those properties. As I mentioned in an earlier blog post, in 2004 the Archdiocese executed a quit claim deed for its 49% of the property on which Hill Murray sits, and the school purchased the other 51% from the Sisters of Saint Benedict. The total value of the property at that time was estimated at $12,000,000, which makes last week's estimated appraisals of the De LaSalle property (located on the historic Nicollet Island, and listed by the Archdiocese at $2,682,100), Totino Grace ($5,088,200), and Benilde-St Margaret ($5,900,000) seem suspiciously low.

As do some of the transactions involving those Archdiocesan properties that took place during my time as Chancellor. For instance, in 2011 Totino Grace, with the assistance of the Archdiocese as property owner, refinanced multiple loans as a real property mortgage in the amount of roughly $7,000,000, nearly two million dollars more than what it is currently claiming the property is worth. A similar refinancing took place with Benilde-St Margaret during the same time period. Benilde had bonds issued by Allied Irish Bank, a bank that dropped to an extremely low rating. The school was able to refinance by securing a mortgage on the Archdiocese's property in the amount of nearly $7,500,000, again almost two million dollars more than current estimated value provided in the notes for Schedule A. I don't think the 'improvements' on the properties made by the schools cover the discrepancies.

Also in Schedule A the Archdiocese notes an estimated market value for the Cathedral of Saint Paul of $21,195,000, while at the same time indicating that the property is encumbered by a long-term lease agreement with the Cathedral parish for $1 a year that means 'no realizable value is assumed' (implying the lease agreement precludes the Archdiocese from profiting from the sale of the property). I find this claim especially interesting because the 'lease' with the Cathedral has never prevented the Archdiocese from realizing income from the use of the property in ways not pertaining to this long-term lease. In 2012, for instance, the Archdiocese (not the Cathedral parish) received $60,000 from Red Bull for the use of the Cathedral property for its three-day Crashed Ice event (the amount was slightly higher in 2013). Although this was referred to as a 'donation', the agreement between the Archdiocese (again not the parish) and Red Bull was a standard rental agreement, with no reference to a sub-lease or the preexisting lease with the Cathedral parish, and with the exception that the 'consideration' received was referred to as a 'donation' so that the Archdiocese could not be legally required to 'rent' the premises for other events that would be perceived as contrary to its mission (e.g. same-sex marriage ceremonies).

I will post more about these long-term leases over the next few days, but in the meantime it is worth noting that while the Archdiocese is estimating the Cathedral's market value at approximately $22,000,000, just a few years earlier the rector of the Cathedral stated publicly that the cost to build the 'artistic treasure' today would run upwards of $1 billion. This statement was made at a time when the Archdiocese was working to pay off the Cathedral debt (held by the parish, not the Archdiocese), incurred as part of a $30,000,000 renovation, and also trying to collect an additional $14,000,000 for water damage and more than $2,000,000 to replace the pipe organs (the latter has been done). It is hard to imagine that there is no market value for a property that is used, in addition to a worship site, as a concert venue, event hall, museum, office building(s), rental housing, and iconic landmark.

I think it is safe to assume that the Archdiocese has significantly undervalued it assets, but at the same time my experience tells me that their recent financial statements likely support such undervaluing. For example, I believe it was in late 2012 that the Archdiocese transferred its ground lease in the Oak Grove property to Commonbond Communities, which wanted to sell the property to get out of the assisted living business (in 1999 Commonbond agreed to a 99-year lease with the Archdiocese for $1000 a year). Commonbond offered the Archdiocese $50,000 for the two and a half acres on which the facility sits at the same time that the Archdiocese was carrying the property on its ledgers at a little more than $16,500, less than half of what Commonbond was offering to purchase it for. 

Interestingly, the Oak Grove property had been donated to the Archdiocese for the specific purpose of building a new parish in Hastings. The parish was eventually built on other land, and, contrary to its representations in the 'Global Notes', the Archdiocese had no qualms in utilizing and eventually selling this 'donor restricted' land for purposes other than what the donors intended, and without consulting the family for its approval (see Item 3 of the Global Notes and Statement, p. 2) or making the proceeds of the sale available to the parish. 

Perhaps the most surprising listings in Friday's filings, however, is the list of creditors found in Schedule F. At first glance it would appear that many of the unsecured creditors (in addition to victims of abuse) are actually parishes in the Archdiocese with some, like Saints Cyril and Methodius, listed twice. The explanation given to journalists is that these entities are owed money as a result of an over-funding of insurance and benefit funds. However, a closer look at the 'parishes' and institutions named shows some, um, interesting listings.

Most of those reading this blog will be familiar with the Strategic Planning initiative that took place between 2010 and 2013 (one of Father Laird's 'signature initiatives). Those who are, and especially those whose parishes were merged as part of this process, may be surprised to find that their former parish appears in Schedule F as a creditor of the Archdiocese. For instance, the Church of the Visitation in Minneapolis is listed on sheet 12 of Schedule F, even though that parish was merged into the Church of the Annunciation in July of 2012. Saint Canice appears on sheet 15, although it merged with Most Holy Redeemer (listed on sheet 16) at the same time.

As the canonical decrees of merger make evident, the receiving or surviving parish in a merger (in these cases Annunciation and Most Holy Redeemer) receives the assets and the liabilities of the merging parish (in these cases Visitation and Saint Canice) on the day that the merger takes effect. The civil statute provides for the same, determining that when two or more religious corporations merge, 'The legal title to assets held or owned by any property corporation that is a party to the merger and consolidation vests in the surviving corporation. The surviving corporation is entitled to receive gifts, devises, bequests, legacies, or other transfers or assignments of money or property, real, personal, or mixed, made after the merger directly or in trust to or intended for any of the constituent property corporations.' (Minnesota Statutes 315.365). So, why list both parishes, when only one is properly a creditor?

In many cases, Schedule F fails to note that the 'creditors' as listed are actually corporations that have been subsumed into surviving parish corporations, but rather lists each former parish in the merger as a separate creditor. However, in other cases only the surviving parish is listed, such as the Cathedral (parish) of Saint Paul (sheet 6). Even more quirky, some of the listings identify the parish by the name that was adopted at the time of the merger (Saint Maximillian Kolbe Church, sheet 10), but others don't (St Mary Church, sheet 11). 

There is no apparent rhyme or reason as to why some creditors reflect the merged status of the parishes and others do not. I thought at first it may be to protect parishes merged with others that have received notices of claims (Father Wehmeyer's merged parishes of Blessed Sacrament and Saint Thomas are listed separately), but then one would expect Lumen Christi and Divine Mercy to be listed along with the parishes that merged into them. I also thought perhaps the merged parishes were listed to suggest a larger number of parishes had unsecured claims, but such a tactic would seemingly have been applied universally. So, one has to conclude that this is simply a reflection of the poor bookkeeping and lack of administrative oversight that has brought the Archdiocese to its knees.

It might even be funny (the Chancery doesn't know how many parishes they owe, or what they are called?), if it wasn't the case that so many of the parishes that were merged out of existence had devoted parishioners who fought those decisions tooth and nail, and who often resigned trusteeships and other leadership positions rather than signing over their parish's assets. The Church of Saint John of Saint Paul comes to mind, since it is listed on sheet 7, right above the parish it merged into, despite the fact that the church was sold to an Islamic Center and is currently operating as a mosque. I can't imagine what those parishioners feel seeing their former parish listed as being owed an unspecified amount of money by the Archdiocese, especially given that their church was taken from them (they were told) because of their 'financial issues'. 

I am posting my version of the Schedule F below, with my notes on which parishes have merged, which corporations survived, etc. The key is light pink= surviving parish, hot pink= parish merged into another corporation, yelllow= surviving parish of a merger with merged parishes not appearing on the schedule. I have placed orange stars next to parishes where name changes have been noted. I also highlighted Our Lady of Good Counsel (sheet 18) which was the cancer relief home of the Dominican Sisters that was sold to Franciscan Health Community in 2008 and which currently operates under FHC as Our Lady of Peace Home. The Dominican Sisters completely divested themselves of their property in the Archdiocese at the time of the sale, even going so far as to donate their remaining burial plots. I can't begin to imagine what or why the Archdiocese now owes their former cancer home, but I hope they get their money.