Scandals endure, but giving rises

Chicago Business
By: Robert Herguth
October 06, 2008

Despite the faltering economy and lingering bad publicity over the handling of sexual abuse by priests, the Archdiocese of Chicago is finding this a surprisingly bountiful time in the pews.

The Annual Catholic Appeal, a pledge drive rooted in the 363 parishes in Cook and Lake counties, is bringing in record levels of cash: $13.1 million so far this year, on pace to far exceed the 2007 campaign.

"It is kind of mind-boggling," says Raymond Coughlin, director of the archdiocese's department of stewardship and development.

But at the same time the church is seeing fundraising successes — giving at Masses also is reportedly strong — it's still paying the price for the abuse scandal.

With its latest big settlement announced in August, the archdiocese has paid almost $50 million in the past four years to victims of priest molestation. The payouts are covered by bank loans, insurance and land sales, church officials say.

While the archdiocese says no money from Masses, where a significant portion of its revenue is raised, or the appeal is used to cover sex-abuse settlements, some say that claim is misleading.

Dioceses don't "sell a product, they rely on (donations), so everything ultimately comes back to the parishioners," says Chuck Zech, director of the Center for the Study of Church Management at Villanova University in Pennsylvania. "It's bogus to say, 'It didn't come from parishioners.' "

To be sure, the nation's third-largest Catholic system is absorbing the costs. The archdiocese's annual revenue is more than $1 billion and it has assets of more than $3 billion.

Roughly a fifth of revenue comes from regular collections during Masses, a figure that has risen moderately over the past couple of years.

The archdiocese had a $261.8-million surplus in fiscal year 2007.

Cardinal Francis George's fundraising machine is going strong. Three years ago, he created lucrative financial incentives for parishes to raise money through the appeal: The archdiocese sets a fundraising goal for each parish, and churches get to keep whatever they raise above that amount.

Last year, 122 parishes got checks totaling about $3 million. This year, almost 300 are expected to cash in, Mr. Coughlin says.

In August, archdiocese officials funded a $12.7-million settlement by tapping into lines of credit from three banks, says the cardinal's new finance director, Kevin Marzalik.

While the archdiocese prefers to pay settlements largely with money raised from land sales, the real estate market has been depressed, which has forced it to depend more on short-term bank loans, Mr. Marzalik says.

The goal is to pay off the settlement through insurance and, mostly, the sale of "undeveloped" property, he says.

Church officials won't discuss specific parcels that might be put on the block, but they will discuss one that won't: the cardinal's historic Gold Coast mansion. In 2002, Cardinal George floated the idea of selling the building, saying he would like to live a more modest lifestyle and use some of the money to help Catholic schools and, if necessary, pay misconduct claims.

Objections from some Catholics followed and he backed off, church officials say. Reached at a recent event, Cardinal George didn't want to revisit the topic. In an e-mail, a spokeswoman says he "never intended to sell it, nor does he now."

One of the bigger recent land transactions involving the archdiocese centers on its longtime headquarters at 155 E. Superior St., which was effectively sold in the form of a long-term lease to Children's Memorial Hospital for $18 million this year.

But that money has been dedicated to renovating two other buildings, including the former Quigley Seminary, that will serve as the main offices for the archdiocese. It's basically a "break-even" proposition, church officials say.

Archdiocesan land holdings are extensive — property and equipment totaled $1.24 billion at the end of fiscal 2007.

Much of the property is more valuable than church record-keeping would indicate, says Jeff Anderson, an attorney who represented victims in the $12.7-million settlement. That's because land values often are recorded at the purchase price, even if the purchase was many years ago and values have since soared, Mr. Anderson says.

A source familiar with the church's real estate holdings confirms those statements.