Church Property: Blessing or Curse?
by George Cardinal Pell, appearing in Volume 42
I believe strongly that bishops, probably every parish priest, and religious superiors must be able to understand basic economic realities, especially about the institutes they are supervising. Bishops must be able to identify the holes in a ladder. They must be able to remember from their experience the types of mishaps that have occurred and will continue to—it could happen again.
I was privileged to speak on a number of occasions at the courses held in Rome each year for the newly appointed bishops. This was one of the points I made to them: you must make it your business to ensure that you can understand the basics of what is happening economically.
I also used to make a second point. I would say, “now if any of you remain ignorant, if any of you do not understand money, for God’s sake do not tell people.” Especially do not tell your staff or the people working with you.
I remember on one occasion I was in quite a high-level meeting with a senior Church official who was genuinely committed to financial propriety. He began the meeting by announcing that he did not understand anything at all about these things. I’m tempted to claim that I almost heard the sigh of relief from one or two crooks in the room. When news of his comments would have percolated through the system, the malefactors would have been much encouraged.
Church leaders need to have a basic understanding of finance, of the value of buildings, and of the revenue which commercial land or buildings ought to return in order to avoid incompetence, loss of revenues or opportunities, and to prevent the ever-present possibility of corruption.
I am not suggesting that people should become like the mythical Italian politician who urged his listeners to always think the worst of other people. He said, “It is sinful, but one will rarely be wrong.” I have explicitly decided to do otherwise for many decades, but incompetence and corruption do not always happen somewhere else.
In one of my very first parishes, we discovered that a couple of the teenage altar servers had been systematically robbing the Sunday collection for weeks, if not for months or longer.
I learned once that Mother Teresa claimed that the two greatest dangers for clergy were sex and money. Not particularly an enormous insight, but to my surprise, she went on to say that money was the worst of these two temptations.
I had to deal with a parish priest who wanted to sell his parish hall to a friend, probably a criminal, who certainly had a colorful reputation. He wanted to sell it for twenty or thirty percent below the estimated value.
More innocently, there was another priest who was very interested in money matters and he leased out the unused parish plant at a rate which enabled the leasee to sublet a portion and get a higher return than he was paying for the whole business.
London Property Fiasco
I might begin with a few general points on the recent London property fiasco in Sloane Avenue at Chelsea, which was supervised by the secretariat of state. I think the first thing is to recognize that the Vatican lost a lot of money on this particular deal. Whether you are an old-fashioned fellow like me or even a little bit more progressive, 217 million euros is a lot of money. And that is the amount that has been nominated by the prosecutor in the London trial. Even if moral culpability cannot be proved among any of the Vatican personnel involved, responsibility for the incompetence must be acknowledged. Life should not go on as before as though nothing has changed.
Even without the grave financial damage inflicted by Covid, no small organization such as the Vatican can afford such a huge loss. Coming on top of an annual pre-Covid deficit, a structural deficit which is running at twenty to twenty-five million euros a year—this is all public knowledge—and a looming deficit of hundreds of millions in the next decade for the pension fund. These are serious and inescapable challenges.
This is the third major Vatican financial scandal in the last forty years. In the 1980s there was the the Banco Ambrosiano scandal involving the banker [Michele] Sindona and Roberto Calvi. As a result of that incident, the Vatican was forced to pay out $230 million.
Then in the period of 2002-2007, we had the sale of IOR [Institutum pro Operibus Religionis, commonly known as the Vatican Bank] and SGIR [a subsidiary real-estate company of the IOR] properties for fifty-nine million below market value. Only recently a former president of the IOR, Angelo Caloia, and [lawyer Gabriele] Liuzzo have been found guilty on these issues and sentenced to jail terms.
By now, the Vatican authorities have made great strides in eliminating corruption. They have stopped the money laundering. With appropriate procedures and a modern chart of accounts, it is much more difficult to defraud. But the authorities have not yet taken effective steps to balance the yearly accounts.
To restate the obvious, the Vatican cannot afford any more huge financial disasters. The three incidents I mentioned, adjusting the values from the 80s, amount to a loss of half a billion, 500 million euros.
The second point to be made about the London property debacle is to realize that efficient, respected, external auditors are not only appropriate but extremely useful, and I in fact would say they are necessary. The external auditors PricewaterhouseCoopers and the Vatican auditor, Libero Milone, were removed in 2017 when they were attempting to examine the accounts of the secretariat of state.
Another very basic point for all church property ventures is to avoid cooperating with banks and financial agents who have a well-established reputation for shadiness, especially when all the respectable banking institutions in the nation refuse to deal with them, apart from the Church. This should not need to be said, but it is a prudential option that has been avoided by the Vatican for forty years at least, until recently. So, Sloane Avenue is a case study in how not to do things.
The Catholic Church around the world has large land and property holdings. Professor Dan Kelly [of the Univesity of Notre Dame] mentioned the Church is the world’s largest land holder. It is appropriate for the Church to own, as well as its churches, schools, and hospitals, property assets as part of its patrimony.
All patrimony, including property patrimony, is to be used for good Christian purposes—for example, service of the poor, education, health—and not primarily to grow the assets. There is no Christian virtue simply in having a larger patrimony, as the Christian attitude has changed from Jewish times so that possessions are no longer regarded as a sign of God’s blessing.
We therefore have the paradoxical situation where the poor and the poor in spirit are blessed, but a Church which is genuinely poor does not have the capacity to help the poor and the down-and-out in any material sense.
Margaret Thatcher used to love pointing out that if the Good Samaritan had not had some capital, he could not have left the money to pay for the fellow who was robbed and left on the side of the road. And that is correct.
Money given by donors for specific purposes should be used for those purposes, or the donation refused. And so too, the source of income to increase the patrimony, for example to purchase land or buildings, should be carefully considered.
A case in point is the Church’s use of Peter’s Pence, which is primarily justified by the way the collection is explained to potential donors. Around ten years ago, the council of cardinals for supervising the economic affairs of the Vatican insisted that the publicity for Peter’s Pence continue to make clear that the collection could be used to contribute to the costs of running papal agencies, such as the Curia. But I do not believe that any cardinal at the time imagined that substantial amounts from the Peter’s Pence collection would be put into long-term property investments.
I do not think that money given for the poor—or what most of the donors think is destined for the poor—should be used for any investment purposes. You might argue about that. My instinct is that money given to the poor should be used for that purpose as soon as possible, rather than in a dilatory fashion to enable the interest to accumulate.
I chaired for quite some years an education committee back in Australia which distributed government building funds for particular projects. We prided ourselves on the speed in dispensing the money and on the comparatively small amount of interest which was allowed to accumulate.
I have also worked on committees with a somewhat different approach. But what is of primary importance is that the donors, whether they be government, corporations, families, or individuals, know what is being done with the funds that they donate.
These people probably do not want the Church to be buying at the top of the market, much less at the time of a property bubble, when the experts predicted there was a ninety percent chance that the property bubble would burst. This was the situation in London around 2016 and 2017. Then Brexit came and fifteen percent went from the value of the pound. The land and property values in London, especially at the top of the market, also dropped a further fifteen, possibly thirty percent.
As an old-fashioned person, I always like to know the owner of any property the Church was buying. I was always loathe to embark on a deal when the ownership ran through a series of shell companies, especially if they disappeared into the opaque waters of a tax haven.
Buildings, Maintenance, and Property
When the going is good, leaders must not act and build as though such times will last forever. Farmers who survive in Australia realize that good seasons do not arrive every year. Farmers who do not act so carefully suffer and sometimes go broke.
Property owners can finish up significantly over-capitalized with underused facilities, or even struggle to pay for the maintenance of the considerable facilities which they have.
Budget provision for regular maintenance is essential for the health of the buildings. In one or two mission countries which I visited, there was a fantastic resistance to doing regular maintenance, much less to setting some money aside every year so that it could be dealt with methodically rather than just waiting until the water was pouring through the roof.
Church buildings in Australia are generally maintained well enough, helped by the levels of comparative prosperity. Declining populations in many country areas and declining rates of Church practice are changing this, but I always urge those building new churches, particularly in our expanding suburbs, to build well, so that the churches would last for generations. Not least because the future generations of believers might not have access to the levels of money which we have today.
Rome is full of splendid ancient buildings whose interiors are regularly restored, changed, and adapted across the decades. I like this approach. Once in Siena, I was staying with a group in what had been an immense Carthusian complex of hermit residences. My first instinct was to lament that this magnificent facility was no longer with the Church. But the historical notes showed that the Carthusians had lived and prayed there for about 500 years. I thought, well that is not bad going; that is pretty good. That is no small achievement.
Dioceses with large property portfolios need to identify accurately the nature and extent of their holdings. For years if not decades in the Vatican, this has proved to be a very difficult task.
Large areas of land need not remain vacant for generations in every circumstance. In Australia and, I believe, in the U.K., it is possible to sell long-term leases of land—for example, for ninty-nine years—for property development, with the revenue for the extension of the leases to be paid at least twenty-five years before they are due. So, in Sydney we have significant tracts of land given to us by the colonial authorities which we were unable to sell but which we have leased for ninety-nine years. In most cases the land, when it was given well over 100 years ago, was in a bad situation.
We have a magnificent site for our cathedral on the side of a hill just outside the original capital. It was next to the jail and over the road from a racecourse. Other tranches of land were also given to us, and we were the buffer between the infectious diseases center and the local settlement at Manly. Of course, it is now fabulously valuable land.
For all entities likely to be in existence in 100 years’ time, such as a diocese, long-term leases are a much more attractive proposition than selling the freehold land.
In countries where this capacity to lease for long term is not a legal possibility, I think effort should be made to have the legislation changed so that it can become a possibility. Certainly, some of the old families in London have used this for generations to maintain their wealth.
Working with money can be seductive, even for clerics. I enjoyed the work and believe it is important. However, I recognize that finance officers should never have the last word in any Church organization. This should remain with the parish priest, the religious superior, or bishop, because that is the way the organizations are set up to help ensure fidelity to the Church and its mission goals.
Author’s note: Since this address was given last April, more information has emerged on two points: 1. The actual loss on the Sloane Avenue property, now sold, is claimed to be 120-137 million rather than 217 million euros (at the recent Rome trial). 2. The purchase described in column three of p. 22 was by the Administration of the Patrimony of the Apostolic See and was not the Sloane Avenue property (mentioned in Libero Milone’s recent public documents).