Larry Davis, Treasurer/Director of Administrative Services Memphis Conference United Methodist Church District Meetings January 2018 Financial Considerations of Potential Merger/Combination of Tennessee and Memphis Annual Conferences Larry Davis, Treasurer/Director of Administrative Services

The United Methodist Church is Changing Special Session of General Conference February 23-26, 2019 in St. Louis Missouri Pew Research Millennials 36% Religiously Unaffiliated vs. 17% of Baby Boomers GCFA 2012- 2015 Statistics: “Stable Decline” 1 of 57 conferences grew Tennessee #4, Memphis #16 Catholics, Southern Baptist, United Methodist (by size in USA)

Change Is Coming Whether We Like it or Not How does this change impact us in the Memphis Conference? What should we be doing now to be prepared for this change? How do we lead through this Change in order to accomplish our mission?

Southeastern Jurisdiction Conferences Membership 12/31/2016 1) North Georgia - 360,771 2) Virginia - 324,931 3) West North Carolina - 279,996 4) Florida - 233,148 5) North Carolina - 226,323 6) South Carolina - 226,270 7) Mississippi - 172,292 8) Holston - 162,288 9) Kentucky - 150,656 10) Alabama-W Florida - 137,614 11) North Alabama - 129,993 12) Tennessee - 116,740 13) South Georgia - 113,229 14) Memphis - 78,320 15) Red Bird Missionary - 1,357 Tennessee/Memphis - 195,060 7 of 14

Joint Meeting of CFA Executive Committees of the Memphis and Tennessee Annual Conferences Regarding Financial Issues Associated With A Potential Unification/Merger of the Two Conferences August 25, 2017 Camden United Methodist Church Tennessee Conference: John Pearce, President Terry Hundley, Vice President Paul Purdue, Secretary Jim Allen, Treasurer Memphis Conference: Bill Milliken, President David Hayes, Vice President Ed White, Secretary Larry Davis, Treasurer (absent)

Purpose of Joint CFA Group: Understand relevant issues/opportunities and find solutions. Report back to conferences with accuracy and transparency. Ensure a potential unified/combined conference will operate financially successful for many years.

HEADLINE: While there is much Financial Due Diligence work that needs to be done before this potential unification/combination occurs, we do believe that, unlike conversations a few years ago, there are no financial issues that would prevent the potential unification/combination.

Financial Perspective/Magnitude MEMPHIS CONFERENCE 2018 Budget $6,058,671 2016 Membership 78,320 2016 # of Churches 413 2016 Average Size 190 2018 # of Districts 4 2017 Appointed Clergy 314 = 40% of Budget, appointed clergy & Membership TENNESSEE CONFERENCE 2018 Budget $8,870,698 2016 Membership 116,740 2016 # of Churches 588 2016 Average Size 198 2018 # of Districts 5 2017 Appointed Clergy 502 =60% of Budget , appointed clergy & Membership

Critical Issue #1: Memphis Conference must fund their post retirement clergy health plan Plan Liability at 1/1/17 $29 million Plan terminated 7/1/16 and now only clergy over age 60 at 7/1/16 have a benefit Liability reduced to $10.6 million Plan to use Board of Pensions & Health Benefits reserves to fund this liability. (Done 9/12/17)

Critical Issue #2: The two Conferences must agree on a consistent method to pay for Clergy Health and Pension Costs Tennessee Conference Apportions Clergy Health and Pension Costs CFA agreed to report to 2018 Conference with recommendations Memphis Conference Direct Bills Clergy Health and Pension Costs Direct Billing is a recent change in Memphis and is very important to them

Critical Issue #3: The two Conferences must agree on a methodology used to pay for the Conference Budget. Memphis significantly reduced their budget such that they could ask local churches for a “10% tithe” of local church revenue. Tennessee apportions budget based on local church expenditures. Tennessee would need to reduce its (non-health and pension) budget by $1.3 million ( 22% of $5.9 million ) to achieve a “10% tithe”. 2018 Budget is “11.5% tithe”

Difficult Issues: Conform Clergy Health Plan Benefits ( Family coverage, deductible, co-pay, part time etc.) Conference camp and retreat assets and deferred maintenance Consolidation of Conference offices and personnel Realization of Cost Savings Plan for potential loss of Conference Revenue Ongoing use of Conference Reserves Control costs and maximize revenue

Not So Hard Issues: Clergy Pension plans: Same plans, all over funded, excess reserves Accounting and record keeping Use of and management of closed church assets Equalization of District budgets and DS & Conference staff pay

CFA Plan, (So Far): Met December 14th Discussed possible merger and Way forward issues Further discussions may be scheduled pending District meetings 2019 Budget Meeting April 3rd, 2018 BOP has initiated with Wespath Economic Study on reserves Due Diligence CFA Exec. Cmt with Jim Allen and Larry Davis