The Three Big R’s

How to repair, replace, and remodel with a depreciation-recovery model

By Jeff Wadley
Photos courtesy of Jeff Wadley

Imagine a camp where there is no need to fundraise for deferred maintenance, repairs, renovations, or replacements. That old truck that needs a clutch, the HVAC unit that needs a compressor, the program area that needs paint, and that zero-turn mower that is on its last lap—imagine ample funds to tackle these projects and more. Imagine further never having to put off replacing a sagging gutter, a 30-year-old roof, or a 50-year-old septic system due to insufficient funds. There’s no need to imagine the worst because another camp has cracked the code on preparing for the future with a depreciation-recovery model that can be implemented today.

In 1949, the Camp at Buffalo Mountain in Jonesborough, Tenn., was founded to serve the children of the state’s upper-east region, and it did exceptionally well until a flash flood, multiple landslides, and several inches of rain destroyed much of the facility in 2012. Desiring a continued United Methodist camp legacy in the region, the board of directors sold the former property to the United States Forest Service. The group then established Camp Bays Mountain on a new plot of land in 2015.

While visiting other camps to collect design ideas, the board and its director kept hearing the same story—many camps had wonderful facilities built in the 1950s and 1960s, but they were all experiencing the dilemma of too much deferred maintenance and no funds to address their needs. So, the board established a goal of not only building a new camp from scratch, but finding a way to fund the Three Big R’s:

• Repair

• Replacement

• Remodeling.

Individuals at Camp Bays Mountain set to work building new facilities, purchasing vehicles, and receiving donated equipment, but they also created a depreciation-recovery model—not as a tax-deduction formula as some might think, but as a model for calculating needed funds for depreciated assets. The established endowment was the mechanism for managing received funds and reinvesting earnings to draw upon necessary future funding.

The following is a step-by-step explanation of how this was accomplished as well as recommendations for your camp.

1. Listing the items.

The first step was listing every building, vehicle, piece of equipment, and items that would probably need to be repaired, replaced, or remodeled over time. In this case we decided not to count items such as chainsaws, weed-whackers, climbing ropes, etc.; however, your camp can do that if desired.

2. Determining today’s value.

Next, today’s value was assigned to each of the items, even if they were donated or already constructed or on the property. This was fairly simple, as the insurance company needed the information anyway to calculate policy coverage for potential loss. (Most camps probably already have this per building and vehicle.)

3. Estimating the item’s lifespan in years.

Then an estimate of the remaining years of service for each item was calculated. For example, the new dining hall was valued at $682,000 with a lifespan of approximately 60 years (based on other camps’ explanations that their dining halls were built in the 1950s and needed to be replaced 50 to 60 years later). A tractor was valued at $30,000 with a lifespan of 30 years, based upon other camps’ data. This estimate was done for 31 items with lifespans varying from 5 to 60 years.

4. Determining the salvage value of each item at the end of its lifespan.

Next, it was time to look at the salvage value of each item. For example, a van was purchased for $23,000 with a 15-year lifespan. On year 15, it was determined the van could be sold for $5,000, its “salvage value.”

5. Calculating an item’s amount needed each year to be deposited deducting the salvage value.

This was accomplished by subtracting the “salvage value” from the “placed-in-service value” and dividing that by the estimated years remaining. For example, a van had a beginning value of $23,000 and a salvage value of $5,000 after 15 years. Therefore, $18,000 (plus the $5,000 selling price) would have to be set aside to replace the van in 15 years, or $1,200 per year. This was calculated for all 31 items.

6. Establishing an endowment (or other mechanism for maintaining funds).

Camp officials created a quasi-endowment, where they wanted to be able to draw on the account into the corpus (beginning deposit) if necessary. This custodial account was set up with the denomination’s foundation. Thus, the corpus was raised, and the account was created the year after the initial items were put into service. Earnings were reinvested, and the account has seen 8 percent in average earnings since its inception.

One question often raised is how to determine the value of an item 15 years from now. The solution is not perfect, but as a good rule of thumb, the amount needed each year is multiplied by that year’s inflation rate.

One final suggestion is to ask a donor or donors to gift the camp the initial corpus (this is also a naming opportunity).

So far, Camp Bays Mountain has drawn funds to replace salt generators at the pool ($3,000), repair a truck ($2,500), repair an HVAC unit ($2,000), and renovate the outdoor worship space ($1,800). None of the $9,300 was fundraised, billed to the budget, or deferred due to not having adequate funds; instead, the costs were covered by the earnings of a depreciation-recovery model.  

So, don’t wait to implement this method—or you may have to wait 50 years for a new dining hall.

Jeff Wadley is the executive director of Camp Bays Mountain in Jonesborough, Tenn. Reach him at jeffwadley@holston.org.