Friday, June 22, 2018

An Irony at Luther Seminary

The Park Bugle of St. Anthony Park reports in its June 22, 2018 issue that Luther Seminary will sell 15 acres of its buildings and land.  The subheading declares, "Sale is Part of 'Campus of the Future' plan, which includes free tuition for incoming students and a trimmer campus."  The buildings to be sold include Northwestern Hall, Stub Hall, several houses and the LDR apartments on Fulham St., Breck Woods, and Bockman Hall.  Remaining at Luther Seminary are the Olson Campus Center and Gullixson Hall.  Looking at the map, it would appear that approximately 70% of the campus is slated for sale.  (See

There are many reasons for the sale.  Years ago I wrote a brief paper justifying the establishment of a new Lutheran seminary -- a seminary that the Institute of Lutheran Theology became -- that alluded to the problems facing the present brick and mortar Lutheran seminaries.  I spoke then of the economic, sociological and theological problems facing these educational institutions (  The problems the seminaries face oftentimes disallow them from operating on the models they have inherited from the past.  Within the ELCA in particular, changes are now rapid.

Luther Seminary, like many seminaries of mainline Protestant Christianity, is witnessing declining enrollment and increased use of online learning platforms.  While headcount at many seminaries is slowly declining, the number of physical students on campuses is dropping much more precipitously.  This seems to be happening at Luther. 

As I was contemplating the move by Luther to monetize their real estate assets to provide operational revenue via "free tuition" for incoming M.Div. and M.A. students, I was stuck by an irony.  While the ELCA and its predecessor bodies have not for decades been able to provide future pastors free tuition for matriculating at Luther, free tuition will now evidently be available to students because of the appreciation of the financial value of Luther Seminary's real assets.

Many of those who will train to become future "missional pastors" at Luther will no doubt have deep concerns and criticisms of capitalism.  Theological literature criticizing America's present  economic system is abundant, and most studying in mainline Protestant denominational seminaries can articulate at least some of the key points of economic injustice underlying classism, sexism, racism, etc. Clearly, a greater percentage of American wealth lands in fewer and fewer hands.  (Think of Jeff Bezos at Amazon who is now worth $142,500,000,000.)  It simply is true that many becoming pastors today understand their task primarily as speaking a prophetic voice against structures of economic injustice, oppression and marginalization.

The irony is this: Those attending Luther in its tuition-free future will likely owe their ability to learn the deep theological critiques of capitalism to . . .  capitalism.  How is this so?

Land value appreciates because developers see a market, and subsequently value an asset on the basis of how it will allow them to serve that market.  There are many reasons why developers develop.  Many developers whom I know have altruistic traits; they want to help people by providing a service that is needed.  However, no developer can develop without calculating the margins, and those margins must include profit.

It is standard in commercial and multi-family development that one must achieve a certain debt service covering ratio (DSCR) before a bank will make a loan on a project.  This ratio is the measure of net operating income (NOI) over debt service.  Most banks will not approve a project if the DSCR is below 1.2.  For instance, if debt service (principle + interest) on a building is $100,000/year, the NOI must be at least $120,000 if the DSCR is to be above 1.2.  Since NOI is the difference between revenue and all expenses, one must show a profit prior to depreciation (amortized write-off of capital expenditures) of $120,000 even to get the loan to allow the project to be built.  Simply put, one must show $20,000 in available cash flow (net operating income less debt service) in order to build the project.  The land and improvements at Luther Seminary will likely have the value they will have, a value based upon a motivated rational seller and motivated rational buyer, because someone can figure a way to cash flow the new project at 20% over debt service.

This means that the value of the asset that can be monetized for free student tuition which will allow students to study the evils of capitalism is itself dependent upon economic realities that presuppose capitalism.  Simply put, if capitalism did not work, at least in this particular case, there would be insufficient land and improvement value to monetize, no free student tuition, and possibly no educational context for the study of capitalism's shortcomings.

But there is more irony.  What the Lutheran Church was not capable of doing -- providing free tuition to those studying to become pastors -- the market is actually accomplishing.   It is precisely because entrepreneurs take risks in order to develop property that land at Luther will likely have the value it will have. Because the land and improvements have the value they have, monetization is possible which can produce free or diminished student tuition. 

It is perhaps too bald to say this, but I shall do so anyway:  The necessary condition for the possibility of a context of free and open dialogue and criticism of capitalism among students and professors at Luther Seminary is the existence itself of capitalism, an economic system apparently capable of providing the requisite funds for the discussion there to occur.

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