L.A. Archdiocese puts schools up as collateral to settle abuse cases

By Dennis Sadowski
Catholic News Service

WASHINGTON (CNS) – Seven high schools owned and operated by the Archdiocese of Los Angeles were used as collateral to secure loans to help the archdiocese pay its share of the $720 million settlements with victims of clergy sexual abuse.

Archdiocesan spokesman Tod Tamberg said the properties helped secure $175 million in loans late in 2007 to pay most of the diocese's portion of the settlements. The diocese agreed to pay $292 million following negotiated settlements involving 553 claims from sexual abuse victims in 2006 and 2007, according to the archdiocese's most recent financial report covering the year ending last June 30.

The school properties were chosen because they could be assessed and appraised within the time frame for paying victims set in the court-negotiated agreements, Tamberg said. The diocese made its payment in December. Negotiated settlements were announced in December 2006 and July 2007.

The seven high schools were St. Bernard, Bishop Montgomery, Bishop Amat Memorial, Damien, Bishop Conaty-Our Lady of Loretto, St. Bonaventure and Daniel Murphy.

Although the properties helped secure the loans, Tamberg said six of the seven schools remain strong and will stay open indefinitely. The seventh – Daniel Murphy – has faced declining enrollment and mounting deficits in recent years, and archdiocesan officials had decided to close the school at the end of the current academic year prior to reaching the settlements, Tamberg said.

"I couldn't state more emphatically that none of these (six) schools are going to close," he said. "They are all going to continue to function, as they have for many years, for decades to come."

Los Angeles Cardinal Roger M. Mahony joined members of the Archdiocesan Finance Council and other archdiocesan leaders at 19 deanery meetings earlier this year to outline a financial recovery plan in the wake of the costly settlements.

Parishioners and others heard that the archdiocese is planning to repay the loans through the sale of 51 properties, reported The Tidings, newspaper of the Los Angeles Archdiocese. The sales are projected to generate an estimated $107 million, according to archdiocesan estimates.

The balance remaining at the end of the loan term in three years is projected at about $50 million. Tamberg said the amount may need to be refinanced if archdiocesan funds are not available to pay the loan.

The diocese also liquidated investments worth $117 million to pay its share of the settlements, Tamberg said.

Settlement payments also will be covered by $236 million in insurance funds and $118 million from about 40 religious orders which had claims filed against them.

One religious order, the Salesians, did not participate in the settlements. Any settlement negotiated by the Salesians will be subtracted from the remaining $74 million to be paid to victims. Tamberg said the archdiocese is estimating it will have to pay an additional $50 million to cover the difference, with the amount to be paid over five years.

The sale of investments, the loss of interest from them and the interest on the loans to pay the settlements will plunge the archdiocese into a $12 million a year deficit for operating the archdiocese's administrative offices, Tamberg said.

The archdiocese plans to address the deficit by increasing parish assessments by 2 percent for five years and reducing administrative costs by 10 percent annually. Both steps take effect July 1.

The archdiocese also plans to improve collections from parishes for insurance premiums and employee benefits, estimated at $3 million to $5 million, and projects that another $3 million will come from cemetery sales to offset the deficit, Tamberg said.

Cardinal Mahony also wrote letters to 101 parishes with large budget surpluses or undesignated funds asking them to consider making grants, pledges or no-interest/low-interest loans.