Archdiocese’s assets debated

LOS ANGELES – Hit with an initial $40 million bill for its share of 45 clergy abuse settlements announced Friday, the Archdiocese of Los Angeles warned that it will have to make cutbacks. And the remaining 485 molestation lawsuits could cost hundreds of millions more.

But although the payouts will certainly hurt, the archdiocese has vast wealth, most of it in land. A Los Angeles Times analysis has found that the archdiocese is the recorded owner of one of the biggest real estate portfolios in Southern California – at least 1,600 properties with an estimated value of roughly $4 billion.

What the nation’s most-populous Catholic jurisdiction might be willing to sell, however, is likely to feed an ongoing debate within the church over who controls parish property – the prelates governing the institution or the parishioners.

Most of the archdiocese property is devoted to religious purposes, such as churches and parochial schools. But there also are oil wells, farm parcels, commercial parking lots, a Fashion District building, and the acreage under a sprawling Alhambra car dealership.

If recent settlements are a guide, the archdiocese and its insurers could take a hit of $500 million or more to dispense with the molestation suits. That would be far and away the costliest resolution in the church’s marathon run of sex scandals.

The archdiocese says it expects insurers to pay almost all of the remaining settlements, but the liability companies say that the archdiocese should bear most of the burden.

At the same time, Cardinal Roger Mahony has staked out a position on internal ownership rules that seeks to restrict the plaintiffs’ access to billions in church and school property.

The cardinal has asserted that churches and schools belong to individual parishes and that the archdiocese doesn’t have the ability to liquidate parish property to settle lawsuits.

Mahony’s stance appears rife with possible church-state conflicts, pitting canon against civil law. Plaintiffs say he is merely trying to avoid fairly compensating abuse victims.

The archdiocese’s finances are difficult to decipher, in part because the church does not include the assets of parishes and other church organizations in its public balance sheets.

On its Internet site, the archdiocese reported gross assets last fiscal year of less than $500 million, because it included only property and funds controlled by the central administration.

A Times examination of property records and other documents suggests that of its estimated $4 billion real estate portfolio, about $175 million is in properties not classified by the tax assessor as used for religious purposes or cemeteries – and thus more likely to be available for settlements.

In addition, the archdiocese has investment funds of around $660 million, although it says most of that money belongs to affiliated organizations and parishes, according to the church’s newspaper, The Tidings.

Mahony said that the church set aside $40 million last year toward Friday’s settlements. He has not said how the church would pay for its share of the remaining lawsuits.

“Our goal is to have no impact to our parishes or ministries that would imperil our ministry,” Mahony said. “There are ways to combine services, maybe to accomplish the goals with fewer personnel, down the road.”

But many parishioners fear that the settlements could cut into the archdiocese’s network of churches, schools and ministries, which serve 4.3 million people in Los Angeles, Ventura and Santa Barbara counties.

The archdiocese’s contention that its insurers are obligated to pay for the rest of the claims has been disputed by liability companies, which contend that California law renders coverage void because church superiors had reason to expect that the abuse would occur. The two sides have also differed on the dollar and time limits of the coverage.

Church and legal experts predict that a compromise is inevitable.

Archdiocese attorney J. Michael Hennigan said it could not begin to pay half of a bill that could exceed $500 million without “great pain.”

He said the archdiocese is weighing which nonreligious property it could sell and would also explore bank loans. If more cash is needed, Hennigan and others said, a fundraising appeal might be launched.

But few doubt that archdiocese programs will suffer in the end. Many note that, when confronted with a $4.3 million budget shortfall in 2002, the archdiocese closed ministries for students, the disabled, minorities, and gays and lesbians.

Hennigan said schools and churches are “not vulnerable” to closure and sale, but he hedged a bit. “You can never say never on anything,” he said.

The archdiocese would not declare bankruptcy to protect its assets from the litigants, Hennigan said. Four other dioceses have taken that step because of molestation lawsuits.

Church scholars say Mahony has almost unchecked authority to sell church property. Mahony consults with a variety of advisory councils that he appoints, but he ultimately answers only to Pope Benedict XVI, scholars say.

Canon law generally prohibits a bishop or cardinal from seizing parish assets, unless he can establish that factors such as a lack of worshipers left the parish unviable.

Hennigan said Mahony interprets canon law to mean that he cannot sell parish property to pay settlements, a position likely to be challenged in court only if the church were to seek bankruptcy protection.

Plaintiff attorneys say civil statutes trump canon law. They also note that the archdiocese is incorporated in California as a single entity – parishes included.

Church scholars say land can be a misleading indicator of the archdiocese’s true wealth.

Like other dioceses, the Los Angeles church often faces red ink because revenues for its central operations are relatively low – $107.5 million last fiscal year.

“There’s a lot of mythology about the so-called wealth of the Catholic Church,” said Thomas Rausch, theology professor at Loyola Marymount University. “I don’t think the archdiocese is especially well-off right now.”

But others say it is impossible to know. As a religious organization, the archdiocese is not required to disclose as much detailed financial information as other tax-exempt entities.

Zech, the Villanova professor, said dioceses have revealed even less in recent years, as the abuse lawsuits piled up.

“They are so secretive,” he said. “An archdiocese the size of Los Angeles … they could find $1 billion tucked away somewhere.”