Bishop of Hawaii Resigns in the Wake of Fiscal Crisis over Loan for Retirement Center

Episcopal News Service. July 13, 1994 [94128]

In the wake of a complicated fiscal crisis stemming from the church's guaranty of a $4 million bank loan for a retirement facility, Bishop Donald Hart resigned as bishop of Hawaii on June 26.

In a letter read in all parishes, Hart said that he was "profoundly sorry" for the complicated fiscal problems he will leave behind, adding that "as much as I would like to be a part of the healing process and to participate in the development of the solution to the problems that confront the diocese, I have come to the conclusion that under the circumstances, that would not be possible."

The financial crisis resulted from the diocese's guaranty of a bank loan for Episcopal Homes of Hawaii (EHH), a nonprofit organization formed in 1989 to develop a luxury retirement community. Hart served as chairman of the board of directors until he resigned in April as questions surfaced about the fiscal stability of the project.

Diocese liable for $4 million

As chairman, Hart had persuaded the diocesan council and its finance department to guarantee a $4 million bank loan for EHH, without disclosing to diocesan officials that the developer of the project had declared bankruptcy for more than $11.5 million in 1986 in California. In addition, the current project began to run out of money and was incurring substantial debts. The Diocese of Hawaii faces liability for the $4 million loan to EHH, throwing the diocese into a financial crisis. Sources estimated it could take over 20 years for the diocese pay off the loan.

As the extent of financial problems became clearer, several local parishes began to demand a full accounting of the situation, and then to request that the bishop resign or face a vote of confidence.

In his resignation letter to parishes, Hart denied that there was any wrongdoing involved in the case. "My intentions, and I believe the intentions for all who voted for the guarantee, were to act in the best interest of the diocese and of our mission to support the ministry in many different ways in the community," he continued.

Yet, Hart concluded, "After long and prayerful consideration, I have decided that it is in the best interests of our diocese and that of my family for me to resign as bishop of Hawaii." Hart's resignation will be considered at the upcoming meeting of the House of Bishops during the General Convention in Indianapolis.

What's next?

At a June 18 budget meeting, the diocesan council outlined a strategy to revise the budget in order to respond to the crisis. For the immediate future, the diocese will have to absorb $465,000 in unbudgeted expenses in 1994, $500,000 in 1995 and an additional $500,000 in 1996. The council has decided to defer payments totaling more than $83,000 to the national church and Province 8. "We're planning to pay it, we just don't have the money right now," David Chung, chair of the diocesan finance department, told reporters. "We will try to make it up in subsequent years." The diocese will consider increasing assessments to parishes from 23 percent to 30 percent of local income.

Hart will work with the diocese's standing committee to resolve financial difficulties and prepare for "an orderly transition."