YMCA of Metropolitan Milwaukee Announces Restructuring, Bankruptcy

June 6, 2014       The NonProfit Times      

Facing rising debt, declining membership and contributions, the YMCA of Metropolitan Milwaukee filed for Chapter 11 bankruptcy protection this week in an effort to help implement a restructuring plan.

According to a statement from the organization, all facilities are expected to continue running throughout the bankruptcy proceedings. The Y also filed an emergency motion with the United States Bankruptcy Court for the Eastern District of Wisconsin that would allow employees to continue to be paid. That measure is expected to go through.

The Y’s financial difficulties have been exacerbated due to the fact that many of its programs – including establishing a new charter school – were funded primarily through borrowing. YMCA officials reported that the organization’s debt exceeds $29 million on 2014 budgeted revenue of $37 million and 2014 budgeted earnings before interest, taxes, depreciation and amortization of $950,000 (a debt-to-EBITDA ratio of 30-to-1). These problems, combined with declining membership, the economic downturn, and dropping contributions, meant that the YMCA of Metropolitan Milwaukee faced insolvency by the fall if no action was taken.

According to the Milwaukee YMCA’s 2012 Annual Report, it received $3.268 million in public support that year, with $411,607 coming from private and government grants. This was a large decrease from 2011, when it received $1.246 million in private and government grants. Overall, total public support and operating revenue was $41.357 million in 2012, down from $44.147 million in 2011.

“The YMCA matters to Milwaukee and is worth saving. Serving well over 100,000 members, of which more than 30,000 are under the age of 18, we provide vital services and programming that advance healthy living, youth development and social responsibility throughout our shared community,” said Julie Tolan, President and Chief Executive Officer of the YMCA of Metropolitan Milwaukee.  “Nobody is turned away from the Y because of an inability to pay.  And we are connectors throughout our communities, bringing together residents, members, other non-profits, health care systems and corporations for the greater community good.”

A request for comment from the YMCA’s national office in Chicago, Ill., was not immediately answered.

The board of directors of the YMCA of Milwaukee unanimously approved a restructuring plan that will largely depend on Chapter 11 bankruptcy relief. The plan calls for selling the majority of its owned centers to “operators better suited to continue” running them and investing in them long-term. Part of this plan means finding a new home for the Y in downtown Milwaukee. After new leased space has been identified and secured, the YMCA of Metropolitan Milwaukee will market for sale the current downtown location, using the proceeds to further repay debt.

“With this new footprint, the Y will be able to strengthen its urban mission, can better deploy its human resources to ensure operations are well staffed and managed, will be able to substantially pay down its debt, and will become positioned to reduce its cost structure while maintaining sufficient earned revenue to support ongoing operations,” said Bob Venable, Chairman of the Board of Directors of the YMCA of Metropolitan Milwaukee.

The final part of the restructuring plan concerns the completion of the sale of the Y’s Young Leaders Academy charter school which, in February, was announced would be acquired by Milwaukee College Prep. The sale is expected to be completed on July 1 $6 million for the school that, while met expectations in two rounds of state report cards, still experienced a decline in student achievement growth in the ’12-’13 school year. The school faced more woes after the departure and Ronn Johnson, the school’s former leader who was accused last year of sexually abusing young boys and former students. Johnson died in a house fire last December while awaiting trial.