With little or no forewarning, the YMCA of Metropolitan Milwaukee stunned the community by announcing in April that it was nearly $30 million in debt and needed a plan to restructure.
By June 4, the YMCA had filed for Chapter 11 bankruptcy reorganization, and in the weeks that followed it began to sell off many of its suburban centers in what several insiders described as a “fire sale.”
At the time of the public announcement, Megan Hakes, executive vice president of Reputation Partners, a Chicago, Ill.-based public relations firm representing the YMCA, said the organization’s massive debt was the result of several factors and “an accumulation of issues built up over time.” Along with the lingering effects of the Great Recession, a continuous decline in membership hurt the YMCA with an average decrease of 5 percent per year since 2011. A decrease in philanthropy also compounded debt totals. According to Hakes, philanthropic contributions are down 25 percent from where they were in 2010.
The bankruptcy filing left dozens of Milwaukee-area businesses and other stakeholders out in the cold. Several of those creditors blamed the YMCA’s problems on mismanagement, poor oversight by the board and a dwindling donor base.
Insiders said they did not blame Julie Tolan, who took over as chief executive officer for the YMCA in August of 2013.
“She walked right into this mess,” said one insider.
The YMCA stopped filing its annual report on its website after 2012. The 2012 report showed net assets of $37.2 million and total liabilities of $36.6 million.
However, creditors contacted by BizTimes said the YMCA’s donor stream all but dried up in 2013 in the aftermath of 23 criminal charges of sexual abuse of children filed against Ronn Johnson, who was the administrator of the YMCA Young Leaders Academy, a charter school in Milwaukee. Johnson eventually died in an explosion at his home in Brown Deer on Dec. 30, 2013. His death was ruled a suicide by the Milwaukee County Medical Examiner’s Office.
“Those sexual allegations were the beginning of the end for the Y. Donors stopped giving because they sensed that a class action lawsuit was the next shoe to drop,” said one creditor, who asked not to be identified for this report.
With declining donations, the organization laid off staff, postponed needed investments in equipment and maintenance at its centers, cut programs and froze salaries and benefits. The downward spiral gathered steam earlier this year, sources said.
According to the filings in U.S. Bankruptcy Court, the 20 largest creditors holding unsecured claims against the YMCA are: U.S. Bank, N.A. (bond trustee), $24.2 million; United Healthcare Insurance Co., $162,847; L&A Crystal Services LLC, $117,990; Clear Channel Outdoor Inc., $60,000; 2-Story Creative, $47,816; Wipfli LLP, $47,500; Merchants Automotive Group, $37,660; Journal Sentinel Inc., $36,037; the U.S. Postmaster, $35,000; Sysco Food Services of Eastern Wisconsin, $32,224; Moegenburg Research Inc., $32,000; The Marek Group, $30,834; Simplex Grinnell, $28,471; PromoLux Inc., $22,176; Central Office Systems, $20,083; Jennifer Coppersmith Design LLC, $19,275; Pieper Electric Inc., $19,086; Carrico Aquatic Resources, $18,495; CSI Media LLC, $18,127; and J.M. Brennan Inc., $17,198.
The bankruptcy filings also include dozens of creditors who have smaller claims against the YMCA Youth Leadership Academy.
While the YMCA will continue corporate operations at its downtown headquarters at 161 W. Wisconsin Ave., it is searching for a new downtown location. Once it finds new space to lease, it will sell its current downtown facility.
YMCA board members have thus far declined a BizTimes invitation to explain to the community how and why the organization fell so deeply into bankruptcy.
Steve Jagler is executive editor of BizTimes.
