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Copyright 2014 Journal Sentinel Inc.
Milwaukee Journal Sentinel (Wisconsin)
GEORGIA PABST, gpabst@journalsentinel.com

Faced with crushing and unsustainable debt of $30 million, the YMCA of Metropolitan Milwaukee will undergo a "massive restructuring" that will result in a much smaller but more focused and sustainable organization, YMCA officials told the Milwaukee Journal Sentinel.

"The alternative is to go out of business," said Julie Tolan, who became president and CEO of the YMCA in August. She and board President Robert Venable said they are determined that won't happen. So the 155-year-old community institution must undergo a restructuring because the Y is necessary and worth saving, they said.

The restructuring could include the closing of some facilities, Tolan said. "All options are on the table," she said. In 2012, the Y had revenue of $41.3 million and expenses of $41.6 million, for a loss of $300,000. A year later, it lost an additional $1.2 million on revenue of $39 million and expenses of $40.2 million.

If nothing changes, the Y will run out of cash by late fall, Tolan said.

The exact details of a restructuring plan are still being formulated with several banks, but the plan will be substantial, Tolan said.

"We have decisions to make that will be dramatic and painful - they already are - but it's what is necessary to continue to impact the lives of so many members, staff and the community," she said. "It will take collective courage."

The Y operates 10 centers, plus Camp Minikani and Camp Matawa. The centers offer child care, after-school programs and day camps, along with health and fitness activities. The Y has 1, 600 employees, 350 of them full time. The Y also has operated the Young Leaders Academy, a charter school, at the Northside Y that it's now selling to Milwaukee College Prep for $6 million. The sale includes the Y building, which will then be leased back by the Y for its programs.

In 2013, the agency listed net assets at $75.4 million, with most of that in property and equipment.

Tolan and Venable described the financial state of the Y as complex and multidimensional, the result of many factors that created what they called "a perfect storm."

Projects led to debt Back in the late l990s and early 2000, the Y decided to branch out, but the growth was financed primarily with debt that accumulated. The projects included: The $15 million construction of the Young Leaders Academy at the Northside Y in 2000. Venable described it as a valuable but expensive proposition.

The construction of other facilities, such as the $6 million Feith Family Y in Ozaukee County and the $5.5 million John C. Cudahy Y on Milwaukee's northwest side.

The multimillion-dollar renovation of the Tri-County Y in Menomonee Falls.

"If you go back to early 2000, things were roaring: The Y was quite prosperous and there was a sense of confidence," Venable said. The decisions were right for the times and for the mission - but then the times changed, he said.

The financial crisis hit in 2008, and it had an impact on the Y that continues today, he said.

Along with debt came declining membership, which has fallen 5% a year over the past three years, Tolan said. Today, the Y has 115, 000 members, including 30, 000 children. Donations have declined 25% since 2011, Tolan said.

In the four years before Tolan joined the Y, the organization had undergone three major restructurings. Some programs were eliminated, wages were frozen and benefits were cut, Tolan said.

But as the agency struggled to balance the budget and make the loan payments to the banks, facilities grew tired-looking. A lot of talented workers left, Tolan said. "As benefits were cut, people looked to other places," she said.

In September, she made the startling discovery that within a 12-to 18-month period, there had been an 84% turnover rate among staff.

"We reached the point where further staff reductions were not possible," Venable said. "We've cut all that we can, and now we have to look at the overall footprint."

Fitness competition In recent years, the Y also has faced increasing competition in the fitness field from the many corner gyms that offer bare-bones workout facilities.

While fitness is a big part of the Y's business, it's not all that the agency does, and the Y has to do a better job of telling its story and explaining its mission, Tolan said.

For example, while a family membership costs $69 a month, with various other types of memberships available, last year it provided $3 million in scholarships for families to ensure safe places and activities for children.

The Y taught 9, 000 children to swim, provided 97, 000 children with free meals during the summer and offered a summer camp called Camp Fun Learning for Youth that served 420 children. The John C. Cudahy Y offers programs for children with special needs.

The Northside Y has opened a clinic in partnership with Children's Hospital of Wisconsin, and through a partnership with United Health, the Y has offered a diabetes prevention program for 650 people who reduced their risks by 50% after 12 months.

That's the kind of programming that needs expanding and needs to be a priority as the Y restructures, Tolan said. "To make a difference in the community, we need to be smaller and more focused to get to the point where we can leverage and expand," she said.

The Y also will look for more partners to join its community efforts, Venable said.

Confronting challenges Across the country, the Y is healthy overall, said Brad McDermott, a spokesman for YMCA of the USA in Chicago.

"Y's reflect the communities they serve, and in communities that may be struggling, the Y may be facing challenges, too," he said.

Like other organizations, such as the Girl Scouts, the Y also has rebranded itself and is trying to more clearly define itself as more than swim and gym, he said.

"We are a cause for strengthening communities in three areas: youth development, healthy living and social development," he said. So the Y is developing programs to prevent diabetes and fight chronic diseases, which are huge issues, he said.

Ulice Payne Jr., a local board member who just finished serving nine years on the YMCA of the USA board, said the Y here is facing the same challenges as many nonprofits following the recession: the shrinking base of funding for services and the growing need for services.

"It's a matter of what you would like to do versus what you need to do," he said. "We need to do healthy living because we do it from the cradle, where we teach the young how to swim, to Silver Sneakers for older adults. No one else does that."

The needs of society are changing, and there's more competition with all-night gyms and other alternatives, he said.

Changes elsewhere He noted that in Atlanta, the Heritage Y, where Martin Luther King Jr. used to go, had to close about a year ago.

"There was a lot of controversy, but the needs of the neighborhood and the people changed," he said.

In St. Paul and Minneapolis, the Y's merged two years ago to prevent overlapping services and create a stronger organization, he said. "The best thing is to take our medicine, even though it's bitter, but that's what this board will do," Payne said.

Tolan and Venable said they decided to make the Y's troubles public now to prepare the community for the decisions that will be coming.

"We need everyone's support in these challenging weeks and months ahead as we walk toward these challenges," Tolan said. "It's not an easy path, but the Y is important and worth saving."

Copyright 2014, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

"We have decisions to make that will be dramatic and painful - they already are - but it's what is necessary." Julie Tolan, who became president and CEO of the YMCA in August DONATIONS, MEMBERS DOWN YMCA membership has fallen 5% a year over the past three years. Donations have declined 25% since 2011. "We reached the point where further staff reductions were not possible. We've cut all that we can, and now we have to look at the overall footprint." Robert Venable, board president "It's a matter of what you would like to do versus what you need to do. We need to do healthy living because we do it from the cradle, where we teach the young how to swim, to Silver Sneakers for older adults. No one else does that." Ulice Payne Jr., board member

Copyright, 2014, Journal Sentinel, All Rights Reserved.

 

April 14, 2014

 

 
 

 

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