Reorganization Gives Lon Morris Hope
By KELLY GOOCH
Lon Morris College is no stranger to monetary struggles, with a financial crisis and fight for survival dating to at least 2005, but board members hope reorganization efforts will salvage the institution.
Trustees at the private two-year, faith-based liberal arts school met with faculty and staff earlier this month about the school's financial problems and, after visiting with several attorneys, decided it would look to engage a reorganization firm, which could help it work through its financial issues.
Lon Morris has bled at least $4.4 million since the 2007-08 school year, with the past school year's possible losses yet to be tallied.
"What they will do hopefully is go to some of our creditors who are holding endowments and free up some endowments, but also ... we have assets we can sell to help alleviate this problem," Dr. Jack Nelson, a member of the board's executive committee, said May 7.
"They will come in, look at the books and say, 'This is profitable. This is not' (or) 'We can renegotiate these for you.'"
In the meantime, he has said the college hopes to be able to get through the summer and has worked to get refinancing of some long-term loans so it can immediately save money.
"We would really like for Lon Morris to stay. That's what our long-range goals are, and we're working toward that. ... We're optimistic moving forward. We expect to be in operations in the fall and expect to get through the summer," Nelson said.
Lon Morris spokeswoman Breezy Lake echoed Nelson, saying the board is hands-on and ready to work on the situation.
"Things are looking positive. ... They're really optimistic about what's going to happen," she said.MONEY STRUGGLE
Board members said the college's financial problems began years ago.
During 2007-08, the college experienced a shortfall of nearly $615,000, with $11.1 million in total expenses and $10.5 million in total revenue, according to official tax documents. That was followed by a $1.2 million shortfall in 2008-09 and a $2.6 million shortfall in 2009-10. Revenue for 2010-11 was about $22.5 million and expenditures were approximately $24.5 million. Numbers for 2011-12 are not finalized.
The shortfall jump in 2009 is attributed to the introduction of new programs, such as football, agriculture and hospitality administration.
Board member Tim McRae said he believes Lon Morris got into its situation after years of doing business the same way.
"I think it's sort of an inherent-type attitude that you always were going to struggle, were always going to be behind in bills. You start to see what to do, so (the school) grew its population without (necessary) infrastructure, which compounded the problem. Then the recession hit and banks tightened up," he said.
The school had always been able to borrow money, McRae said, but money wasn't as available, and it compounded things and brought the school to its current state.
That has meant delayed paychecks for employees and serious discussions about the school's future.
College leaders recently met during a retreat and probably had a grind session in which they talked a possible college shutdown and the need to raise capital to move forward, McRae said.
The board looked at three possibilities -- continuing operations, a possible merger and closure and, in the end, realized the school needed professional help.
"We went into a board meeting (May 7) not knowing the outcome," McRae said. "We knew a possible closure would be difficult, but a seizure of operations was a possibility, but we listened to two attorneys about reorganization. They thought we were a candidate for reorganization outside of bankruptcy. They told us we have assets, but he said we definitely have a cash-flow problem."
Even so, John Kroll, a Lon Morris trustee and economist with the firm Haley Romero Winick & Kroll Inc., said he doesn't know that there is a breaking point, and he is committed to the school and its students.
"For the Jacksonville area, it is a great place with a great story. Not to say that some challenges the school has faced over the last five years haven't put it in a difficult position, but there isn't a breaking point for me," he said.
Kroll said he thinks the college fell into the same trap as many organizations that experience fast growth.
The college grew too quickly, he said, and outstripped its ability to internally finance and maintain that growth from a cash-flow perspective.
"From my perspective, we are an asset-rich college. ... We have a great balance sheet, (but) we have a cash-flow problem that was predicated on some quick growth. (The school was at more than 600 students last fall), but a couple years ago we were about 1,000, so that put a big drain and a lot of stress on the college's cash position to manage that growth, so I think that's kind of where we are," Kroll said.FACULTY REACTION
Despite the financial crisis, McRae said he was pleased and amazed at the faculty and that they've "hung in there," even with their paychecks delayed.
"They're really dedicated people. We spoke to them (May 7), and I am still in awe of the group. They're still hopeful we will bring this college out of this financial crisis. I think they're amazing. A lot of them are people who are retiring, so (the pay is) supplemental, but some are hurting bad," he said.
One such dedicated employee is Katie Snyder, director of agricultural sciences and dance instructor.
She said she loves her students, believes in what they're doing with their lives and wants to be a part of it.
Ms. Snyder, whose been with the college a little more than two years, went on to say she feels blessed to work at Lon Morris and loves coming to work.
"I love my administrators. I love my colleagues. I love my students. I love the opportunity this job has given me," she said. "They hired me to create the agriculture program, and I know everything I've done. I've gotten to create traditions and forge relationships with people. This semester, I'm teaching dance also, and I love it, and they've given me the task this fall of starting a drill/dance team on campus."
She added, "How many get to come back (to their hometown) and do what they love? Being able to impact that many students (and) when I believe in the Christian values, Why would I walk away from it?"
But not everyone feels the same way. Ms. Snyder said her colleagues have their own opinions and needs, but she is blessed enough that she can stay at Lon Morris even with the late payrolls.
"Yes, regular payment would be lovely, but this is what Lon Morris has been dealt. You can't change it. You can only deal with it," she said.
"I understand if my colleagues don't stay. That's their preference and their prerogative. I try to stay with the kids and do my job. I respect other people in their decisions but try not to get caught up in some of this talk. I'm sure there's some negative feeling, and that's OK because that's how they feel, but my feeling is I think (the college is) going to be OK."
And she said she was encouraged after meeting May 7 with board members.
"We walked in ... and didn't know what to expect, but after the president (and others) addressed questions from employees, they were open and communicated. They
let us know, 'We're here. We're going to fight to make this happen,'" Ms. Snyder said. "Though this was encouraging dialog, I know it was hard for them to do that. I respect them for doing that. I have faith in them. I like this avenue they're looking at to help us improve. I thought it was very encouraging. ... I'm keeping my head down, and I'm doing my job just like I would every other day."
When asked whether she sees a way out of the financial problems, she said she thinks there is a way out, and that the college is going to have to rely on its faith.ICON
That faith is part of what's made Lon Morris what it is today.
McRae called the school iconic, as it is the oldest chartered two-year college west of the Mississippi River, according to the school website, and it has churned out successful alumni such as Emmy-winning actress Margo Martindale and country singer Neal McCoy.
The history of Lon Morris dates to 1854 with the establishment of the New Danville Masonic Female Academy in the Kilgore area, according to internet reports. In 1906, Charles R. Kelley began making the stone for the "Twin Towers" of Alexander Collegiate Institute, which would later be known as Lon Morris College, history reports state.
"It's been such a staple and so iconic. ... If it were to go away, it would leave a tremendous void in the community. It's the type of industry that is not replaceable," McRae said. "I can't even imagine the kind of hole it would rip."
The college's primary goal, he said, is to move students to a four-year institution.
"They've got a good success rate. They're giving these kids a good quality education," McRae said. "A lot are kids who wouldn't have gone to school if it weren't for Lon Morris. For a lot of these kids, it's a life-changing experience. It's very rewarding when you see a success like this.
"This is a college that is doing a great job at educating students. Kids are going off to universities, so we're turning out what's going to be productive citizens and doing it in a faith-based Christian environment."
As far as the instructors at Lon Morris, Kroll said they are "extremely high quality," many coming from large, prestigious universities, and he doesn't think financial stresses have diminished the quality of instruction. However, he said Lon Morris has more graduates than the local economy can absorb.
Kroll said financial gifts to the school are "fairly steady," but the school could do better in reaching its alumni base. He also noted that the school is profitable if it can maintain 600 to 700 students for a number of years. He said projected enrollment for the fall is 630 to 640 students.
But he said the impact of Lon Morris goes beyond financial because it provides an opportunity to students who might not have done as well in high school.
David Russ, coordinator of admissions, knows that firsthand because he graduated from the institution in May 2011.
Russ came to Lon Morris to get his associate's degree because it was close to his home.
He said he's pleased with the education he received and ended up staying because of a great employment opportunity. Now, he has faith in the school's future.
"It's tough. It's ugly. But I think ultimately people can get past it," he said. "All the people I work with on a daily basis, they're going head-first. We're working like any day any time of the year. I think we self-motivate each other. It's not a bad place right now."