Saturday, Nov. 03, 2007

YMCA in Poor Health

Awash in debt, group looks at selling building

Mired in an ever-deepening financial crisis, the YMCA of Stanislaus County may be forced to sell its building to keep from going under.

After program, staff and other cuts have failed to turn things around, YMCA leaders are exploring selling the facility at McHenry and Floyd avenues in Modesto, which includes two indoor swimming pools, a gymnasium and fitness center.

One option would be to find a wealthy benefactor to buy the building and lease it back to the nonprofit organization for a nominal fee. That would allow the Young Men's Christian Association of Stanislaus County to keep its doors open, some board members reluctantly acknowledged.

The YMCA has been heading in the wrong direction for several years, suffering from declining revenues and rising liabilities, increasingly putting its future in peril.

An internal document obtained by The Bee shows the YMCA owing creditors more than a half-million dollars on Aug. 31, with no cash and current assets of less than $93,000. And the YMCA's line of credit from Modesto Commerce Bank swelled from $86,250 in June to $145,750 in August.

Asked whether the YMCA is in danger of folding, longtime board member Dennis Wilson said, "Let's hope not."

But some board members acknowledged the YMCA has been plagued by a number of problems in recent years, including declining membership, difficulties with vendors and its bank, and using previously sacrosanct endowment money, bequeathed by community leaders, to secure loans to pay bills.

At the same time, the board members expressed deep affection for the YMCA and a commitment to bridging the financial sinkhole.

Over the past four decades, thousands of children and adults have learned to swim, played sports and worked out at the YMCA. But time took its toll, and even a major renovation of the 43,000-square-foot building

in 2004 failed to reverse spiraling money problems, three board members conceded Tuesday.

"Yeah, we're struggling," said Steve Ward, board president. He said leaders must "turn this (bad news) into an appeal to the community."

United Way hires CEO

Steve Smith took over as chief executive officer of the YMCA in May 2002, at the beginning of its five-year tailspin, and left last week. He became chief marketing officer at the United Way of Stanislaus in June and split time between both jobs until Thursday.

Two days earlier, Ward, Smith, Wilson and board member Allen Layman told The Bee they are exploring every avenue to save the YMCA, but they offered few ideas other than hiring Smith's replacement. They acknowledged that the difficult financial situation might have played a part when two finalists recently rejected the board's employment offers.

"We didn't sugarcoat it," Wilson said.

Federal tax forms suggest the YMCA was on an upswing in the five years before Smith replaced former CEO Karen Servas. From 1997 to 2002, membership dues and total revenue more than doubled, management aggressively beefed up the YMCA's core programs, and leaders embarked on a capital campaign to upgrade deteriorating facilities.

By 2004, the YMCA had shrunk operating hours and eliminated 38 employees. By 2006, Smith had reduced spending on core programs to a level preceding 1997. The YMCA's fund balance, or the difference between assets and liabilities -- $1.15 million strong in 2000 -- plummeted to $11,548 as of April.

$1.8 million in debt

Board members Tuesday confirmed an item from their April meeting agenda, obtained by The Bee, citing $1.8 million debt. In addition to $542,805 in current liabilities, the YMCA owed $171,429 on the bank loan, $392,904 on the renovation and $756,860 in unspecified long-term debt.