Another Nonprofit Makes a Big Hairy Mistake on a Building

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February 14, 2013; Source: San Diego Union-Tribune

NPQ has repeatedly written about the impact that buildings can have on organizational flexibility. In fact, Clara Miller’s article, “The Four Horsemen of the Nonprofit Financial Apocalypse,” points to research from the Nonprofit Finance Fund that indicates that:

“…about one-third of organizations that acquire facilities can manage these shoals well. This third ends up with a building that cradles the program and works financially: a true triumph. Another third manages to complete the building but arrives gasping on the beach; as a result, this group becomes the walking wounded. Among this group, program quality and financial health are typically impaired for years.

For a final third, financial imbalance pervades operations to the point of requiring reorganization or even extinction.”

Again, buildings are not just fixed assets but fixed assets that need to be fed like hungry babies. They should be built or bought with reserves in hand.

So, case in point: in Southern California, the YMCA of Riverside City and County (with facilities in Riverside, Hemet and Temecula) declared Chapter 7 bankruptcy and closed its doors. It blamed the bankruptcy on debt associated with a new building it erected in Temecula, a facility built with a lot of cooperation from local officials. Others, however, suggest that mismanagement is to blame.

Supporting the second point of view is the fact that the closing was anything but orderly and respectful of its community. A January 31st Press-Enterprise article reported that members, who apparently learned of the closing through the news media, were still being charged even after the Y was closed but at least some employees had never been notified of the closing and had not been paid for months. A sign said it was closed on January 11th “for maintenance.”

The building in Temecula was built on land the YMCA leased from the city for $1 per year. It’s a 14,832 square-foot facility that includes a lap pool. The lease stated that the Y was required to maintain the facility and if they did not, Temecula city officials could take it over. In the spring of 2012, the Y reportedly attempted to sell the Temecula building to the city for more than $1 million in order to help cover costs at the other two facilities, but structural issues with the building apparently intervened. According to reports, there is a crack in the bottom of the pool, a leaking roof and water damage.

Read that article by Clara Miller. There is more in there than just a cautionary note about buildings.–Ruth McCambridge