Village close to loaning strained private school $200K
LAKE PLACID – The Lake Placid village Board of Trustees has tentatively agreed to lend the National Sports Academy $200,000 as the small private school continues to restructure its finances after nearly closing last year.
Trustees voted unanimously Monday to approve the loan, although the vote hinges on NSA meeting several conditions: the school must provide the village with loan guarantees and credit scores, and a commitment letter needs to be signed. That letter may also include additional conditions agreed upon by loan counsel.
The loan will be used primarily for unexpected capital expenses since the school doesn’t have access to a line of credit, explained Hue Kinsman, who is acting as a financial advisor for NSA’s new Board of Trustees. He said the loan will serve as working capital for the school so it can enter the 2013-14 school year with “adequate cash balances.” NSA hopes to bring in more revenue next year through higher enrollment and increased tuition.
Kinsman crafted the school’s application to the village’s Revolving Loan Fund.
“We need that cash because this institution doesn’t have access to a line of credit,” Kinsman said. “We don’t know what’s going to happen. The boiler could blow out tomorrow, we could have a roof problem the next day – and to not have adequate cash in the bank in order to be able to address these issues when you have students who are in the residence building is irresponsible.
“We need these proceeds in order to bridge us to a point where we’re generating the cash that we know we can in order to be able to pay the loan back and create a sustainable school that not only is doing better financially but also is in a position to grow and have higher quality services.”
Mayor Craig Randall said the loan application would have failed had it been brought to the board a few months ago. He said the school has taken substantive steps to shore up its finances, and now the loan makes sense.
“They’ve risen to the occasion,” he aid. “It’s their opinion that if they’re granted this loan, they have the ability to keep the school operating going forward, which means vendors have some opportunity to get paid.”
The village’s loan fund is generally used to support new businesses that are creating jobs. It can be used to retain jobs, Randall noted. In this case, about 25 jobs will be saved as a result of NSA’s restructuring. No principal payments would be made over the first six months, and then it would be paid back monthly with 5 percent interest over a five-year period.
Kinsman addressed the board prior to the vote. Kinsman is chief financial officer for West World Media, a company owned by Brett West, the new chairman of NSA’s Board of Trustees. The other new board members are John Peracchio and Don Simkin. Peracchio’s daughter is a freshman at NSA, and West’s son is a senior. Simkin’s son is a former student.
Those three comprise an “angel group” that infused a large sum of money into the school’s operations to stave off potential closure last year.
“We refer to them as angels because they’re really not looking for material, financial benefit here,” Kinsman told the board. “This is more a benevolent exercise to save the school that their kids attend as well as try to operationally fix something that I think they all believe, and I believe as well, is a unique institution.”
Kinsman said he and the new board members met with NSA’s core administrative team in late December and identified several “fundamentally simple” changes the school could make to improve its financial situation.
“It doesn’t take rocket science,” he said.
The school’s staff was bloated, Kinsman said, and some students who received financial aid didn’t actually need it. He said the business model merely broke even rather than brought in revenue.
“When you get into that kind of cycle – whether it’s a school, or a small company, or a large company or whatever – it’s fundamentally unsustainable,” Kinsman said. “You’re taking next year’s money, and you’re spending it on this year’s expenses, and eventually you run out of cash. It’s just that simple, and that’s what happened.”
Kinsman said NSA has made a lot of progress since the end of 2012. Staff levels and compensation have been reduced, tuition has been increased to become more competitive with similarly sized private schools, and enrollment has been increased through the addition of a new girls ice hockey team. That team has been developed through a partnership with Selects Hockey of Portsmouth, N.H.
“We’re seeing a clear path to having a stronger enrollment at a much higher price than what we had last year, so the revenue side is starting to shape up the way we’re hoping it would, and the cost side has been addressed,” Kinsman said.
To get to this point, Kinsman said NSA had to rely on several sources of funding. The new trustees contributed more than $300,000, parents added another $200,000 or so, former trustees donated cash, and then there’s the loan from the village’s revolving fund.
A small group of vendors and contractors to whom NSA owes money attended Monday’s meeting. None of them spoke out against the loan, but they did express frustration about a lack of communication regarding overdue payments. Kinsman took down their names and phone numbers and promised to contact them immediately.
The loan fund started in the 1990s after Housing and Urban Development gave the village money to lend to the Mirror Lake Inn, which was heavily damaged by fire. Once that money was repaid, a permanent revolving fund was established.