You Solve It -- A likely Bankruptcy Scenario

[Cburkhardt]

You Solve it – A Likely Bankruptcy Scenario

Ten years ago a city of 1 million had its own council, the “Big City Council”.  Surrounding it were three smaller suburban councils.  In a ring surrounding this metropolitan area were four rural councils.  This combined territory happens to comprise an “Area”, which at the time was a national BSA organizational structure. 

Over the decade and prior to the bankruptcy filing, two of the suburban councils had financial and membership problems and combined into Big City Council.  Their property was sold and the cash went into the camp endowment for the multi-camp Big City Scout Reservation and a small camp known as “Big City Training Center”.  Big City Council seems to be run well and the “city Scouters” are “nice enough”, but the other councils in the Area avoid dealing with it because they fear they will somehow be “forced” to combine into it.

One remaining suburban council is “Rich Folks Council”, where many of the economic elites from the metropolitan area live.  The council has a deluxe property (“Camp Rich”) located six hours away that is hardly used, but there is plenty of cash to keep it running for the diminishing number of “Rich Folks” Scouts that can afford to drive there for the two weeks the camp operates in the summer.  The operation of Camp Rich is subsidized by local citizens for $250/Scout. 

Two of the rural councils combined into “Merger of Equals Council” and have been squabbling ever since because the combined council executive board cannot decide which of two inherited small camps to sell – yet cannot sufficiently utilize or fund both of them.  Membership has been static, but slowly declining. 

The other two rural councils include “Happy Council” which has no camp because it has always used “Big City Scout Reservation”.  It is healthy from a financial and membership standpoint.  Everything there seem to run very well and everyone seems happy.  

The other rural council is “Sad Council”.  It has a medium-sized but severely run-down camp.  When some manufacturing plants closed a few years back, the population of the council plummeted along with membership, so the council executive board has been trying to figure out what to do.  The Scoutmasters and CORs are enraged that the dining hall has a leaky roof and that the pool no longer works.  They blame the council executive board for paying the two professionals too much and want them both fired.

The spring 2020 bankruptcy filing and stoppage of cash flow from COVID negatively affected Scouting in most of the Area.

 

• ·       Big City Council has terminated over half of its 36-member staff and has put the Big City Training Center up for sale.  Big City Scout Reservation lost a lot summer campers because its own Troops have started to attend camps in other states.

•        Rich Folks Council seems untouched, but COVID diminished recruitment.  Therefore, local citizens will now subsidize the Rich Folks scouts at their far-away summer camp up to $400/scout.

• ·       Merger of Equals Council announced that after ten years of indecision, it would sell one of their camps.  Unfortunately, the council entirely drained its endowment by operating both camps over the decade, so the camp chosen to go forward has a lot of deferred maintenance.

• ·       Happy Council has been weathering the downtime by leaving two vacant staff positions unfilled.  They also outsourced their business/administrative operations to Big City Council.  They do not own a camp to worry about.  They have a $1 million endowment, which they feel good about because they are a small rural council.  Membership is “steady”.

• ·       Sad Council heavily mortgaged their worn camp to get the pool running and the dining hall roof fixed.  However, an uninsured property loss due to a storm wiped-out most of the program areas.  The Scoutmasters and CORs blamed this on the single remaining professional, whom they made sure was terminated.  The council has no employees, no endowment and a camp worth $375,000 that is mortgaged for $225,000.

It is now the summer of 2021 and the Bankruptcy process has led to local councils being requested by the Bankruptcy Court to help fund the Victims Trust Fund in exchange for a discharge of local council liability.  Without discharges, the councils will be on their own to fund the defense of child abuse allegations going back to the beginning of each council.  The contribution amounts requested are based on the number and value of credible abuse claims filed by victims, which abuse is claimed to have occurred within the geographic territory of the respective council.  

Each council’s ability to pay the contribution to get the discharge is as follows:

• ·       Big City Council can pay by using half of its endowment or it can sell a part of Big City Scout Reservation.  Alternatively, it could sell the entire Reservation and rely on other councils to run Scout camps.  Some of the City political leaders wrote an Op-Ed that urged the Reservation be sold and have Scouts conduct summer camp in City parks instead.

• ·       Rich Folks Council can pay.  Heck, it’s a rounding error for its annual endowment income.

• ·       Merger of Equals Council cannot pay the bill by itself under any circumstances.  It will have either to liquidate or convince some other council to merge with it and take on its liabilities (including paying the trust contribution to get the discharge).

• ·       Happy Council can pay the contribution to get the discharge, but will have to liquidate half of its endowment.

• ·       Sad Council cannot pay the bill by itself under any circumstances.  It will have either to liquidate or convince some other council to merge with it and take on its liabilities (including paying the trust contribution to get the discharge).

Question:  What do you think will happen to Scouting in the Area?  You can go any way you want, but you cannot change the facts that I have provided, and you must confine your comments to local Scouting and not national BSA organization issues.  You must assume the national BSA organization survives to provide basic program development, supply and other core functions to units and councils.  You do not have to tackle everything.  Feel free to concentrate on a particular issue.  Let's have some fun with this to lighten our spirits and understand that there will be a future for Scouting after the bankruptcy and COVID have run their courses.  I promise to post my own prediction, but I'll keep you all guessing for a while.

[qwazse]

How are the lodges in each council? Which lodge has the most ownership of their camp?

[Cburkhardt]

I suggest we leave aside the more specialized topics like OA, Wood Badge and things like that for now and try to concentrate on the overall situation for our pretend Area.  I also suggest everyone concentrate for at least a week on posting their predictions and answers for the problem, rather than commenting on what is posted.  It would be just great to see the variety and categories of solutions first.  Then we can have fun.  And yes, I will put out my grand plan eventually so you can all “have at me”.

[Cburkhardt]

That said, the OA youth at the national level have a rule that when councils merge, a new combined lodge is always formed.  That sometimes aggrieves folks who would like to be a member of their childhood lodge.

[skeptic]

It might be a great challenge to the youth to form their own teams to work at it from that all important side of the knot. But, only in BSA would such a marass of issues be on the board.  It might even be interesting to have the same basic scenario, but in another scouting family or two in other parts of the world.  Playing outside the box and realizing other shapes exist.

[Jameson76]

Is the first train running East or West?  I was not clear on what time it left the station or the horsepower of the engine.  I think it was steam, but not sure.  Pretty sure the second train was delayed by the hurricane.  Who takes trains these days anyway?

My answer is they will never meet

[MattR]

27 minutes ago, Jameson76 said:

Is the first train running East or West?

Wrong question: At what speed is the train shorter than the tunnel?

 

To answer the original question, follow the money.

Big city council's camp is starting to lose customers and hence money, thus putting it into a death spiral.

Rich council has the more enjoyable camp because it has an endowment to hire good staff, and hence troops start going there, thus helping rich council's financials. They can buy and run one of the other camps so distance is no longer an issue. Their funders are not interested in merging with other councils.

So, final answer: Rich council keeps running as a normal council, the lawyers end up with most of the camps, all the other councils fold, some enterprising group of volunteers decide "we don't need no stinkin' council" , make a wiki with ideas on how to run scouting in their area without camps or local councils and generally have more fun than before. Eventually they join the Trans Atlantic Council because that's the easiest way to handle all that other stuff. (mainly because someone at the trans atlantic council figures they've been doing this for decades so they should profit off of it.)

Oh, and the train fits at 80% of the speed of light.

 

[walk in the woods]

It would have taken way less words if you'd just said Chicago/C7.  Anyway, the short answer is nothing is going to happen at this point because it's too late.  The councils that can afford to pay will, and then they'll sit back to watch how everything shakes out.  No board is going to take on the liabilities of a weak neighboring council at this point.  The councils that only have liquidate/merge as their options will be liquidated.  There will be a number of units that will be council-free for a period while the survivors hold cage matches for territory after the discharge.  Done correctly, the cage matches will be great fundraisers! 

 

Edited August 28, 2020 by MattR
removed media that didn't pertain to topic.

[Cburkhardt]

One Solution:  Two councils dissolve, two council merge and one council gets new responsibility.

The Big City and Happy councils must have some positive program things happening, because maintaining reasonable membership amid the difficult overall circumstances is a leading indicator of success.  They will turn out to be the key local organizations that survive.   

The Rich Folks council is kind of a mystery.  Dropping membership could be an indicator of program difficulties there, but they seem like they can choose to attempt anything they want because of their endowment.

 

The difficulties are the Merger of Equals council and Sad council, which lack resources to obtain a discharge.  Members of their current executive boards and other local volunteers do not want to continue the council structures if they have to defend against abuse lawsuits by themselves – and maybe face liability for things that happened decades ago.  Both councils have worn camps that need work, but Merger of Equals council has no cash on hand to make improvements and Sad council only has $150,000 of equity and cannot borrow more.  Both councils have questionable organizational reputations for overpaying professionals, internal disputes and (in the case of Merger of Equals) inability to make key decisions.  Raising capital funds for the camps with such reputations would probably be tough.  The decision is either to liquidate in bankruptcy and get liability discharges, or convince other councils to absorb them, have them pay the Victims Trust Fund contributions and hope the combined going-forward council does something good with the worn camps.

Merger of Equals council and Sad council choose to liquidate, because there is little rational basis for other councils to take on their significant financial burdens.  Liquidating in Ch. 7 bankruptcy provides them their liability discharges without a Victims Trust Fund contribution.  The remaining assets are sold, the cash is applied to the debts and the charter to provide BSA programming in their geographic territories reverts to BSA national.

In the meantime, Big City council’s executive board rejected the idea of using City parks for summer camp or selling any part of Big City Scout Reservation.  Big City paid its Victim’s Trust Fund contribution out of its endowment, and received a discharge.  During the process, its council camp committee determined that the program at the Reservation needed to be entirely re-vamped.  They also want to attract scouts from the previous rural and suburban councils that no longer have camps to start attending summer camp at the Reservation.  They decide to re-name the several camps on the Reservation after the now-closed legacy camps of the suburban and rural councils – and they invite the volunteers from those geographies to “adopt” these re-named camps and bring former camp signs, traditional displays (like a favorite totem pole) and similar things to the Reservation.  They ask the best volunteers who had been involved in the legacy camps to join the Big City council camping program committee to reinvent programming on the Reservation.  The previous OA lodges (now re-designated as Big City OA chapters) and other program groups are encouraged to focus on using use their respective “adopted” camps.  

Happy council made a $500,000 contribution toward the Victim’s Trust Fund and received its liability discharge.  Happy council was thereafter approached by BSA national and asked if it wished to operate Scouting in the geographies of the previous Merger of Equals council and Sad council.  It agreed to do so on condition that it would not be expected to purchase or maintain camp property.  Happy council also expanded its administrative/business management agreement with Big City council to handle the additional membership load.  Happy council concentrates on program and field service and focuses its endowment toward that end.  Some of the Scouters from the previous rural councils quit when they heard that Happy council did not want to buy their worn camps out of bankruptcy.  They joined other youth organizations that better-reflect their program and membership preferences.

While all of this was going on, the investment bankers on the Rich Folks council executive board decided they had a problem with their overpaid Scout Executive who they discovered was not leading an honorable effort to provide Scouting to more youth and was over-using endowment funds on a numerically diminishing summer camp program.  This negligent approach was found to extend across other council operations as well.  This all came to a head when a former executive board member made an unsolicited offer to purchase the far-away Rich Folks council camp and convert it into his personal hunting preserve.  Since only 192 Scouts attended the camp last summer, the council accepted the offer, used a part of the cash to contribute to the Victim’s Trust Fund and got their discharge of liability.  After studying what to do next, the board members decided to approach the Big City council for a combination.  The significant Rich Folks council endowment was placed in a restricted trust to be only used for ongoing camp maintenance and program expenses at the Reservation.  One exception was that before they combined with Big City council, the Rich Folks council purchased the small worn-out summer camp that had belonged to the now-defunct Sad council.  It was restored to a pristine state, but as a “close in” camp, training center, Scout Shop and small office that is leased to Happy council for some of its rural-based District Executives.  The former Sad council Scoutmasters who joined other youth serving organizations were enraged when they learned the old Sad council camp dining hall was re-named after a long time contributor to the Rich Folks council.  They promise to never step foot on the property again.  They also despise the new green roofs that were put on the camp buildings, because the roofs were brown when they attended camp there as kids:  “Those city folks and their rich friends have ruined the Boy Scouts of America because they destroyed the appearance of our camp.”

Summary

·       Big City council combined with Rich Folks council.  Both councils made Trust Fund contributions and received discharges.

·       Sad council and Merger of Equals council both took Chapter 7 bankruptcy and liquidated, including their worn-out properties. 

·       Happy council made a trust fund contribution and received a discharge.  It agreed to administer Scouting in the previous territories of Sad and Merger of Equals, but only retained two of their highest-performing employees.

·       Big City council now owns the only go-forward camps, the multi-camp Reservation and the small “close in” camp that used to belong to Sad council.  It was purchased out of bankruptcy by the defunct Rich Folks council and transferred to Big City council.  Happy council leases part of it for a small office.

Comment

I think the illustration can be a typical arrangement that will happen within the next two years.  Councils that cannot or will not contribute to the Victim’s Trust Fund are highly likely to dissolve.  City councils will combine with suburban councils, but those suburban councils can have a say about the resulting camp and council structure.  Sometimes the suburban councils will dominate.  Disagreeable or obstinate councils and personalities will be left behind, because there will be no time or inclination to accommodate organizational deformities when so many key decisions need to be made within a short time.  “Mergers of equals” and drawn-out contests over which camps will be kept or operated will no longer take place.  A focus on fewer and better-endowed camp properties will happen – because the Bankruptcy, COVID and need to contribute to the Victim’s Trust Fund will force termination and sale of marginal operations. These changes will take place very rapidly, so the pain can be temporary.  Councils that continue will cooperate more closely on matters of maintaining facilities and even offering field service.  It the example, Happy council is reliant on Big City council for quite a bit – but they like it that way.  Big City council will be the dominant partner in that relationship, but knows it is better to have rural Scouting handled separately and locally. 

In a few days I'll post a dramatically different result.   

[Cburkhardt]

7 minutes ago, walk in the woods said:

It would have taken way less words if you'd just said Chicago/C7.

There are some similarities, but if you look at my "first version" result you will definitely see differences.  Chicago/C7 is a microcosm of a lot of the challenges and provides all sorts of examples of things done well and poorly.  I love the "cage match" fundraising idea!

[David CO]

Conservative scouters in all of the listed councils join up with a nation wide coalition to revolt against the liberal reformers at BSA.  Fox News is giving the revolt positive coverage every night.  Sandhill Investments (a venture capital fund) offers a whopping sum to the Victim's Fund contingent on a complete turnover of the boards of national and local councils.  The lawyers insist on BSA accepting the offer.  The courts approve.

Donald Trump mentions the changes in BSA during his second Inaugural speech.  Says "scouting is now better that ever before.  The best scouting ever.  Like nobody has ever seen before."

Barron Trump joins scouting and has his picture on the cover of Boy's Life.  This prompts boys from all over the country to sign up.  Peace and prosperity return to scouting.  [clapping]

Edited August 28, 2020 by David CO

[Cburkhardt]

Here is a different potential outcome, perhaps more consistent with the views of some commenters:

 

A March, 2021 announcement by the Bankruptcy Court that 26,000 claims filed had been determined to be credible caused the national BSA reorganization bankruptcy case to teeter on the edge of conversion to liquidation.  After a series of hearings and decisions, the Court ordered that substantially all non-designated assets of councils would need to be applied to the Victims Trust Fund in order to raise a sufficient total to allow a national Chapter 11 to move forward.  Or, the national organization case could be converted to liquidation and the councils would be on their own to either file council bankruptcies or defend individual civil actions.  National expressed preference for liquidation.

One effect of the national BSA liquidation is that the rights to the BSA program were sold in a pre-packaged deal to a group of 45 local councils that had sufficient endowment funds to make the purchase and hire a small staff to maintain and license the program to councils.  All national properties were liquidated, including the bases.  The councils are now on their own to determine whether they will continue and on what basis.  The practical relationship between councils and the new charter-issuing group is that of a licensor-licensee.  Congressional leaders indicate they will recognize the new licensing group as the “new” BSA.                              

Sad council and Merger of Equals council filed for Ch. 7 liquidation and ceased operation.  About half of their units continued with BSA programming by choosing a new council affiliation with Big City council so they could still participate in advancement and attend a traditional BSA summer camp.  These stand-alone units pay a drastically-lower dues amount to have their Scouts have “official” status for their ranks and access to the new version of the BSA rank patches.  That is substantially all they get for those dues.  Units that affiliate with a council also have some liability insurance.

Happy council determined to file for Ch. 11 reorganization.  Not having a camp to operate, not having debt and having the management relationship with Big City council makes its reorganization plan reasonably strong.  However, the volunteers that assembled its previously-robust endowment are heartbroken that they have been required to turn over all but $250,000 of their hard-earned endowment.  Their Scouts will continue to attend Big City Scout Reservation, which now operates at high capacity due to so many other camps having closed.  It has become a genuine profit center for Big City council.

Big City council made a huge contribution to the Victim’s Trust Fund, significantly and permanently trimmed-back its staff, sold the training center and is exploring a significant reduction in the size of its Reservation.  Big City is one of the councils that owns the program licensing rights, which is more of a service to other remaining councils and not an income-generator.  

Rich Folks council was able to avoid paying a huge contribution to the Victim’s Trust Fund because much of its endowment income was not directly held by the council.  Its operations continue largely as-is, with a diminishing number of youth participants each summer.

 Notes

 

A national liquidation might result in 50-60 surviving large councils of focused functionality continuing forward, with a small licensing organization becoming the new “national”.  Essentially, Scouting would have BSA councils in metropolitan areas (often operating a camp) and a limited number of small councils would exist outside those areas because of unique circumstances.  Most small councils would no longer be capable of owning a camp and very few would conduct summer camp due to insurance reasons.  The surviving councils would continue to serve their geographies, and the unserved areas outside those geographies would allow units there to license directly with the “new” BSA.  There would be vast portions of the US outside the metropolitan areas without volunteer or professional Scouters above the unit level.  A number of local and unaffiliated clubs continue to engage in local camping activities and include only adults and youth who ascribe to the social, religious or other philosophical views of those clubs.

[walk in the woods]

On 8/27/2020 at 6:16 PM, Cburkhardt said:

Let's have some fun with this to lighten our spirits

I guess a GIF from the greatest post-apocalyptic movie franchise in history doesn't qualify as having fun @MattR?  Smdh.

[David CO]

1 hour ago, Cburkhardt said:

One effect of the national BSA liquidation is that the rights to the BSA program were sold in a pre-packaged deal to a group of 45 local councils that had sufficient endowment funds to make the purchase and hire a small staff to maintain and license the program to councils.  All national properties were liquidated, including the bases.  The councils are now on their own to determine whether they will continue and on what basis.  The practical relationship between councils and the new charter-issuing group is that of a licensor-licensee.  Congressional leaders indicate they will recognize the new licensing group as the “new” BSA.                              

BSA is liquidated, and a group of 45 local councils attempt to purchase the rights to license the program to council.

WOSM realizes that there are a lot of bucks to be made off of the licensing of program and materials.  WOSM files suit claiming that with the liquidation of BSA, all rights to the scouting name, trademarks, history, and materials reverts to WOSM.  While the lawsuit is going on, Puerto Rican nationalists apply to WOSM for its own scouting association, which is named the Boriken Scouting Association, allowing it to continue to use the BSA acronym.  

Following the model used in some other countries, WOSM decides that the USA need to have a scouting association with two divisions, one conservative and one liberal.  WOSM wins the lawsuit and institutes its new partisan model of scouting in the USA.  WOSM makes a ton of money, pitting one group against the other.

Big City council joins the liberal scouts.  The suburban councils join the conservative scouts.  Each side is happy, but they constantly criticize each other in public.  Fox News and Fake News have a field day reporting on the ongoing in-fighting between the two BSA divisions.

Edited August 29, 2020 by David CO

[David CO]

(continued)

Hollywood makes a movie about the bankruptcy and division of BSA.  Director Roman Polanski labels it as the "greatest post-apocalyptic movie" in history.  It is a huge hit, and becomes a movie "franchise" with sequels, prequels, spin-offs, and a TV series starring Wil Wheaton.  WOSM gets the foreign market distribution rights and makes even more money.

Newly elected president Joe Biden pardons Roman Polanski, so that he can return to the USA to accept his Academy Award for the movie. Roman Polanski becomes an icon for the liberal scouts, and receives a silver buffalo for his great service to scouting. 

Edited August 29, 2020 by David CO