Diocese of Long Island is Broke, Seeks Shelter in Bankruptcy Action
Episcopal News Service. April 15, 1993 [93067]
The Diocese of Long Island has voluntarily petitioned for reorganization under Chapter 11 of the Federal Bankruptcy Code in efforts to create a "breathing spell" to recover from a major financial setback tied largely to the operation of its schools.
The action ironically came on Good Friday, April 8, and was necessary because "there just isn't any money left," according to John H. Works, Jr., chancellor of the diocese, in a statement released from the diocese. A lastminute insurance payment was needed to keep the cathedral open for Easter Sunday services.
The cash flow pinch is the result of maintaining the schools, St. Paul's and St. Mary's, in the face of sharply declining enrollments in the last 20 years. When the diocese decided to close the schools in 1991, without prior approval from the New York State Attorney General, a resulting legal tangle made the financial situation even more desperate.
The courts finally decided that the Cathedral Corporation which holds all the property could use the St. Paul's property to pay rapidly accumulating debts and establish a new Cathedral School on the St. Mary's property. That agreement was not worked out in time to forestall the cash flow problem and "we determined that, under the circumstances, our only practical alternative was to obtain court protection needed to resolve our financial obligations and move ahead with our turnaround strategy," said Frederick M. Reuss, Jr., chancellor for the Cathedral Corporation.
The St. Paul's property proved difficult to market but the Village of Garden City agreed to buy the property for $7.25 million and the deal will close in June. That may be too late, however, since accumulated debts of about $7 million may make it difficult to pay past debts, meet current obligations and still move ahead with the new school, the Attorney General's Office observed.
Bishop Orris Walker, Jr., said that he was pleased that diocesan officials had been able to work out something with the Attorney General but added that he agrees that there may not be enough funds available for the new school. "As bishop of the diocese I have a pastoral responsibility to ensure that any enterprise sponsored by the Episcopal Church in this diocese has a reasonably foreseeable chance of success in the long term. We simply cannot afford to repeat the mistakes of the past," he said.
While the dashed dreams of a new school will be "painful to some," Walker said that "we simply may not have enough money to go around to satisfy both our creditors and to endow a new school."
Christopher Wright, finance chairman of the board of governors for the proposed new Cathedral School, said he remained hopeful that the necessary funds will be available. "But we must all face the realities of the situation at hand. At this point our fate is in the hands of the bankruptcy court and the Cathedral Corporation's creditors," he said.