One Delegate's view of the Atlantic Union College constituency meeting.

This is my attempt to reconstruct from my notes as accurately as possible what
happened at the meeting of the Atlantic Union College constituency 
at the South Lancaster Village Church in So. Lancaster, Mass. on March 10,
1996.  The session was chaired by Elder Ted Jones, president of the Atlantic 

The devotional  was given by A.C. McClure, president of NAD.  
He used the illustration of the disciples trying to cross the sea
in a boat, pointing out that they were doing the right thing but their efforts 
were fruitless.  Then even when help was given, in the form of Jesus,
they at first failed to recognized it and thought it was a ghost.  
He ended with referring to a quote from 2nd Sel. Mess. pg. 372 that 
the Lord allows matters to come to crisis so that people look to him
alone for help.

Four prayers were then given and the chair made a point that these
prayers, in French, English, English, and Spanish, reflected the diversity
of the community.

Major guests were introduced including R.J.Kloosterhuis of the General 
Conference and the full complement of N.A.D. officers  (McClure,
Baptiste, Crumley, Osborn, Prestol) also the board and the faculty 
and staff of A.U.C.  

The meeting was called to order with the notice that although it had not been
published in the Atlantic Union Gleaner, it had been mentioned in the Adventist
Review.  The chair called for a motion to approve the agenda, which 
was amended to include the presentation of an "Alternate Proposal",
and then voted.

Dr. James Londis, president of the college, gave a report on the current
state of the college, with historical background as well.  He claims that
in the next few years 400-600 small colleges will close across the United
States due to financial and demographic reasons.  Tuition charges have 
gone high enough now that they cannot raise the rates farther and expect
people to be able to pay.  Recruiting is competitive and people won't consider
coming to the college if scholarships aren't offered.

140 of the 430 students at AUC now have zero base income for financial
aid purposes.  80% of the families in the constituency have incomes
less than $40000 a year.  He quoted a Harvard official that says the only
thaing that keeps Harvard out of big financial trouble is tht they 
have low debt and no deferred maintenance liability.

Londis pointed out that before he was hired (1993) an auditor's report
had shown the college was "essentially bankrupt" and at the time 
was at least $3 million in debt.  When he received the offer he requested 
$1 million to turn the college around.  He didn't get it.   An offensive
yearbook and problems with the music department had recently occurred and 
the college's reputation was suffering.  There was a high default rate
on student loans, and enrollment drops well below projections.
He decided to go ahead with the dining commons project in march after the 
major donor threatened to withdraw the money if it were not begun promplty.

It is a violation of NAD working policy to borrow money for operating purposes,
nevertheless in July of 1994 the college was again essentially bankrupt
and needed $2 million to get through 94-95.  The request was made to NAD
and after consideration during Annual Council a loan was arranged 
through the Atlantic Union Revolving Fund.  A fund raising committee was 
appointed at this time and according to  Londis did not meet until 7 months

In the Fall of 1994 a consultant recommended that they change the academic 
structure, reduce majors, cut staff, and get more paying students.  
A taskforce found $700,000 in savings but this was not enough, and 
another enrollment problem loomed in the fall.  In March of 1995,
the union leadership urged them to continue to go ahead with the new school year so they issued 
faculty contracts for the next year.   An aggressive recruitment
effort was mounted with students and faculty participating, getting the
enrollment to 447 students, but $500K in additional costs were incurred t
through extra scholarships to get them to come.  

In August of 1995 the college met its first payroll crisis.  Once
contracts are issued, if a payroll is missed in the state of Massachusetts,
employess can file a complaint and receive treble damages, accreditation
is gone and funding would be gone from Government student aid.  
So they dipped into the endowment to make payroll, and later did that
on two other occasions.  They are also selling  most of the houses the 
college owned.  [Editor's note--it was here in the fall of 1995 that the 3 
vice-presidents of AUC  resigned.]

They received some help from the alumni but soon got back that donors
were concerned that they would want to be assured of the college's continuing
operation before funding.  Londis feels that another downsizing of 
the type necessary to balance the budget could not be done without losing
an unacceptable amount of students.  At this point it was recommended
that he talk to Andrews University.  The discussions resulted in
a concept paper.  {note--the delegates received no written information 
on this plan--all details were given in the speech of Andreasen which 

At the close of Dr. Londis' remarks the chair remarked that the 
fundraising committee had not been able to meet because several of them
had conflicts of interest being committed to fundraise for other 
institutions.  He referred to a conversation he had had with N.C. Wilson who 
told him not to expect any money from fundraisers until survival is clear.
It was voted to approve Dr. Londis' report.

Next was Mark Hyder, interim VP for finance.  To open his presentation
he introduced Steven Blake, the independent auditor.  Mr. Blake is
a partner in Cline Brandt Kochenower & Co.  

The last paragraph of his statement reads
"The accompanying financial statements have been prepared assuming
Atlantic Union College will continue as a going concern.  As discussed
in Note 17 to the financial statements, the college has suffered
recurring losses from operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. 
Management's plans in regard to these matters are also described in Note 17.
  The financial statements do not include any adjustments that might
result from the outcome of this uncertainty."

Note 17 reads
"The college has suffered several years of declining enrollment and depletion
of working capital and has reached a point where merger and/or
a necessary infusion of working capital coupled with a major
restructuring has become immenent [sic].  Management has concrete options
of either merger or refinancing currently before them.  However these
options will require time to consummate and it is uncertain at the 
current level of operations, how long the college can continue to operate
without an immediate infusion of working capital."

The auditor's spoken remarks were brief.  "Yes the college is bankrupt.
You're out of students and out of money."  He went on to make the 
reference that this is like crossing the River Jordan.  It is swift
and it is deep, but it will part.  It was voted to accept the auditor's report.

Mark Hyder continued his presentation, drawing attention to the numbers in 
the 5 years of financial statements that had been given to the delegates.
The operating loss over 5 years had gone from $39000 to $1.9 million.
Enrollment has dropped by 174 students over that time.  The debt at the
May 31 1995 end of the school year was $6.2 million.  $1.6 million of 
that is current, the rest is long term.  Approximately $3 million  was
owed to the Atlantic Union Revolving Fund, $2.4 million is owed to the 
General Conference.

From that time to December 31, 1995, they had lost another $1.7 million
and the hemorrhaging continues.  They have survived up till now by 
borrowing the entire cash balance of the endowment.  Now nothing is 
left there either.  In addition to the nearly-missed payroll in August,
it also happened in November and December for 3 pay periods in a row.
A local bank loan (using the next semester's revenue as collateral)
was obtained.  Now they have less than 10 days of working capital and
do not have enough money to meet their next payroll on March 21.
Projected operating loss between now and the start of the next 
school year is $3.2 million and they have to find that money somewhere.

They can't let payables build up because they tried it already and most
vendors are dealing with them on a cash-only basis already.  They
have been declined on several bank loans.  

Other problems:  The default rate on the nursing student loan program
is too high and their participation in this program has been frozen
since the start of the year.  Other default rates are high as well
and other loan programs are in jeopardy.  

$800K in federal student loan funds and $300-400K ofPell grants come in 
each year fto AUC.  This has been done in the past by wire transfer.  Now
they are required to submit the request in writing and get the funds
30 days later.  They are required to show evidence of administrative 
capability to provide the education they say they are going to provide.
If an audit report were to conclude that AUC is not a going concern,
they would have to post a cash bond to refund the federal programs
if the semester were not completed.

The treasurers report was accepted by the assembly.

Dr. Londis  made a brief report that the board of trustees of AUC
had endorsed the concept document and recommended it to constituency
that it be pursued once the details are fleshed out.  He moved that
the concept of merger be endorsed by the constituency, and it was seconded.
Dr. Niels-Erik Andreasen then rose to speak to the motion and explain the 

He stressed that Andrews University has no eagerness to rush into a merger
but does have an openness, and that they were there because and only 
because they were invited.  He spoke of two possible ways Andrews could 
be involved.  The "easy way" would to be a consulting service.
If he were a consultant, he would say to get rid of debt, cut the 
budgets, recruit like mad, and put management in place.  But these ideas
work against each other, he explained.  Cost cutting works against recruiting.
  Putting good management in place costs money, etc.

The "hard way", namely the merger,  in his words "may not even work."
Perhaps a future could be provided, no longer through Atlantic Union
College, but  a branch campus of Andrews University.  It would take the form 
of another school of Andrews University, headed by a dean with expanded 
responsibility.  In academic planning the goals would be that there are many
in the Atlantic Union who want an SDA education near home, and there
exists a talented faculty which should not be lost or wasted if we can help it.
It cannot be done in all areas, we must identify the areas with 
critical mass to keep the 4 year degree, and this has not yet been 
determined.  It is also important to keep the AUC tradition of a strong
general education program.   In some programs students would start
in South Lancaster and complete in Berrien Springs.

All support services such as accounting, records, financial aid, student
accounts would be handled with existing personnel on the main campus.  
AU librarians would oversee the conversion of the library and elimination 
of duplicate holdings and make the James White Library accessible to 
those on the South Lancaster campus electronically as much as possible.

The budget would feature deep cuts in academic offerings and services,
but would still plan on a residential campus, although not all of 
the current buildings would be used.  Those that would be there would have
to have maintenance and depreciation fully funded.  As much money 
would be necessary for financial aid as previously.

The first obstacle that Dr. Andreasen mentioned is that Andrews has not figured
out how to balance the budget of such an entity.

The second obstacle is that implementation will be difficult.  The 
North Central Association of Colleges and Schools will have to 
look over all the details.  Other professional accreditiations 
such as Amer. Assn. of Coll. + Schools of Business could be affected.

To sum up, we have the concept, but implementation is a problem  
Andrews board of trustees authorized the administration to continue
the discussion.  He pointed out that "Small rural college campus
are not a hot commodity" and also said "If you can come up with an idea
so I can go home and mind my own business, I would be a happy man."

Dr. Willoughby of AUC made a statement voicing concern that 
Dr. Andreasen referred to AUC as "a small rural campus which is not a 
hot commodity," and the attitude that we should be thankful that he 
is here at all.  She expressed desire to hear more
about the policies that would be developed and wondered if 
the school would become effectively a junior college.

More questions asked from the floor:  Did the concept account
for a student drop due to cutbacks?  Yes it did--they were budgeting on 
350 students.  Would the AU merger, if approved, have any impact 
on the current financial situation?  No, said Dr. Andreasen.  
His instructions were that AU would extend no money to cover deficits
or losses and that there would be no short-term injection of capital.
The only financial advantage would be stabilization.

At this point a Mr. Tony Romeo, not a delegate rose to speak and the 
chair asked if non-delegates ought to be permitted to speak.
It was moved that they should be allowed to speak [by me... SCT]
and that motion was voted down.
Another motion was then offered that they should collectively have
45 minutes to speak, and that carried.

Mr. Romeo then gave an impassioned speech that the constituents
were willing to help but that some of the shenanigans[not his word]
had to stop.  He offered to make a donation and asked others to give.
[Mr. Romeo is evidently an advertising executive in New York City]
The meeting then broke for lunch and reconvened at 2 PM.

Will Kitching, leader of the alumni _ad hoc_ committee, CPA,
and adjunct business faculty at the college, presented the so-called
"Alternative Proposal."  Aside from the proposal itself,
his first point was that the present administration of the college had paid 
little or no attention to marketing as distinct from recruiting.
He cited other examples of mismanagement and suggested that it was time to 
let pastors win souls and let business people take care of the business.

At this point there was an objection from the floor and the chair
ruled that Mr. Kitching was out of order in his comment.  "What we
are interested in is solutions".  A couple others protested from the floor
that things have been covered up.  The chair instructed Mr. Kitching
to proceed with the proposal.  

His points were that the problems are  1) not enough enrollment  2)  not
enough cash  3)  never a capital campaign.  He  said [quoting his source
which the editor does not remember ]  "Insanity is doing the 
same thing over and over and expecting different results."  Also
"Some things you do for money but don't give up your values for money."
He pointed out that if we had 5 million in cash we wouldn't be here now.
He made reference to the redundant conferences for the different races
as a possible cost savings whereby subsidies could be increased.  And he
also noted that the consultant from Stanford had submitted his report
without ever coming to the campus and assumed that marketing and fundraising
techniques had been tried to the ultimate.

The proposal included several sections, including
Disadvantages of Andrews merger:
1) No incremental capital
2) Reduction in academic programs
3) Does not solve inefficiencies of current administration
5)  Incremental costs of merger are unknown
6) being asked to approve when full terms are not disclosed
8) suspicion of NAD motives..."guinea pigs" in new higher ed model.
10) AU is not assuming assets or liabilities---they have control without risk

Short term financing
Claim that AUC is funded through MAy 31, 1996 [this was disputed, see below]
Pursue other bank financing and restructuring debt
Group of SDA investors to provide private financing.
Focused fundraising on top 100 donors, with PR video
Loans from alumni, constituents, friends

One year financing
Top 50 donors each commite to raise $100000 or more through network
of friends in one year.
Next 50 raise $75000 or more.
Next 50 raise $50000 or more
Next 50 raise $25000 or more

Long term financing:
$15 million capital campaign over seven years

Cost cutting:
Cull marginal majors,
Hire some people as combined staff/faculty.
Restructure cafeteria pricing.

Recruitment:  Continue existing programs plus more.

More information can be obtained on this part from 
Will Kitching, 111 Brigham St.  #8-E,
(508) 562-5082.

At the conclusion of Kitching's remarks, Glenn Coe requested to make 
a few remarks.  1)  If AUC is not considered to be a "going concern"
then not a single commercial institution will lend to them.  The only
solution is internal.  2)  The merger with Andrews is good idea
and the remaining AUC constituency should not have any problem 
maintaing identity.   There is no downside to doing "due diligence"
to flesh out the details of both proposals.

Many questions were then asked from the floor.
One was procedural, asking if we were considering only the merger proposal
or also measures for financial exigency. It was agreed that either could be

Some of the more significant questions dealt with if it was possible
to reduce the amount of money that the Atlantic Union sends up to the NAD
and GC.  1 or 2% was the figure mentioned.  The chair asked A.C. McClure
to speak to this issue.  Key words in his speech...can't use
money that is due another organization... that is money that doesn't
belong to you.  The topic came up a couple other times and the chair
referred to the difficulty of changing the "laws of the Medes and Persians."
Other delegates echoed this theme with "time to move the Medes and 
Persians out and bring in the Greeks".  

Sylvia Ellis of Bermuda rose and suggested that an offering be taken
at the session and that she would start it with $200.  $9000 was raised
from the 100-odd delegates and 150-odd spectators.

John Satelmajer, vice-president of the student association, outlined
the student activities at Atlantic Union College now under way in
fund-raising and recruitment.  (Plan is to raise $250000 before 
end of year).  "It's not a financial thing, it's a faith thing"  he said."
He presented a petition with the signatures
of 180 students on it, opposed to the merger.  Most of the other students
present at the meeting echoed the anti-merger sentiment, although
one or two pointed to an earlier poll that had been taken showing the
student body 2:1 in favor of the merger and spoke in favor of it.  It 
should be noted that this meeting occurred during the college spring break
so not all the students were available but many stayed over to attend the 

One brother [whose name I did not catch] mentioned that there was a 
racial divide and that almost all who had supported keeping the college
open were black and those who had supported the merger were white.
"Did Christ die to save policy?"  he asked, and also suggested that
several of the leaders at the front table would hear Christ say 
"depart from me, I knew you not."

Other miscellaneous comments from the floor:
"This is like mortgaging your house and then moving out and living
  in a tent and letting your neighbor come in and live rent-free"

"Collaboration is a good idea but the merger is not"

"We are so tied up in red tape...why is it so hard to give?"

"I love this school and I'm not going to see it go down.  If you
need help, ask me.. I'll do anything."  [a student]

After the period for comments for non-delegates, Stennett Brooks,
president of the Northeastern Conference requested time to speak.
[The Northeastern conference has 45000 of the ~75000 members 
in the Atlantic Union which covers New York, New England, and Bermuda]
He pointed out that his conference's subsidy and students are
divided between AUC and Oakwood College.  His estimate was 100 at AUC
and 200-300 at Oakwood.  He pointed out that Oakwood once endured
similar problems and was able to turn things around.

He pointed out that he did not support the tithe witholding from upper
divisions that had been suggested by several of his pastors earlier
in the meeting. He also noted that the problem had been around for
quite some time and that several times [as a member of the board]
he had believed that 'just another $500K or $1M' would solve the problems
as the administration claimed. 

He expressed problems with voting a "concept" such as the Andrews 
merger, also wondered what role the Lake Union constituency would
have in the merger, what board seats if any would be assigned,
could the [often-mentioned but never confirmed] 4-5 majors shrink to two?
He urged what several other speakers had mentioned earlier,
namely pursuing a dual track of negotiating the AU merger and 
simultaneously continuing to pursue ideas to maintain the independence
of the school.  He then proposed an amendment to that effect,
which was seconded.

Richard Osborn, NAD VP for education wondered aloud if Andrews would 
continue with talks on this basis.   The answer appeared to be yes.

Elder Griffin of the Greater New York Conference noted that there are
currently 541 SDA students from the Atlantic Union attending other
SDA colleges such as Oakwood, Southern, and Andrews.  "This is our college.
Bring them back."

Norman Wendth of AUC expressed the idea that both groups, pro and anti-merger
both showed passion and love for AUC which means that there are some
things that it still does very very well.  He urged the continuing
of discussion with all interested parties represented.  

Elmer Malcolm of the Northern New England Conference drew the analogy
of the parable of the fig tree..."at first we were excited, we 
dug around the tree and fertilized.  But now we are out of fertilizer.
Even at current debt levels it will take 12-15 years to pay off the debt.

At this point question was called on the amendment, a vote was
taken by secret ballot.  The amendment passed 66-33.  It was then
declared by the parliamentarian to have supplanted the original motion
since it also included the text of the original motion.

The chair then suggested that a special constituency of the Atlantic
Union be called for March 31 to discuss this further.  Alvin Goulbourne,
the secretary of the Atlantic Union, protested that this would not 
be enough time.

A.C. McClure had spoken several times during the session but in his last
speech he made himself quite clear.  

Three issues remain to be resolved

1) Where to get the $3.2 million to finish the school year.
	[Actually he said that but somewhat less than that is required
	to only make it to May 31... 2.3 million]
	The consensus of leaders present at the meeting is that they all
	agree that the money must be found somewhere to avoid default
	and ascending liability.  But at this point they still do 
	not know where to get that kind of money.

2) A viable financial plan for the 96-97 school year
	[since even if the merger is concluded it cannot be implemented
	until the 97-98 school year]

3) Long term plan

In his opinion, both of the tracks  (Andrews merger or standalone)
speak only to #3.  He stated clearly that all 3 plans must be in 
place by the March 31 meeting, the budget for next school year must balance,
and all relevant concrete facts  (the alternative plan, the AU merger details)
must be in place.

The other factor involved in the time urgency is that AUC has to make 
the decision of how many faculty, if any, to hire by the end of March
so contracts can be issued.  And once contracts are issued, one
of the largest expenses, and a fixed cost at that, is committed and 
the point of no return is crossed to have the next school year.

AUC is at least $6.2 million in debt right now, endowment fund is gone,
$3.2M new debt neded to get through the year.
[That translates to losing more than $4 million just this year alone.]
They still don't know where the March 21 payroll or any future payrolls
are going to come from.

The plan on the merger negotiations was to come up with a 
comprehensive plan in time for a constituency meeting in June.

The plan in the "alternative proposal" was to begin fund-raising and 
creative loan finding immediately.  The constituency voted to pursue
the alternative proposal as one of the two tracks but gave the administration
and the ad hoc committee no specific directions on implementation.

The Atlantic Union constituency on March 31 will have to make a decision
whether or not to open the college again next year or not.  If a decision
to open is made, it will have to be backed up by a balanced budget.  From
what was said by the AUC administration, it doesn't get any easier 
to get loans even if lenders know that a merger with Andrews would
be forthcoming.  

Vocal opposition was voiced to the merger proposal by alumni, students,
and faculty of AUC.