MONEY TREE: Texas College Asks Bankruptcy Court for OK to Sell Property
TYLER, Texas (AP) — The oldest junior college in Texas is seeking permission to sell a “substantial amount” of its property after filing for bankruptcy earlier this year.
Lon Morris College is a 158-year-old United Methodist School in East Texas but has suspended its fall semester. The Tyler Morning Telegraph reported that the school submitted an application in federal bankruptcy court seeking permission to sell much of its property.
The application says Lon Morris has an estimated 112 acres of real estate with dorms, classroom buildings, a library, a chapel, and admission buildings. Sales would pay creditors and former employees.
Lon Morris is in Jacksonville, a town of about 14,500 people about 125 miles southeast of Dallas.
A judge may decide on the college’s request at a hearing scheduled for Oct. 31. If it’s accepted, a property auction could be held Nov. 15, according to the application.
The newspaper cites the application in reporting that Lon Morris is trying to hire an auction company that would market and sell school and certain personal property and at least two of the major secured creditors agreed “to a cash auction of real estate by public auction free and clear of liens, claims, charges, encumbrances and interests.”
Meanwhile, Capstone Partners, which the school previously hired to facilitate an agreement with an educational and financial partner, has suspended its efforts, partly because Lon Morris lost Title IV eligibility. The firm made the move even though the application indicates that there was some interest from would-be partners, according to the Telegraph.
Jack Nelson, who has served as Lon Morris’ board vice president, told the newspaper the school has made a small income through selling vehicles, but that he believes those proceeds were used to keep the doors open and have people at the college respond to transcript requests and check on the facilities.
Lon Morris suspended classes in August after the U.S. Department of Education decided not to allow students to use federal aid there. Federal statutes disqualify schools that file for bankruptcy.
A few years ago, the two-year college reinstated its football team after a nearly 70-year hiatus in hopes of saving it from mounting debt by increasing enrollment. Instead, the school was burdened with waves of new students who couldn’t pay their bills and overwhelming football expenses.
The college’s football-based revitalization strategy involved recruiting more than 300 football players for the first season on partial scholarships of $7,500 each, leaving them to pay more than $15,000 in remaining expenses and replenish the school’s coffers. The recruiting helped more than triple the school’s enrollment to about 1,000 students by 2010.
The campus didn’t have enough room to house the rush of new students, so administrators leased a nearby hotel. Lon Morris also offered huge tuition discounts to players — as high as 53 percent in 2010 — and failed to collect payments from those who could not pay, yet continued to take classes.
Other costs, including hiring security to combat reports of misbehaving players, further damaged the school’s finances.
The debt topped out at more than $20 million, according to court documents, forcing administrators to furlough almost the entire faculty.