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WMU Trustees demonstrate actual oversight

Trustees at Western Michigan University exercised some actual oversight today by voting to end WMU’s affiliation with Cooley Law School in 2023. In the past three years, the law school has faced several complaints that could affect its accreditation.

WMU and Cooley entered a co-branding partnership in 2013. Initially, the institutions believed that the partnership would strengthen academics at both institutions. Citing Cooley’s accreditation warnings, the COVID-19 pandemic, and lack of academic improvements, the WMU Trustees voted to terminate the partnership agreement, effective in 2023. According to the termination proposal:

“Ventures not at the center of WMU’s strengths and mission have been eliminated to maintain focus and stability through these unprecedented times,” the proposal said. “The board believes that affiliation with Cooley has become a distraction from the university’s core mission.”

Cooley Law School is one of just 10 American Bar Association-accredited schools to miss a newly revised accreditation standard that requires at least 75% of a school’s students to pass a state bar examination within two years of graduation. According to the ABA, Cooley’s passage rate (based on 2017 graduates) is 66%.

Actual oversight protects the institution

The WMU Trustees acted today to protect the institution they govern. Actual oversight includes looking at the goals of the partnership and determining that they remain unmet. It also requires a willingness to admit that the potential of an agreement and its actual practice are two different things. Further, actual oversight recognizes that when situations change (as in COVID-19), the range of probable outcomes also changes. What seemed like a good decision then turns out NOT to be a good decision now.

This is the kind of retrospective review the WCC Trustees need to exercise over projects like the Health and Fitness Center. COVID_19 has unquestionably affected the HFC. It cannot achieve its goal of revenue generation. In fact, it cannot achieve self-sufficiency. The pandemic forced the HFC to close during the last quarter of the fiscal year. In that time, WCC claims that the facility lost nearly $1M.

The HFC remained closed for the first quarter of FY21. If the loss rate is similar, the HFC should see another annual loss of at least $1M from the first quarter’s complete closure. In addition, it will face losses from the facility’s inability to operate at full capacity. Likewise, the pandemic will not relieve the College of the building’s extraordinary maintenance costs or its million-dollar annual bond payment.

Actual oversight would require the Trustees to reconsider the long-term advisability of pursuing this revenue-generation scheme, given the extraordinary vulnerability of this particular industry to the pandemic. It is time to start looking at other options.

COVID-19 and its effects aren’t going away

COVID-19 has simply changed the fitness industry in ways that do not support the continued operation of the HFC as-is. The six-month closure this spring and summer forced users into other fitness options. While some members will undoubtedly return with great enthusiasm, the building cannot be used to its full capacity. According to WCC’s CFO Bill Johnson, oversubscription is an integral part of the HFC’s business model.

The heavily damaged fitness market means that WCC cannot pass the building’s high (and growing) operations, maintenance and debt costs to a smaller pool of subscribers. Further, it’s not clear when or if the fitness industry can ever return to pre-pandemic operating levels.

The annual bond debt is scheduled to grow each year through 2027. This is unfortunate because there’s no indication that the subscriber base will grow accordingly, or that the remaining subscribers will tolerate massive increases in their membership and/or usage fees. Earlier this year, Muskegon Community College’s Board of Trustees re-examined their decision to purchase the former YMCA. After attempting to operate it, and losing millions of dollars over five years, the Board finally closed the facility and put it up for sale. In the end, they exercised actual oversight, admitted that the facility could not make money, and closed it.

It is time to start looking at the HFC in the cold, hard light of day. Where will the money for the last seven years of bond debt come from, if it won’t come from operations? How will the College pay for the extraordinary maintenance costs, when revenues don’t cover operations? When the Trustees authorized the HFC, what steps did they take to mitigate WCC’s and the taxpayers’ risk?

At what point does it become necessary to exercise actual oversight?

Photo Credit: Stefano Brivio, via Flickr