Bau Graves stood in front of an audience in Michigan last July and spoke frankly about the Old Town School of Folk Music in Chicago, where he served as executive director.

Graves shared insights he had not yet made public back home: that the deputy director he hired in April was being personally groomed as his successor, that his retirement was imminent, that he was “embarrassed” that the Old Town School was “pretty much made up of white folks” and that the “organization is part of that systemic racism.”

What Graves, who stepped down in January, didn’t reveal that day was that, metaphorically, the Old Town School was on fire, the flames of which still burn today.

To begin with, there is a faculty revolt over charges of unfair wages and leadership failures, which recently resulted in the formation of a union with the Illinois Federation of Teachers (IFT). There’s also a gaping budget deficit—nearly $1 million by the end of August, according to board minutes. Worse yet is the reality that enrollment in group and individual classes, which make up the bulk of the school’s revenue, is plummeting. In 2017, the school reported a loss of $729,352.

Things worsened after Bau’s address. In September, the school’s board announced it was selling the school’s historic building at 909 West Armitage in Lincoln Park, igniting public rallies, town halls and an online petition that got sixteen-thousand signatures. The board’s stated reason: to seed a $10 million endowment. In an interview with Newcity, Graves said the sale was designed “to keep ourselves out of debt.”

In November, he sent his staff a letter announcing buyouts and suggesting layoffs were imminent.

The school’s economic crisis, detractors say, is largely of its own making, due to a decade of mismanagement, lost opportunities, misguided priorities and poorly timed decisions. For its part, the school argues that enrollment is down because guitar playing is out of fashion and because YouTube videos and School of Rock have crowded the marketplace.

In any case, the Old Town School is slammed with the worst public-relations crisis in its sixty-one-year history—a crisis that threatens the bankable goodwill the school has enjoyed for decades. These events have swirled over the past year to create a cyclone that will either uproot the school’s longevity, or make it a very different organization.

This account is based on interviews with more than two dozen people intimately involved in the school since Graves was hired in 2007. They include both current and former administrators and teachers. Many spoke on the condition of anonymity, either because they weren’t authorized to speak to reporters or because they fear retaliation. In some cases, the personal pronoun “they” is used to protect the gender identity of the source.

To understand where things are requires a brief history lesson. The Old Town School of Folk Music opened December 1, 1957, in a rental space at 333 West North, a former bank building. It was the height of the folk revival, when middle-class Chicagoans were discovering the music of Appalachia, the Smoky Mountains and the Mississippi Delta, as well as timeless songs from around the world. Frank Hamilton, the school’s first guitar teacher, established a teaching method he learned as a teenager from folklorist Bess Lomax Hawes, daughter to song collector John A. Lomax and sister to ethnomusicologist Alan Lomax. Instead of the traditional conservancy approach, Lomax Hawes taught songs, not notes, and within groups rather than to individuals. The idea was that folk music was as much of a social expression that would better communities as it was a discipline. If people sang and played music together, they would connect in ways that would intuitively make communities stronger.

“There was musical elitism in the academic community back then,” said Hamilton. “You could study there, but the teacher would tell you you’ll never be as good as Bach or Beethoven. The best you can do when you finish your degree is to go teach someplace. My motto is, music is not an exclusive club.”

Because of the Old Town School, folk music didn’t die in Chicago as it did elsewhere by the mid-1960s. The school groomed a new generation of singer-songwriters into the 1970s, including John Prine, who took lessons at the Armitage building, the first home owned by the school. The school became a focal point for musicians in Chicago and for those passing through, and developed national prominence for its teaching practices and booming music community. “Here’s one New Yorker who is damned envious… We can learn from you!” Pete Seeger wrote in 1980 in an open letter in Come For to Sing, the monthly magazine the school funded to cover the scene from 1975 to 1987.

By the 1990s, the school recast its image by programming ethnic dance and music from all around the world, such as flamenco, Senegalese drumming and jazz, all taught by preeminent musicians in the city who were scouted to build the faculty. Over these years, weekly enrollment jumped from 200 to 4,000 students. “We rewrote the mission to define folk music as a traditional music of the world. And therefore our programming reflected that,” says former program director Michael Miles. In 1998 the school moved into the 40,000-square-foot former Hild Library, an art deco building from 1929. Nearly $10 million in renovations turned the stacks into a 425-capacity auditorium. Joni Mitchell performed opening weekend. Eight years later, the school purchased a bakery across the street for $2 million, razed it, and in 2011 broke ground on a third facility, spanning 27,000 square feet. It helped that, thanks at least in part to the success of Wilco and Bloodshot Records, Chicago was then ground zero in the nation for alternative country. The Grammy-winning success of the “O Brother, Where Art Thou?” soundtrack also launched a wave of interest in stringed instruments and old songs. The school was flush with money, had steadily rising enrollment, community goodwill and a staff which was passionate about building upon it all for future generations.

And that is where the story really begins.

Administrators from the time characterize the spirit of that first decade in Lincoln Square like that of a modern tech start-up. “There was a very entrepreneurial feel that we were creating something from scratch. We wanted to push the school to grow from many corners,” says one former administrator. The staff was small but nimble, and employees wore different hats. But the casual nature of the operation also translated, at times, to sloppiness. One former administrator who worked closely with the budget says they were shocked to discover the school didn’t practice basic financial controls. “[The school] had never had a CPA for long stretches of time. That meant budgets were often delayed, accounts payable controls were nonexistent, and the numbers floated to the board every quarter were questionable.

“A lot of it is incompetence matched with inexperience,” they conclude.

Another former administrator says financial data “was unnecessarily opaque” when it was shared. Analysis of enrollment trends according to revenue was unavailable to department heads. This practice made budgeting each term difficult, because it was impossible to know “what [class] was most profitable and what was least profitable.”

The board’s decision to break ground for the new building was portrayed as similarly reckless.

“They bought [the land] because they were cash rich—that’s the bottom line. They were doing so well generating cash from operations, so they were sitting on all this cash,” says a former administrator who was present during that time. “They had no grand vision for what they were doing with all these properties.”

Graves took over as executive director in 2007, the same year the board voted to move forward with a $13.5 million campaign to raise the new building.

Then came the crash. The Great Recession that hit in 2008 snapped corporate checkbooks shut. The capital campaign was delayed, according to a person directly involved with the fundraising effort. “The potential big donors weren’t willing to make that level of commitment at that point because everyone was waiting to see what would happen.”

By 2011, when construction started, the school hadn’t raised enough to cover total costs, which were later adjusted upward to $17 million, according to school reports. The school anticipated enrollment to keep climbing. That year, Graves told the Tribune he planned to increase the number of classes to 900 from 700 and add at least a hundred teacher jobs to the payroll, but, in fact, enrollment had started to tumble.

By the time the new building opened its doors in 2012, total enrollment should have shot up in subsequent years because of the added classroom capacity. Instead, the opposite happened. Enrollment that year was 17,325 students, making up 35,805 registrations; by 2017, enrollment fell thirteen percent to 15,000 students, with registrations dropping nearly thirty percent to 25,300, according to school reports. Net income ended up in the red—dropping from a positive $2 million in 2011 to a loss of $729,352 in 2017.

Student tuition makes up the majority of school revenue, more than grants, concerts and other sales. Having a third of the school’s revenue stream cut by thirty percent, and its cashflow plunging toward red, inevitably meant a shake-up.

In remarks to the faculty in November 2012, Graves admitted that the administration wrongly assumed the building’s grand opening “would generate a substantial bounce in enrollment.” Instead, the growth rate was only two or three percent. “This miscalculation—for which I take full responsibility—has a ripple effect through the budget,” he said.

Making the squeeze tighter was the new debt. Monthly payments began that year on $10 million in tax-exempt bonds that the school had borrowed. “The assumptions were that we’d save significantly by moving when contractors were hungry and money was cheap—and that we’d successfully raise the rest of the capital funds faster than the interest payments on the bonds could eat up all the savings,” Graves said. He forecast that if the school paid off the bonds by late 2014, “it will have been a good bet. If not, we’ll end up spending more.” The school paid the last of its construction bonds for the new building in December 2015.

No one interviewed for this story blames the economic downturn of the school on the administration. Their shortcoming, most say, was resistance to creative risk-taking or reimagining how to use the existing facilities and brand to establish new revenue. Instead, years of inertia would plunge the school toward insolvency.

“What was within their control was the ability to react to the situation quickly and with great focus,” says the former administrator. “There were remedies that could have been activated that were resisted.”

Once Graves took charge, he made incremental cuts that administrators and faculty alike say were demoralizing. He “inadvertently jeopardized the collegial community by dispersing the concentrated community energy,” says one former administrator. Graves, on the other hand, was new both to the school and to Chicago. To him, cuts were cuts.

Gone were longstanding popular programs like First Fridays, a monthly open house that might feature a square-dance band in one room, children’s music in another, a group guitar strum in the auditorium and a mandolin jam in the hallway. Also gone were periodic tribute shows and Six-String Social, a weekly community gathering at the Armitage building that featured guest speakers, panel discussions, performers and group singing and playing every Friday night.

To the staff, cuts like these were the first indication that Graves didn’t understand how central community interaction was to the school and its traditions. “He took the joy out of it,” says a current administrator. A former administrator laments the lost marketing potential: “It was the best marketing we had, because it was fully rooted in our past and in our mission.”

Graves characterized the programs as “loss leaders.” First Fridays, he said, “wasn’t worth continuing to provide a fairly small group of teachers with a paid monthly party.”

But more troubling to those on staff was how Graves, facing falling revenues and enrollment, appeared disinterested, or unable, to get the school a comprehensive and professional marketing plan that would go beyond print ads and email campaigns to harness the power of data analytics to help the organization target their messaging on an array of digital platforms. Unlike Second City or Steppenwolf, which use their storied histories to generate revenue and build inventive programming, the Old Town School largely dismissed its origin story once Graves took over.

The school’s archive—rarely seen photographs, memorabilia and archival recordings—could be revenue sources through exhibitions, merchandise and media opportunities, as well as provide source material for larger marketing efforts. Bob Medich, the school’s marketing director since the mid-nineties, was involved in digitizing vault recordings. He struck a deal with Bloodshot Records to produce a series of five “Old Town School of Folk Music Songbook” CDs. Rob Miller, Bloodshot’s co-founder, said the CDs—featuring unreleased recordings from Old Town ranging from Andrew Bird to Steve Goodman—were successful, garnering reviews from all around the world and yielding significant and steady revenue for the Old Town School to this day. “It was the most successful marketing project the school had ever done,” Medich said.

But Graves fired Medich months after he arrived in Chicago and future editions were shelved. Miller said after Medich left he pitched Graves for Bloodshot to release live concert recordings from its archives dating all the way back to the school’s earliest days. The reissue market was booming then, owing to labels like Chicago’s Numero Group, Omnivore Recordings and Jack White’s Third Man Records. These companies were releasing archival recordings by everyone from Syl Johnson to Charley Patton. In the Old Town deal, Bloodshot proposed covering all manufacturing costs and giving the school the majority share of revenue, making it a win-win as a profit-maker and marketing tool.

But Graves rejected that, too. “Between the ‘Songbook’ series, the well of goodwill accumulated over the decades with touring artists and the treasure trove of recordings in their vaults, [the Old Town School] could have been the Smithsonian Folkways of the Midwest,” Miller wrote via email.

The Old Town School did receive two separate grants from the Donnelly Foundation totaling $80,000 to start a digital archive that launched in 2011. Selections from “Live From the Old Town School,” a total of 127 recordings that are available via iTunes and other outlets, are available to stream on the archive web page for free. Resource Center Director Colby Maddox also has uploaded field recordings and other archival material on the website and the center hosts a podcast and Facebook page that features interviews, archival recordings, photographs and oral histories that span the Old Town School’s long history.

School success stories were also ignored. When other organizations commonly ring heavy bells whenever former alumni win Grammys or get nominated into the Rock & Roll Hall of Fame, the Old Town School is often silent.

The school seemed to understand its influence when it reached its fifty-year milestone in 2007. It threw a successful benefit at the Auditorium Theatre that featured faculty, friends and alumni like Jeff Tweedy, Bela Fleck and Abigail Washburn, Roger McGuinn, and even students from the school’s Wilco ensemble. The evening thrust the school into the headlines, earned national media attention, and raked in proceeds from 4,000 tickets.

For most successful arts organizations, any major event, particularly an anniversary, is an entryway to raise funds. Yet when the school turned sixty in 2017, the date came and went. Graves said he “hemmed and hawed about it for a long time” but ultimately concluded the anniversary wasn’t enough of a milestone to warrant a splash. He added that recent competition from venues like City Winery make it “a lot harder to assemble an all-star cast” like the fiftieth event. “If we ask them to play four songs at a big benefit at a fraction of the fee they can be getting at multiple other venues in town, it’s not quite as appealing,” he said.

Colleen Miller, the school’s talent buyer for seveteen years, who produced the Auditorium show, rejects that claim. She says artists agreed to play the anniversary for “a pittance” because of the school’s reputation and the relationships she built over the years. In the end, the school netted $600,500 for the fiftieth anniversary concert and all related activities. Another event Miller produced during her tenure, a tribute in 1997 to Old Town School alum Steve Goodman, which featured Prine, Lyle Lovett, Emmylou Harris and Jackson Browne, brought in $350,000.

“Yes, the market has changed” for producing benefits, says Miller, who left in 2011 to join the launch of City Winery. “But that doesn’t mean you don’t come up with something. You do something deluxe in a big theater because you say, ‘How many other large organizations like us have survived sixty years?’ Of course it’s a milestone.”

Faculty members say they couldn’t understand why the school was withdrawing from the world and was stubbornly resistant to new ways of promotion. Graves decided to stop printing the school’s course catalog in 2009 and in a meeting told faculty they would have to play a bigger role in promoting their own classes and couldn’t rely on the school to do it for them. That compounded the feeling that the faculty was on its own.

Eventually, the wider community took notice. Rich Gordon, a student since 2001, says he was discouraged at how hapless the school appeared to be at expanding its outreach. All he saw the school doing to rally revenue were programming cuts and tuition hikes. He says both “have disproportional effects on young and poor people and people like me who want to take more than one class.” Since Gordon also happened to be the director of digital innovation at Northwestern University’s Medill School, he suggested to Graves that the school participate in a special program run by Medill’s integrated marketing and communications program that lets graduate students perform deep analytic dives into company data to produce comprehensive digital marketing strategies. Had it done so, the Old Town School would have joined the ranks of companies like Nordstrom and Allstate that have taken advantage of the program.

“I thought it would be very inexpensive to do and a better way to do marketing strategy,” says Gordon. “You get professional-caliber consulting work for a very modest price.”

Graves said no. He said he had just hired Simple Truth, a small branding agency downtown. “I wouldn’t want to engage too many cooks in our marketing kitchen,” he said. “It might cause chaos.”

Internal documents provide a snapshot into what marketing ideas the school was considering. One document from October 2017 shows the school’s top administrators sketching out marketing initiatives it wanted completed by the end of first quarter 2018. They include a rebranding to remove “of Folk Music” from the school’s name, producing video samples of classes for the online catalog, testing satellite locations in the West Loop or Pilsen that would focus on hip-hop production, African drumming, guitar and urban dance, and promoting two new programs: “Hip Hop/Music Production” and “The Music Industry.” By 2019, the school said it wanted new classes “in a variety of formats” that might incorporate a performance by a “visiting hot shot teacher” or others “taught by visiting celebrities when possible.” Other classes might focus on “the social side of music making, preferably in partnership with local microbreweries or distilleries.”

None of those ideas became reality. Kish Khemani, Old Town School’s board president, agrees that, “in some cases the school has not been quick to adapt to change in terms of programming and digital marketing.”

“But I think it is unfair to put all that on Bau,” he adds.