Lunchtime patrons work out on machines (left) Wednesday while others run around the indoor track at the Downtown YMCA. The YMCA of Metropolitan Milwaukee will sell most suburban centers but keep the urban ones, including the downtown site. Credit: Rick Wood

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Facing nearly $30 million in debt, the YMCA of Metropolitan Milwaukee filed for Chapter 11 bankruptcy protection Wednesday and announced it will sell the majority of its real estate assets.

Filing for Chapter 11 will allow the organization to complete its restructuring plan and deal with its remaining debt, which was on the verge of sinking the 155-year-old institution in Milwaukee.

The Chapter 11 bankruptcy petition — it is the most common form of bankruptcy and allows the YMCA to reorganize its finances without the threat of creditors' lawsuits — was filed with the U.S. Bankruptcy Court for the Eastern District of Wisconsin.

Under the restructuring plan, the Y will establish "an urban Milwaukee Y" centered within, or very close to, the city of Milwaukee, said Julie Tolan, president and CEO.

"The YMCA of Metropolitan Milwaukee fully expects that all centers, camps, programs and other commitments will continue to operate uninterrupted throughout the bankruptcy process," Tolan said.

The Y also will file an emergency motion with the bankruptcy court to allow it to continue paying employee wages and benefits without interruption, she said.

Vendors and suppliers will be paid according to their standard terms for any invoices for post-petition goods and services, she said.

Under the restructuring plan announced Wednesday, the Y will deliver services through centers that are primarily leased, restricted or donated and establish "a truly urban mission."

The YMCA operates 10 centers, plus Camp Minikani and Camp Matawa. The centers offer child care, after-school programs and day camps, along with health and fitness activities. The Y has 1,600 employees, 350 of them full time.

The centers and one camp that will remain part of the Milwaukee YMCA include:

■Rite-Hite Family YMCA, which offers a wellness and prevention partnership. It includes the Schroeder Aquatic Center, which was spun off into its own nonprofit organization in 2007 but still works in partnership with the Y.

■Northside YMCA, in the Lindsay Heights neighborhood, which serves as home to a Children's Hospital of Wisconsin primary care unit.

■Parklawn YMCA, the first YMCA in the country to be built in a public housing project, at Parklawn on the city's north side.

■Camp Minikani, on the shore of Amy Belle Lake in Hubertus.

■The Downtown YMCA, located in The Shops of Grand Avenue mall, will remain open, but the Y plans to sell the facility and look for new space to lease downtown, Tolan said.

■John C. Cudahy YMCA, which houses adaptive Miracle League baseball programs and summer day camps. Under the plan, summer programs will continue, but the center will close during the fall, winter and spring when it is underutilized.

The Cudahy Y was built on 55 acres near N. 91st St. and Brown Deer Road by Michael Cudahy, and he paid for a portion of the $5.5 million it cost to build the center. But the Y has not been able to bring new partners and develop programs, so it will be treated more like a summer camp until new year-round options can be explored, Tolan said.

What's for sale

The other properties, mostly in the suburbs, will be sold to "operators better positioned to continue these Y's and invest in these centers for the long term," and the money from those sales will be used for debt reduction, Tolan said.

■A letter of intent has been signed between the Y and the YMCA of Central Waukesha County to purchase the West Suburban YMCA in Wauwatosa, Tri-County YMCA in Menomonee Falls and Southwest YMCA in Greenfield.

■The YMCA of Metropolitan Milwaukee also has a letter of intent from the Kettle Moraine YMCA to purchase Feith Family Ozaukee YMCA in Saukville.

■The Y is still looking for long-term partners or buyers for the South Shore YMCA in Cudahy and Camp Matawa in Campbellsport, she said.

Pending the sale of all of the suburban centers — which the bankruptcy court must approve — operations, membership benefits, programs and services at all of them will continue as normal, Tolan said.

As previously announced, the Y is completing the $6 million sale of the Young Leaders Academy, a charter school, to Milwaukee College Prep, where the Northside Y is located. The Y is leasing back the YMCA facility under the deal.

The Y also continues to try to sell 20 acres on S. 27th St. that it owns in Franklin. The land was once contemplated as a new Y, but that plan was abandoned more than five years ago, said Robert Venable, YMCA board president.

YMCA members were notified of the restructuring plan.

"While we work to implement this plan, please know that it is business as usual at the Y," the notice said.

Chris Becker, the CEO of the YMCA of Central Waukesha County, said Wednesday the center's board will vote on the final offer to purchase the three properties at its meeting June 17.

"It's a big step, but a natural progression for our organization," he said.

Each of the three Milwaukee Y's is either in Waukesha County or on the Waukesha County border and fits the model of the Y's in Waukesha County, he said.

The acquisitions would double the size of the organization, which now runs two full centers — one in the city of Waukesha and one in Mukwonago — with smaller facilities at Carroll University, a camp in Eagle and a child care center.

Becker said the Waukesha County YMCA had debt of about $2 million and would borrow for the purchases, but he said there's been donor interest as well.

"We have strong facilities, growing membership and program bases, and we operate very conservatively," he said.

Problems date to 1990s

The Milwaukee Y's financial troubles date back to the 1990s when it expanded and built a charter school and new centers, and started new programs financed primarily with borrowing. The economic recession, competition from other health clubs, and a downturn in membership and contributions added to the financial woes.

Membership has fallen 5% a year over the past three years, Tolan said earlier. Today, the Y has 115,000 members, including 30,000 children. Donations have declined 25% since 2011, Tolan said.

In 2013, the agency listed net assets at $75.4 million, with most of that in property and equipment. Tolan said the organization's debt now exceeds $29 million.

The agency tried to address the problem by laying off staff, delaying investments in its centers, freezing salaries and benefits, and limiting program offerings.

"Absent a significant restructuring and debt reduction, the YMCA of Metropolitan Milwaukee will be insolvent by as soon as this fall," Tolan said.

A special task force of the board has been meeting since October to find a way forward.

Tolan, the first woman to lead the Milwaukee YMCA, became president and CEO in August. She said it soon became apparent a long-term solution was needed.

"After considerable discussions with banks and looking at all the factors needed for a successful outcome, the Chapter 11 process became necessary," Venable said. "There was no one single factor, but a combination of factors as we looked at a restructuring plan and looked at a sustainable urban mission."

That also required selling most of the real estate to reduce the debt.

"We believe this plan represents the most comprehensive solution possible for resolving the Y's urgent financial and operating challenges and is the Y's best shot at survival," he said.

Tolan said, "Selling most of our assets will give us a new organization that will be smaller, and we will have a debt we can afford to pay and that will be significantly reduced."

Although suburban centers provide a lot of revenue for the Y, Tolan said the urban sites are very important to fundraising and, collectively, raise more in philanthropy than the suburban centers.

"It's counterintuitive, but it's true," she said.

"This new urban model is eminently sustainable," Tolan said. "We raise a lot of money for scholarships, and people want to support these programs to give children access to these experiences."

Brad McDermott, speaking for the YMCA of the USA in Chicago, said that while across the country YMCAs are healthy and growing, like any other business or nonprofit, they are not immune to the effects of an economic downturn, he said.

"From time to time, Y's file for bankruptcy," he said. "Y's tend to reflect the community they serve, and if the community is struggling, the Y's will suffer, too."