LITTLE ROCK — The Cathedral School in Little Rock owes the federal government more than $100,000 in back payroll taxes and has depended solely on one donor to cover hundreds of thousands of dollars in expenses, Trinity Episcopal Cathedral church officials said Thursday.
A tax lien has been placed on the only property the school owns — two houses on Broadway. The buildings that house classrooms, which are situated in the historic Quapaw Quarter near the Governor’s Mansion, are owned by the church and not subject to the lien.
The elected vestry board of the church announced Wednesday that it had voted to close the school after 54 years but didn’t explain its decision until Thursday. School officials had told the Arkansas Democrat-Gazette that they were surprised by the move because they’d been working hard to make the school financially stable.
“Given the large dependence on a single donor, the lack of a budget for the 2011-2012 school year, whose fiscal year begins July 1, 2011, and the precarious nature of the school’s financial status, the vestry was greatly concerned about the school closing during the course of the upcoming school year,” Kay Stebbins, senior warden of the vestry, said in a statement.
“That scenario would have been the worst possible outcome for the students, faculty and staff of the school, and the vestry wanted to do all in its power to protect against that bad ending.”
The school serves children in prekindergarten through fifth grade. It is to close today. In addition to the tax lien, Stebbins said, the school owes more than $300,000 to banks for mortgages. Stebbins said in an interview that school officials were aware of the vestry’s concerns and should not have been surprised by the vote.
“Our concerns had been voiced for quite some time — as far back as two years ago,” when the church first began talking about closing the school.
John Tisdale, chairman of the school’s board, agreed that the vestry had shared its concerns but said they had not suggested that the school would close.
“We’ve been addressing [the concerns] for two years,” Tisdale said.
Fred Niell, the school’s headmaster for the past two years, did not immediately return a message seeking comment Thursday.
Calls Thursday to School Board member Jennifer Pyron also were not immediately returned.
In an interview Wednesday, Pyron said the school had been aiming to cover 70 percent of its expenses with tuition and 30 percent with private donations — a structure that she said many private and parochial schools follow.
However, she acknowledged that the school was far from reaching that goal.
According to the statement Thursday, tuition would not cover a sufficient portion of the school’s costs for more than five years. Vestry officials said tuition funds 32 percent of the school’s expenses, “leaving the organization $873,000 short of covering its expenses.”
“The vestry felt it was not financially prudent to rely on one donor for the next five years to fund the school,” the statement reads.
The statement said vestry officials began scrutinizing the school’s finances in 2009. That same year, Episcopal Collegiate in Little Rock opened a $19 million elementary school, which Pyron said drastically cut into the Cathedral School’s enrollment.
Enrollment dropped from 245 during the 2007-08 school year to 187 during the 2008-09 school year and to 60 in the 2009-10 school year.
Enrollment had jumped up to 79 during the most recent school year, Niell previously said, and it was expected to increase again next school year.
The vestry said the increase was because the school planned to expand to include the sixth grade — something vestry officials were not told about.
Though a donor had pledged to continue covering school expenses that were not covered by tuition, Stebbins said Thursday that the vestry was uncomfortable with that arrangement because there was nothing that legally obligated the donor to continue his support.
“We had no commitment other than his word,” she said. “Our concern was that something would happen that would prevent him from doing that.”
But Tisdale said there was no reason for the vestry to doubt the donor’s commitment.
“That donor has lived up to his commitment every year,” he said, adding that the school’s financial shape isn’t as bad as what the vestry has made it out to be.
“Like most other charities over the last two or three years, we don’t have any extra cash around,” Tisdale said. “But we also have very committed donors who have lived up to every commitment they have made to us. We don’t have any reason to doubt that those folks will not continue.”
Stebbins said church officials had not decided what to do with the buildings that house the school.
Arkansas, Pages 11 on 05/25/2011