The McNally Smith shutdown: 6 questions and answers on the school's finances
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The McNally Smith College of Music is expected to close Wednesday after more than 30 years in business. The St. Paul school said it was losing money and didn't see a way to reverse that.
The shutdown caught students, faculty, staff and many others by surprise, and has left them wondering about payrolls that haven't been met, advance tuition payments that have been made and other financial matters.
Here's what we know about the college's finances:
Who owns the school?
Ownership is split between the two founders, Jack McNally and Doug Smith.
What do they say about the finances of the college?
The school is a private business, and can keep financial information to itself. But Jack McNally said revenue was falling and costs were rising. Enrollment has fallen by about a third in recent years to about 440 students. And the school wasn't able to charge most students full tuition — about $28,000 a year.
The college has been giving millions of dollars in financial aid to students to help them afford the school. McNally said the school ran out of time to transform itself into a nonprofit and try to make itself financially viable that way. And with the delay, some critical financing went away.
What about the school building and other assets?
Property records indicate the school building is worth about $13 million and there appear to be mortgages of about $3 million on the property. There's also a lot of audio and other equipment in the school, although it's not clear to what extent the school owns it outright. But it seems that there could be several million dollars that could be used to compensate employees, students and other creditors.
What about the finances of the school's founders, Jack McNally and Doug Smith?
Some have suggested they're millionaires. But when asked about that, Jack McNally laughed for about ten seconds in disbelief and then talked about how he and Smith were just guitar teachers who decided to start a school and it just grew and grew. Public records don't indicate McNally and Smith are living like millionaires. Not based on what their homes are worth, at least.
What about compensating people who haven't been paid and others owed money?
Jack McNally said he understands people are hurt and angry and he wants do to the right thing by them. He said he and Smith have put in their life savings and borrowed on their homes to make payrolls. He said the two of them are committed to paying people what they are owed as quickly as possible.
Could the school be saved?
In an e-mail to staff and faculty on Monday, the school's founders said they are working very hard to see if it is not yet too late to preserve the college in some form. McNally told MPR News, "We are certainly open to ... anything we could do to resurrect the college. If someone has a feasible idea we'll listen." On Tuesday afternoon, Jack McNally said there are "ongoing discussions with supportive entities."
The McNally Smith website has not mentioned the school closing. The online admissions page was disabled Tuesday