Social Development Commission board members haven’t decided yet if bankruptcy is the right move for the agency after a virtual board meeting Thursday.
As an anti-poverty agency, SDC provided services that included tax assistance, weatherization and job training for years before halting operations amid financial turmoil two years ago.
Now that SDC is insolvent, which means it can’t pay its debts, and has little-to-no financial resources, the board discussed the agency’s options for the future.
Options include but are not limited to filing for bankruptcy under Chapter 7 for liquidation or under Chapter 11 for restructuring.
Commissioners discussed a memo outlining the bankruptcy options, which was not shared with the public, during the meeting. Commissioners said it was prepared by staff at Foley & Lardner LLP.
“I’m glad we have the document here,” Commissioner Michael Harris said. “However, time is just passing us by as well, because we do need to make a decision.”
With liquidation, a trustee would be appointed to help turn SDC’s assets into cash, distribute the money between the creditors and people owed and wind down and close the institution, according to Commissioner Peter Fetzer.
Fetzer is an attorney and partner with Foley & Lardner, but does not specialize in bankruptcy.
For Chapter 11, SDC and its creditors would have to agree to a reorganization plan in which SDC could reasonably resume operations and pay off its debt over time, Fetzer said.
“It can’t just be pie in the sky that you can resume operations,” Fetzer said. “You actually have to be able to demonstrate that to the court.”
Fetzer said funding didn’t seem likely for SDC.
“I’ve not seen it,” he said. “Without funding, we can’t operate. If we can’t operate, then I think we need to liquidate.”
Discussion
“I’m not convinced today that bankruptcy is the pathway,” said Jorge Franco, interim CEO and board chair of SDC.
He said he’s not sure what SDC would get out of it, as the organization is already in negotiations with some creditors and could continue to explore private sector opportunities to support funding.
Commissioner Richard Diaz said he feels like the commission is discussing the same things over and over again without taking action or determining the future direction of SDC.
“If bankruptcy isn’t an option and we are going to pursue funding, what are we going to do?,” Diaz asked. ”Like, what is our plan to entice funders to give us dollars?”
Commissioner Walter Lanier said he does not think SDC should pursue bankruptcy at this time, but he could see value in learning more about the requirements for reorganization, which Fetzer agreed with.
Fetzer said he’s hearing two visions for SDC: one would be a private-public model that would try to get private funding for lost grant funding and slowly rebuild SDC’s operations, and the other would be a much smaller SDC that would be more of a research entity.
“Visions are great, but that vision has to include how you actually think you can get funding and how likely is that funding to happen,” Fetzer said.
Franco suggested that SDC staff prepare a strategic list of pathways for SDC for the board to review and comment on.
Other items
Before the board moved into closed session, Amy Rowell, executive director of COA Youth & Family Centers, called again for accountability and transparency from SDC staff and commissioners.
Rowell has previously said SDC owes her organization more than $150,000 and hasn’t been open about when or why it hasn’t paid, which is putting a burden on COA and the nonprofit community.
“You talk about rebuilding credibility and reimagining the role SDC might play and ensuring the health and well-being of the community, but you must be willing to acknowledge much more clearly what happened to reassure that the same will never happen again,” she said.
Franco said he empathized with COA’s situation and understood Rowell’s comments.
“I can tell you this, we will do everything we can to restore those dollars that are owed. Unfortunately, it’s going to take time,” he said.
SDC’s next board meeting is scheduled for Aug. 20, according to the agency’s website.
Jonathan Aguilar is a visual journalist at Milwaukee Neighborhood News Service who is supported through a partnership between CatchLight Local and Report for America.
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