Hualalai Academy to close

Hualalai Academy will close its doors to students in all grade levels at the end of this school year.

Hualalai Academy will close its doors to students in all grade levels at the end of this school year.

“May 2014. At that point, Hualalai Academy will not exist,” Head of School John Colson told West Hawaii Today following a tumultuous weekend that kicked off Friday afternoon with a letter from the school’s board of directors notifying parents that the K-12 private independent school would close its doors at the end of the academic year — or sooner — because of lacking funding. “Unless we find someone to eliminate the debt.”

Hualalai Academy, located at the end of Kealakaa Street in Kailua-Kona, carries a total debt load of approximately $2 million, Colson said. That figure includes the school’s expenses after revenues that total $1.4 million, a $200,000 bridge loan the school in November to keep high school operations going and approximately $300,000 in bridge loans secured during the past week from members of the school’s “ohana” after news broke of the impending closure.

“As soon as that one (letter from the board of directors) went out we were contacted by several folks who wanted to make sure we stayed open through the end of the year,” Colson said, noting the school has also received more than $25,000 in direct gifts. “With this level of support already in hand, we most definitely will be able to finish the year.”

The initial letter, dated Friday and signed by Hualalai Academy Board of Directors Chairman Matt James, specifically stated the school would close at “the end of the academic year or sooner if we are unable to secure additional funding,” and asked the school’s “ohana” to chip in to make it through May 31. The letter also provided background on how the school’s financial situation got to its current status including efforts to stabilize the school financially and January rejections from local and mainland banks for loans and refinancing.

“As of Jan. 16, with no other viable options for the school, we felt we must disclose our financial situation to you. Thus we must now work to find transitional funding to complete this school year and assist families as they begin to find other educational options for the 2014-2015 school year,” the letter reads. “To put our financial situation into perspective, the school needs to raise approximately $3,000 per student to make it through the remainder of the 2013-2014 school year.”

Colson said he, the school and board of directors felt compelled to let parents know mid-January so that they could make other arrangements for their children at other schools. Many private schools, which he said Hualalai Academy is working with to place its students, close application periods at the end of this month.

Concerned parents, who expressed frustration and confusion after receiving the letter via email Friday, contacted West Hawaii Today regarding the impending closure.

None would speak on the record with attribution about the planned closure, finances and initial letter, which one parent said was sent after the close of school Friday, leaving parents with no information on their children’s educational future over the three-day Martin Luther King Jr. holiday weekend.

But, two days after the initial letter, on Sunday, Colson, who admitted this week that the initial letter’s wording could have been better, tendered another letter to parents notifying them that the school had secured enough loans and gifts to make it through the end of the school year. Colson denied any impropriety when asked directly by West Hawaii Today regarding finances after one of the parents who contacted the newspaper questioned where the money went.

Despite securing funding to remain open through the end of the school year, including the $300,000 in bridge loans and more than $25,000 in direct gifts from Hualalai Academy ohana, the future for Hualalai Academy beyond May appears bleak.

However, Colson in the letter stated that potential donors seeking to help with the debt had contacted the school.

“We know that if we can’t kill the debt, we’re going to close,” he told West Hawaii Today, adding that the school’s effort to secure loans and refinance were rejected because of a lack of cash flow, despite the school’s land assets. “The question is: Can we find a way to reorganize and reopen at some point because we don’t want it (Hualalai Academy) to just die.”

Colson, who left Hawaii Preparatory Academy in Waimea to take over operations at the school on July 1, 2013, with the hope of stabilizing it financially, said a “perfect storm” led to the board’s decision to close the school at the end of this school year. James, who heads the board of directors, also took that volunteer position effective July 1, 2013.

The “perfect storm,” Colson said, was a culmination of events that started around 2007 when the school bought the land it sits on, currently valued at $8.7 million, and built the campus. Shortly thereafter, the economy tanked and enrollment numbers went down, which Colson attributed to possible competition from charter and other schools.

The school for the past several years has run an annual deficit of approximately $250,000, and, despite budget cuts this year that Colson said left the school running “bare bones,” the debt continued to mount, reaching now $2 million. Faculty also took a 10 percent pay cut to ensure the school remained open through May and the school is unsure if they will receive pay for June and July, which is included in their salary, Colson said.

“It’s all for the kids — whether we survive or not we want them to finish in a positive way,” he added about the teachers agreeing to the voluntary pay cut. “These teachers love these kids.”

In 2007, the school boasted 235 students in kindergarten through 12th grade. This academic year, 2013-14, enrollment had dropped to 110 students, prompting the school in November to suspend high school operations for the 2014-15 academic year. According to Colson, the high school has just 11 students, down from an average of 30 to 40 students.

According to numbers provided by Colson, which were also provided to parents in a letter tendered following a Tuesday morning meeting with some parents, the school this year to date has collected $1.425 million in tuition, but provided more than $203,000 in financial aid to students leaving the school with revenue of $1.22 million. Faculty and other program expenses totaled $1.42 million resulting in a deficit of more than $200,000.

That deficit doesn’t include costs associated with keeping the school open for the remainder of the academic year nor does it include the cost for closing the school for which the school has obtained the $300,000 in bridge loans over the past week, Colson said.

“It really boils down to a school of 110 kids and we’ve reached a point where we’re unable at this time to run a balanced budget,” Colson said. … “This school has tried everything quite frankly and I still believe that we can be a quality independent school if we can find a way to do away with the past debt.”

However, Colson said he, the school and its board of directors remain open to ideas and suggestions that may keep the school open while they hope for a charitable contribution. One of the options Colson said the board and school have considered in the past week is selling the land and leasing it at an affordable rate through a not-yet-formed limited liability corporation.

“We’ve turned every rock that we can,” Colson said. “We’ll be happy to talk with anyone who has ideas, suggestions.”

Hualalai Academy was founded in 1996, although it was started in 1985 as a satellite campus of Hawaii Preparatory Academy, according to its website.

Those interested in providing suggestions or ideas can contact Colson via email to jcolson@hualalai.org or call the school’s main office at 326-9866.