Financial troubles lead to purchase of Urbana U.

Urbana University has been acquired by Franklin University in an agreement that allows the smaller 164-year-old school with an estimated $30 million economic impact in Champaign County to remain open.

The deal, announced Tuesday, will provide financial stability to Urbana and extend the geographic reach at Franklin, a private nonprofit institution based in downtown Columbus.

Staff cuts are likely at Urbana, although the school — which has about 1,800 students — will maintain its name and athletic programs.

Financial details about the agreement weren’t disclosed. The move was necessary due to long-term debt at Urbana and administrative decisions that led to deficit spending, according to information from the universities and tax forms filed with the Internal Revenue Service.

The agreement will likely benefit students in the long run, said Kirk Peterson, president of Urbana. But in the short term Urbana University faced serious problems if a deal wasn’t made to shore up its finances.

Several local officials said the deal was crucial to save the historic institution..

“We were at a point where losing accreditation because of financial conditions at the institution was becoming a reality,” Peterson said. “This is a true godsend for us in that it helps us align with an institution that has financial stability because of the years of success they’ve had running the institution that is Franklin University. For us this is a wonderful opportunity.”

Peterson declined to discuss the decisions that led to the university’s financial troubles.

But a 990 form filed with the IRS showed Urbana University saw about $574,000 in operating losses for the fiscal year 2011, which ended in May 2012. That tax form was the most recent available on Tuesday.

Urbana took in about $24.6 million in total revenue that year, but saw about $25.1 million in total expenses. The university dipped into its reserves of $5.3 million to cover the shortfall.

Urbana will function as a division of Franklin. Urbana’s board of trustees will dissolve once the agreement is finalized, and the president will report to the Columbus university’s administration.

Urbana’s athletic teams and its affiliation with the NCAA will be unaffected.

However, layoffs are possible. A information sheet released with the announcement says “it’s clear that a reduction in overall salary expenses will be necessary.” More than 400 people worked at the university in 2011, according to the tax records.

Both Peterson and Christi Cabungcal, chief of staff and senior vice president for administration at Franklin University, declined to say how many layoffs were possible or which positions could be eliminated.

And because Franklin is an at-will employer, faculty at Urbana who now serve under a tenure model that guarantees some professors long-term employment will switch to Franklin’s policies.

The agreement will allow Franklin to extend into a new market and provide services to a more traditional student base, Cabungcal said.

The Columbus institution will also make investments to improve Urbana’s campus, although specific projects will be determined by work teams that include staff members from both entities, Cabungcal said.

Those investments could include repairs to roads on campus, for example, or improvements to student dormitories, said David Ormsbee vice president for enrollment management at Urbana.

Several local officials also said they believe the agreement will breathe new life into the struggling campus.

Franklin will acquire the smaller university’s assets and the deal will also allow both entities to share resources like information technology and administrative support, for example. It could eventually lead to more academic programs offered at both institutions.

The university wouldn’t have survived if not for the partnership with Franklin, said Steven Polsley, Urbana University Board of Trustees chairman. The university had been struggling financially for 164 years, he said.

Its current financial situation was such that they had been soliciting donors and setting goals earlier this year to raise $4 million by fall to remain afloat. But the fund-raising campaign wasn’t going fast enough to meet the university’s August deadline, Polsley said.

“Our borrowing was at a max. We really couldn’t borrow anymore. Our cash flow was such we couldn’t continue to operate much longer,” Polsley said, adding the partnership with Franklin University was a “match made in heaven.”

The school relied heavily on student enrollment dollars and had been struggling for years, said Urbana Mayor Bill Bean, who served on the university board between 1990 to 2000.

The partnership with Franklin should solidify Urbana financially, he said, and city officials will do what they can to support the schools.

“It’s going to be good for the faculty, staff and students,” Bean said. “I’m thrilled Franklin University decided to come here to Urbana and make a home here.”

Some students on campus Tuesday expressed optimism about the decision.

“(It’s going to) improve our technology a little bit and maybe get some improvements in the dorms and stuff like that, that we need,” said Anna Gebby of Springfield, a sophomore at Urbana.

Elise Brunner, of Bellefontaine, said she is excited that the university will remain in Urbana.

“Even if we need help from somebody else, that’s not a bad thing … everybody needs help every once in a while,” Brunner said.

Urbana was founded by Rev. James Parke Stuart, Col. John H. James, Milo Williams and other members of the Swedenborgian Church with a charter granted by the state in 1850, according to the Urbana University website.

Classes were offered to elementary and secondary students under the name Urbana Seminary and college level classes began in the fall of 1854, according to the university website.

The primary school was closed in 1911, leaving a secondary school and junior college. In 1928, the secondary school was closed. A four-year college was re-established in 1968, according to the university’s website.

In 1975, Urbana was granted full membership in the North Central Association of Colleges and Secondary Schools. The institution operated as Urbana College until 1985, when the use of the chartered name “Urbana University” was re-established, according to the Urbana University website.

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