The College of New Rochelle is on the brink of closure after staff cuts, asset sales and a refinancing failed to alleviate a debt crunch.
The 115-year old Catholic school in New York’s Westchester County said Friday that “cash flow challenges” probably will force an end of operations by the end of this summer. The school issued a statement Monday revealing that Mercy College in nearby Dobbs Ferry, New York, is working toward crafting a memorandum of understanding agreement to absorb CNR’s students and some faculty.
CNR, with an enrollment of about 3,000 students and five campuses in the New York City area, has grappled with fiscal challenges since discovering $31 million in unmet financial obligations in 2014, including $20 million in unpaid payroll taxes. Mercy would not assume any of CNR’s debt if the agreement goes forward, according to CNR.
“Mercy College is actively working with regulatory and accrediting agencies to make sure that approvals are in place to accommodate CNR’s programs for fall 2019,” the New Rochelle-based school said in a statement. “Mercy College is uniquely positioned financially and academically to offer current CNR students an uninterrupted pathway to continue and complete their education.”
Moody’s Investors Service cut CNR’s debt rating one notch to junk-level Ba1 in 2013 citing liquidity challenges that left the school with just 78 monthly days of cash on hand. A year later Moody’s withdrew the school’s underlying Ba1 rating on $57 million of civic facility revenue bonds issued through the New Rochelle Industrial Development Agency and the Dormitory Authority of the State of New York, citing “insufficient or otherwise inadequate information.”
CNR tried to combat its fiscal challenges with a December 2016 auction of five single-family homes located adjacent to the campus. An August 2017 report released by the school also detailed savings achieved through staff reductions, cutting two administrators and refinancing $6 million of revolving line of credit obligations.
“The College of New Rochelle‘s audited financial statements for the fiscal year ended June 30, 2018, have not been completed due to open audit items,” the school’s memo released Friday said. “These include negotiations with the Internal Revenue Service to abate accrued penalties under the installment plan for the college’s outstanding federal tax liability that were stalled during the shutdown of the federal government and are ongoing.”
In addition to its flagship Dobbs Ferry campus, Mercy has three other locations around the New York City metropolitan region in Yorktown Heights, the Bronx and Manhattan. Mercy is exploring leasing portions of CNR’s main New Rochelle campus and its four New York City campuses as part of the agreement.
Mercy’s total enrollment is around 9,500 including 6,864 undergraduate students. Moody’s withdrew its rating on Mercy bonds in 2005, which was in junk territory at Ba1 at that time involving around $7.6 million of debt.
CNR would be the latest of a string of colleges in the Northeast that have been forced to shutter due to fiscal stress. Vermont’s Green Mountain College and Newbury College in Brookline have both announced plans to close at the end of the spring semester after experiencing enrollment challenges. Hampshire College in Amherst, Massachusetts, is not accepting a full freshman class for this fall while it explores a strategic partner.