The University of the Arts has filed for bankruptcy after a plan to merge the shuttered school with Temple University fell through.
UArts abruptly announced its closure in June, shocking students, faculty, city officials, higher education experts and the community. The bankruptcy filing on Friday came two weeks after it faced a demand from bondholders for immediate repayment of more than $50 million in debt, Bloomberg News reported.
The 154-year-old institution, whose properties include prominent historic buildings along South Broad Street, listed assets and liabilities of $50 million to $100 million in its Chapter 7 liquidation bankruptcy filing.
Members of the UArts community and elected officials including Gov. Josh Shapiro and Councilmember Mark Squilla had expressed hope that a merger might save the school. More than 330 of UArts’ roughly 1,100 students transferred to Temple over the summer, and leaders of the state-supported institution in lower North Philadelphia expressed enthusiasm for a merger.
But the Inquirer reported last month that the deal fell apart over objections from the Hamilton Family Charitable Trust, a family foundation that contributed about half of UArts $62 million endowment.
“After an exhaustive effort by our internal and external team, we were unable to identify a solution that would be in the best interest of Temple’s community and mission,” Temple President Richard Englert and other top university officials said in a statement.
Temple is already supporting the former UArts students with financial aid and other assistance, a Temple official told the Inquirer, plus a merger would have brought new expenses for maintaining UArts facilities and eventually operating a somewhat larger combined university. Temple has about 30,500 students.
But the late Dorrance Hamilton intended her funds for UArts, not Temple, trustees for the Hamilton Family Charitable Trust reportedly said, and they vowed to fight any effort to transfer the money to Temple.
The University of the Arts board subsequently said that it still wanted its endowment, including the trust funds, to be divided up among the schools that accepted its students, including Temple, Moore College of Art and Design, and Drexel University, in part to support scholarships for those students.
UArts’ properties and assets are worth an estimated $93 million, according to the bankruptcy filing. While endowments usually may not be used to satisfy creditors, the board could sell the university’s properties to pay off outstanding debts.
The union representing UArts faculty said on Friday that it had expected the bankruptcy filing “to come any day,” and lamented that it will “complicate” a class action lawsuit former instructors had filed over UArts’ failure to comply with the federal WARN Act, which requires advance notice of mass layoffs.
“This filing comes as former students, staff, and faculty continue to struggle with the damage done to their educations and careers, and while the UArts Board has neglected its legal, contractual, and moral obligation to negotiate severance payments for workers affected by UArts’ collapse,” the United Academics of Philadelphia said.
About 700 faculty and staff lost their jobs when the university suddenly shut its doors in early June.
“We will fight to make UAP members whole using every legal avenue available,” the union wrote in a statement. “The priority should not be bondholders or real estate developers, but the flesh-and-blood communities whose lives were upended by this disaster.”
It remains unclear exactly why UArts closed. At the time, the board chair and school president said “significant, unanticipated expenses … came to light very suddenly” and they “were unable to bridge the necessary gaps.”
President Kerry Walk told the Inquirer that some expected donations and grants never arrived and those unanticipated expenses diminished the school’s cash reserves.
UAP officials attributed the problems to a “colossal case of neglectful financial mismanagement.” They said the university had a $12 million loss in the last fiscal year and had mortgaged some of its buildings beyond their appraised values to secure $40 million in additional debt.
Pennsylvania Attorney General Michelle Henry is investigating the closure and, as part of the recent state budget deal, legislators passed new rules requiring orderly closures when educational institutions shut down.
“When UArts shuttered its doors, students and staff were left with no answers to their questions, no plans for their future, and no accountability for the losses the closure caused,” state Sen. Nikil Saval said last week. “Months later, the circumstances around the closure remain murky and opaque. We cannot let this manufactured crisis in higher education become an epidemic.”
