Community center in northern Minnesota, $2 million in debt, files for bankruptcy

A nearly 20-year-old community center in northern Minnesota took the uncommon step of filing for Chapter 11 bankruptcy.

The Walker Area Community Center has been a money pit on top of the hill overlooking Leech Lake since it opened in 2007. Its budget is generated from ice rentals, gym memberships and donations, which haven't been enough to sustain operations. Many community centers in Minnesota are taxpayer-funded. Walker's is a nonprofit.

It owes nearly $2 million to lenders, according to recent filings in U.S. Bankruptcy Court. Though uncommon for a nonprofit, much less a community center, Chapter 11 allows the nonprofit to remain open rather than dissolve as it restructures its finances.

"This path of reorganization, it's not a Hail Mary by any means. It's a truly strategic and well-thought-out play with some pretty smart people involved," said Chad Trapier, the community's center first executive director, hired last April. "We're all very confident that this is the right path."

A local bank and a prominent businessman are backing the nonprofit in this new chapter. First National Bank North pledged $250,000 and Dave Cochran, a marina owner in Walker for decades, agreed to match up to $1 million in community donations.

Trapier announced the voluntary bankruptcy Tuesday in a news release issued that morning and followed by an email sent shortly before midnight to 600 members.

"Encourage others to stay engaged, support our mission, and stand with us as we rebuild. We are here to stay!" the email said. It asked members to donate, volunteer and attend a public forum next month.

Trapier said he's done a lot in the past year to get the community center in the black. There are more committees and events to generate revenue, and fee increases for tenants like the Boys & Girls Club, Rotary and youth hockey association are under consideration.

"While consistent with its mission, the debtor provides these leases at a significant discount, which negatively impacts the debtor's ability to generate sufficient revenue to offset ongoing expenses," court records state, adding that there is a lot of deferred maintenance on the 50,000-square-foot facility.

The nonprofit's highest cash flow is during hockey season.

The youth hockey association pays $54,000 and is experiencing a loss in pull tab revenue from regulation changes on the Leech Lake Reservation.

Trapier said the association is important for youth, particularly for surrounding communities without hockey programs.

"It's absolutely essential that they're here, not just that but the Boys & Girls Club, the Walker School of Tae Kwon Do and Just for Kix," he said of the nonprofits using the community center.

The community center formed as a nonprofit in 2001 with the intention of building only an ice arena, Trapier said. But after years of community engagement, the plan evolved to add community space, he said. They were able to raise enough money to cover construction loans, but that was it, he said.

"So right from the beginning, a lot of community members, including City Council members, took the stand that it was destined to financially struggle, and that proved to be true," he said.

"It's essentially been a year of trying to prove consistency to people," he said. "These courts require you to really put together a pretty intensive plan where you have to explain everything and go to court multiple times and justify everything that's happened."

The property is named the Arvig Walker Area Community Center but commonly referred to as WACC (pronounced "whack"). Telecom company Arvig is a creditor that also paid for naming rights until last year, when the contract ended and the center lost $50,000 in annual revenue.

Trapier intends to approach townships and the city to see how they can use the facility more and contribute financially.

"This is really a collective effort to make sure this is done the right way," he said.

WACC's chief restructuring officer, Robert Burns, said in a statement that bankruptcy is necessary to achieve solvency "and serve our community for many years to come."

The public forum will take place June 4 at WACC.

Mike Hughlett of the Minnesota Star Tribune contributed to this story.