24. Mills College Has $85 Million Without Restrictions, So Why Can'...

There is a rally today at Mills College, 4pm PST. Be there if you can, tune in if it's live. If you're down there now reading this, please spread the word about this blog. #MillsForever

Source: Save Mills coalition, live update

Truth and Transparency

Some big news on the lawsuit, too much to go into in detail right now. Basically, the College didn't hand over all the documents they were supposed to, so the AAMC are asking for the judge to extend the restraining order. The College is fighting back hard, going after the AAMC and the Plaintiffs for damages while repeating their same old arguments ("look! we found a voodoo dancing professor from Smith College that agrees with everything we say!") and throwing in a few new ones ("this lawsuit filed by two people of color against a predominantly white board is an anti-racism violation!"). The Defendants seem to be at the "throw everything at the wall in case something sticks" stage of their desperation to avoid transparency at all costs.

Thanks to the Save Mills Coalition for linking to this blog in their excellent post A Question Of Truth And Transparency. One of their readers sent us some referenced financial bullet points, pulled together from public documents. This is included below.

In recent Court filings, the College said that use of its endowment to remedy its financial emergency was restricted. This is a bald-faced lie, as the audited FY20 accounts show the unrestricted part of the endowment is over $70 million and, on top of that, the Board has also already approved additional borrowing from the restricted part of the endowment for $15 million. Perhaps they mean it is restricted from being used for their own nefarious (and self-dealing?) purposes.

The idea that the Mills endowment cannot be used to keep the College alive through ~~unprecedented~~ unexpected challenges like this century's pandemic is laughable, and hints at the undercurrent of what is really going on here - the theft of billions of dollars of assets right under the noses of the Governor and Lieutentant Governor, the Attorney General, the Alameda Superior Court judge, the Board of Trustees and all stakeholders.

This is why we need #NewLeadership. The obvious things are not being done; the things that are being done are increasingly bizarre, illogical and irrational. And that's just from what we can see, imagine what the stuff they are trying to hide must be!

The combination of hyper-secrecy and coldly calculated information warfare seems excessive for a non-profit dedicated to women's leadership and social justice, where all parties claim to be acting in good faith in the best interests of Mills College. Good faith and transparency go hand in hand; good faith and disinformation do not.

Which Is True: Audited Financials, Or Defendants Gaslighting?

Source: Defendants Cross-Complaint August 27, 2021

The College is now claiming their expected deficit for the financial year is $20 million (what happened to Beth's "half a billion to a billion?" Last year's result was a $6.4 million profit, so this is a near-$27 million swing to the opposite direction. However they calculated this implausibly high number, it still fits within the College accreditors view, based on extensive on-campus interviews with the CFO, President and others, that Mills College had sufficient reserves available to it via its endowment to get through several years of trading even in a worst case scenario.

Instead of showing their business case for the merger, the Defendants are fighting tooth and nail against transparency. Is there illegal activity going on? Well, Beth Hillman is a lawyer, she is surrounded by lawyers from the #7 biggest law firm in the world, including some from out of State not licensed to practice law by the California bar...and they are openly defying a judge's order. Innocent, law-abiding citizens with nothing to hide don't do things like that.

In the latest move, the AAMC has filed to extend the injunction as the College has not provided significant information that the judge ordered them to, such as what the actual terms of the deal with Northeastern are.

Source: Plaintiff's Ex-Parte Motion August 26, 2021

How can the Board vote on the deal if the terms of it are a secret? Why would the terms be so secret, if it is a good deal for Mills College? Why not just show the term sheet to the Trustees asking for it?

The Mills College Financial Situation

[Thank you to whoever compiled these bullet points, this is a helpful summary]

The information used here has come from the Mills College audited financials, IRS Form 990 annual returns, and filings with the Alameda County Superior Court.

The essence of the AAMC lawsuit is to ask the Hillman Administration and Executive Committee of the Board to prove their claim that the College has no option but to close forever, or be absorbed by Northeastern University. The two Plaintiff Trustees sat on the Board of Trustees, which according to Mills College Bylaw 12.2 entitles them to inspect and make copies of "documents of any kind"i.

The College has denied this to the Plaintiffs, who claim in court documents that it "came as a shock" to learn on March 17, 2021 President Hillman's plans to cease granting degrees, make the campus co-ed for undergraduates of other colleges to live there, and change the name to the "Mills Institute". The Trustees had merely voted at the Board meeting on March 4, 2021 to begin discussions of a Teach Out plan for further consideration and design for a Mills Institute, both subject to further board review, deliberation and potential approval. Likewise, with Northeastern University, the Board voted only for negotiation discussions to begin, subject to final board review, deliberations and potential approval. This has been reported differently in the Hillman Administration's PR campaignii.

The Plaintiffs claim in Court documents they "have not seen evidence of the dire financial picture being portrayed; much to the contrary". Their filings share some of the information they found in their due diligence which has not previously been made public. The lawsuit seeks other information that so far the College has refused to provide in a practical manner for review, and a pause for 60 days in committing the College to any transactions until trustees have time to review this momentous decision.

Financial Highlights

Mills College's auditors Crowe Partners rated the College as a "going concern" through at least January, 2022. iv
In FY20 Mills received a score of 2.9 out of a maximum 3 in the Department of Education Financial Responsibility Ratio, its highest in 5 years v
The WASC re-accredited Mills College for another 8 years in 2020, noting the continued financial emergency was offset by other aspects of financial healthvi
Revenues grew from $53.7 million (FY19) to $66.8 million (FY20), an increase of +24% vii
Annual Expenses reduced from $61.8 million (FY19) to $60.4 million (FY20), a reduction of -2.2% vii
Mills College made an unrestricted profit of $6,366,736 (FY20). The profit with donor restrictions was $2,380,206. vii
Net tuition represented 29% of Mills College's overall revenues in FY20. vii
In FY20, total assets were $315.2 million, total liabilities were $42.7 million; leaving net assets of $272.5 million
Net assets without donor restrictions was $70.5 million (26%). viii
The College's endowment was valued at $206 million at 31 March, 2021. Chair Katie Sanborn has claimed the endowment was $189 million at 30 June, 2020. Trustee Carmen Wiley has claimed on Instagram the endowment was $190.9 million at 30 June, 2020. According to the audited financial statements the size of the endowment was $189.1 million (page 18) or $187.3 million (page 26) or $186 million (page 33). According to the IRS Form 990, it was worth $187.3 million at 30 June, 2020. It is clear that there is confusion within the Board about the present market value of the Mills endowment. ix
The market value of the endowment is at least $25 million over the corpus of $161 million.
The college has invested in offshore private equity and venture capital funds. These investments may not be reported on the books at fair market value.iii
One investment the Mills College endowment made was in Stripe, which is expected to be the most valuable IPO in U.S. history
The 135 acres of prime real estate in Oakland, CA is only recorded on the balance sheet as $291,686 xii
Plaintiffs have asked for a catalog and valuation of the art, rare books and manuscripts, Center for Contemporary Music and SF Tape Music Center archives, and other assets of the College. This was valued on the Balance Sheet as $3.4 million in 2020. It is certainly worth more than that, as a single item from the collection, a Shakespeare First Folio sold in 2020 for around $10 million.xii
Even without revaluing these assets to fair market value, Mills College's debt-to-asset ratio is low, its debt-to-revenue is low, its debt-to-endowment is low, its debt-per-student is low, and its endowment-per-student is high - all of which are indicators of financial health, not weakness.
The Board has already approved a $15 million loan from the donor-restricted endowment. This could provide immediate short-term finance to let the college continue trading out of the COVID recovery and figure out how to fix the structural deficit problem of expenses exceeding revenues after the Tuition Reset.xiii
One of President Hillman's first moves was to reduce the annual payout to the College from its endowment to 5%. It was only recently increased to 7%. Plaintiff Trustees have asked to see cashflow projections showing the impact of this increased payout on the College over the next 3 years. This has been denied. The difference between 7% of $206 million and 5% of $187 million is approximately $5 million per year. xiv
The College has a $5 million line of credit from First Republic Bank which expires in March 2022. They are the largest creditor. xv
The second largest creditor is the AAMC, who provided a $2 million loan to the College. Repayment terms of this loan have already been renegotiated, with the AAMC providing the College some grace in delaying repayment.xv
The College was previously able to raise money with a bond issue even after Moody's downgraded its credit rating. The bond debt, also to First Republic Bank, is approximately $24 million.xv
The Mills College endowment holds investments in fixed-income funds of $24.8 million , ie. greater than the bond debt xvi
The College needs to spend $3 million+ on ADA compliance. This is part of a settlement made with the Department of Justice in 2012, which allowed Mills College to improve its ADA compliance in 3 stages, 2 of which have been done. The 3rd stage is due to be completed by December 31, 2023.
Mills needs to spend $3-$6 million for sewer improvements, required by EBMUD xvii
Mills needs to spend $1 million for boiler improvements, required by Bay Area Air Quality Management xvii
In FY20 Mills College received $7,694,782 in COVID relief funding from the PPP and HEERF programs. It is not yet known how much they received in FY21. xviii
Plaintiffs claim that expected substantial insurance payouts related to COVID have not been included in cashflow projections. ix

The publicly available information raises serious questions about the true financial position of Mills College, compared to what has been reported by the President. The Trustees have also seen information that is not publicly available. The Administration's fierce fight to avoid explaining their rationale, rather than handing over the documents, seems to indicate there is more to what is going on than meets the eye.

Mills College appears to be able to trade through its challenging circumstances. The argument of the Plaintiff Trustees is bolstered by the Save Mills coalition's independent expert Stefano Falconi, the AAMC legal team's forensic accountant Jeffrey Brandlin, and other industry professionals. Janet Holmgren, former President of Mills College from 1991-2011, told the Daily Beast "I think this idea that women are not interested in women's colleges is yet to be proven"xix.

FOOTNOTES

i. Bylaws: https://www.aamc-mills.org/s/Complaint-for-Damages-and-Equitable-Relief-1.pdf Page 48
ii. Plaintiffs statement of shock: https://www.aamc-mills.org/s/04-Declaration-of-Dr-V-Nakka-Cammauf-ISO-Ex-Parte-Application.pdf Page 2
iii. Plaintiffs have not seen evidence of dire financial situation: https://www.aamc-mills.org/s/05-Declaration-of-T-Singh-ISO-Ex-Parte-Application.pdf Page 3

iv. https://www.aamc-mills.org/s/04-Declaration-of-E-Roberts-ISO-Opposition-to-TRO.pdf Page 8
v. https://www.aamc-mills.org/s/04-Declaration-of-Dr-V-Nakka-Cammauf-ISO-Ex-Parte-Application.pdf Page 4

vi. WASC Accreditation Team Report https://wascsenior.box.com/shared/static/uyf83gz15endntryapq78qk6ztb3wlbz.pdf and Feb 2020 Letter https://wascsenior.box.com/shared/static/dhgmp2gqknmsd8ac7eqtqghn5zcvng96.pdf

vii. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 6
viii. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 5
ix. $206m endowment: https://www.aamc-mills.org/s/Complaint-for-Damages-and-Equitable-Relief-1.pdf Page 8
x. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 33
xi. Stripe biggest IPO in history, expected in 2021: https://www.forbes.com/advisor/investing/upcoming-ipos/
xii. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 30

xiii. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 12
xiv. 7% payout rate https://www.aamc-mills.org/s/07-INDEX-EXHIBITS-ISO-Opposition-to-TRO.pdf Page 132
xv. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 13
xvi. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 29
xvii. ADA & deferred maintenance costs https://www.aamc-mills.org/s/07-INDEX-EXHIBITS-ISO-Opposition-to-TRO.pdf Page 133 ; DOJ settlement: https://www.justice.gov/sites/default/files/usao-ndca/legacy/2013/01/23/mills_college%20signed%20settlement%20agr.pdf Page 57

xviii. Audited FY20 Financials https://inside.mills.edu/about-mills/docs/FY20-Audited-Financial-Statements.pdf Page 34,35
xix. Daily Beast: https://www.thedailybeast.com/the-fight-to-save-womens-colleges-from-extinction>

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24. Mills College Has $85 Million Without Restrictions, So Why Can't It Stay Independent?