The Community House files for bankruptcy

The Community House Association in Birmingham filed for Chapter 11 bankruptcy reorganization in federal court this week after a purchase agreement with the United Jewish Foundation of Detroit was terminated and the association was facing a June due date for paying off several million dollars of debt.

In early November of last year The Community House announced plans to evolve into the Birmingham Area Community Foundation to carry on the original mission of the iconic community group, and the closure and sale of its building on 380 Bates Street in the city effective July 1 of this year.

A few weeks after the announcement, the city of Birmingham filed a lawsuit in Oakland County Circuit Court asking for an injunction to halt the sale as part of the city’s effort to retain The Community House as a community center for Birmingham residents, based on deed restrictions that called for the building to be donated to another nonprofit or leased to the city at a nominal rate if the association were ever dissolved.

Officials from The Community have responded that they were not dissolving the association but transitioning the organization to a community foundation to carry on the work of the nonprofit group.

The Jewish Foundation of Detroit had made a purchase offer that exceed the $7 million appraised value of the building and the purchase seemed to generate generally positive response in the community. The Jewish organization had agreed to live up to the original deed restrictions on the property and make them part of the purchase agreement, and had offered to continue with community events and access for local groups, much like what the building had been used for in past years.

Former chair of the association board Camille Jayne and current president of The Community House Alison Gaudreau explained to Downtown that the purchase offer from the Jewish organization was contingent on the city dropping its lawsuit but the city did not back away from the litigation which was not expected to be heard by the circuit court judge for many months if at all this year.

Jayne and Gaudreau said that the Jewish Foundation of Detroit even agreed to allow the city to make a competing offer on the purchase but its original offer “was too low.” Gaudreau said that The Community House Association made a counter offer and had set a deadline of Tuesday of this week if the city wanted to make another offer. The city commission held a closed session on Monday evening but another offer was not made until Wednesday of this week. Once again, Gaudreau said, the offer was considerably lower and contained too many contingencies and a time schedule making the offer unworkable.

The Birmingham City Commission has held a couple of closed door sessions in the past month to discuss lease and/or possible purchase of property, which is allowed under the Michigan Open Meetings Act. Although observers assumed the sessions were about The Community House, city officials have never disclosed the specifics of the meetings. Birmingham Mayor Clinton Baller on Wednesday said that no public votes were taken after the closed sessions and no public statements were made.

The sale of The Community House was intended to clear up about $3 million of secured and unsecured debt facing the association which had to be satisfied by the end of this June. The largest portion of the debt is owed to the Chief Financial Credit Union. Any funds left over after clearing up debt were expected to be be used as seed money for the new community foundation, the formation of which Gaudreau said had been receiving positive feedback in the community.

The Community House in recent years has struggled for revenue, tapped out budget reserves and opened lines of credit to continue operating.

Gaudreau said that the federal court would supervise an auction of the building and would be determining what groups or persons could be part of the auction. Jayne said that the reorganization bankruptcy was the “furthest thing from our plans” but the association was facing a “June 30th hard date to pay back obligations” and had “no other options.”

Gaudreau also said that the ECC educational program at The Community House would continue until the end of this May and any banquet events would still be honored until the end of this June.