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Friday, November 20, 2015

HIGH-PITCHED SQUEALS EMANATE FROM BAY CITY AREA FINANCIAL INSTITUTIONS: What Will Happen To Those 2016 Balloon Payments When The Bay City Academy Bubble Finally Bursts?



Hint: it may not be Chemical Bank doing the squealing when the Bay City Academy goes under. The USDA-backed (meaning all you taxpayers) loan pays the bank up to 80 percent of its losses in the event of a default by Steven Ingersoll's Madison Arts, LLC.

But here's something I'll bet you didn't know, even if you read the Bay City Academy's top secret 2015 financial statement: Steven Ingersoll still managed to suck nearly $1.0 million dollars from the school — an amount that was paid to Ingersoll in the year after he was indicted by the federal government!

Gee, Miss Fortune, how did he do that?

Although the management agreement with Ingersoll's Smart Schools Management of Bay City, LLC was terminated in April 2015, Bay City's favorite felon still managed to pay himself $140,968 in management fees. (Prepaid in a lump sum, of course, at the beginning of the fiscal year.)

I know what you're saying: where did Ingersoll manage to pull out even more money from the school?

Lease payments!

The lease expense for the fiscal year ending June 30, 2015 was $759,972, and every nickel went to Steven Ingersoll.

The Bay City Academy conducts a significant portion of its operations with leased equipment and facilities — under the terms of non-cancelable leases with (wait for it) Steven Ingersoll's Smart Schools Management of Bay City, LLC!

Yes you read that right. Ingersoll's entities were paid $900,940 by the Bay City Academy during the 2014/2015 school year.

Of course, Ingersoll apparently uses some of his revenue to pay the 400 N. Madison Avenue location's Chemical Bank mortgage loan.

Chemical Bank, the financial institution holding the Bay City Academy's $1.8 million dollar mortgage, quietly filed an “assignment of rents” document in Bay County on April 10 against the charter school's 400 N. Madison Avenue property and an adjoining parcel at 412 N. Madison owned by Ingersoll.

Assignment-of-rents is a provision in a deed of trust or mortgage. The clause entitles the lender (in this case, Chemical Bank) to collect rents from the mortgaged property in the event of default by the borrower. This clause provides that during such default, all rents and incomes from the secured property will be paid directly to the lender to help reduce the outstanding loan balance.

In order to get the loan, Steven Ingersoll had to show some “skin in the game”. The bank required Ingersoll provide 20 percent of the equity in the project, and Ingersoll and his wife, Deborah, both signed loan papers.  (The Ingersolls were using jointly held personal property as security, although Assistant US Attorney Janet Parker alleged during Ingersoll's trial that the duo used a property holding whose deed had already been transferred but not recorded.)

According to the Bay City Academy's super secret 2015 financial report, minimum future lease payments under its non-cancelable leases after June 30, 2015 are as follows:

2016 $ 759,972
2017 $ 690,948
2018 $ 690,948
2019 $ 690,948
2020 $ 690,948

So follow along with me now: during this current fiscal year (ending June 30, 2016), the Bay City Academy is scheduled to pay off $2.2 million dollars in short-term loans (which are in reality state aid note payments the school subsequently refinanced when it couldn't pay off its previous loans within the required 12-month window), shell out another $759,972 dollar lease payment to Steven Ingersoll, make a dent in its $1.3 million dollar deficit, and pay all its expense — all of that on revenue that's projected to fall well short of $4.0 million dollars.

Even Janet Yellin couldn't make that math work! 

And one more thing about the USDA-backed loan that's supposed to bail out Chemical Bank if Ingersoll defaults: how do we know the USDA will cover the bank's losses in the case of an asset forfeiture?

Squeal, piggies, squeal!


  1. Breaking News !! There is a story about the $1.3 million debt of BCA on Mlive. I had to check Mlive a couple times... thought I was seeing things.

  2. Thanks for the heads-up. Amusing to read that Craig Johnston, president of Bay City Academy's Board of Directors, blames Ingersoll for the mess.

    Hey, wait a minute! You were on the board the entire time Ingersoll was making that "mess". Johnston's remedy? Change the name of the school.

    Anybody have suggestions for a new name?