On a September afternoon in 2008, Thomas R. Ahlersmeyer and Patrick T. Ferry found themselves sitting next to each other in an Oregon airport. The two college presidents had been together for a meeting of the Concordia University system, which is composed of six campuses operated by the Missouri Synod, a Lutheran denomination.
Ahlersmeyer was awaiting his flight home to Concordia’s Ann Arbor branch, and Ferry to its Wisconsin arm, in Mequon. Ahlersmeyer was returning to a campus on shaky financial ground, while Ferry’s had solid footing. Ferry wrote in his journal that day: “Did I mention that I had a preliminary conversation with the President of Concordia Ann Arbor about us acquiring that school?”
Nearly five years later, the conversation bore fruit. The two colleges agreed on an acquisition of Ann Arbor’s campus by the Wisconsin branch, which the two sides called a merger.
Tucked into the agreement was a simple provision that some in Ann Arbor are now eyeing warily. That clause, which gave the Wisconsin campus ownership of prime riverfront land in the fast-growing Michigan university and technology center in the event of Ann Arbor’s closure, is why many on the Michigan campus are tempering their rejoicing over recent news that the college won’t close this coming academic year.
“I have developed a lot of close relationships and mentors here and the thought of potentially losing those crushed me,” said Grace Dodgson, a junior. “I was happy that we were not shutting down right away and that there are more discussions to be had about the future of the school.”
But she knows there’s a big hurdle to make sure she doesn’t feel that hurt again next spring. “Over the next year I would like to see Concordia Ann Arbor become its own university so that we do not have to fear another situation like this being tied to another school,” she said.
The terms of the merger, which supplied a financial lifeline to the Ann Arbor campus, are now the focus of suspicion among observers who worry over the institution’s future.
“We never viewed either campus as just an asset to be considered for transactional purposes. and I’m not implying that’s exactly what is happening now, but that is certainly how it is being interpreted in some circles,” Ferry said on a podcast in late February.
A Roller-Coaster of a Month
Dodgson and others on the Ann Arbor campus had a roller-coaster of a February, starting with an email and video message from President Erik P. Ankerberg, who said that despite record enrollments, the Ann Arbor campus wasn’t doing well financially. The Ann Arbor campus had 1,200 total students in the 2022-23 academic year as compared to 892 students in 2015-16, and the Wisconsin campus had 4,980 total students in 2022-23. Job cuts, program cuts, and property sales were on the table and likely to occur before the start of the next academic year. That led many to believe the Ann Arbor campus was on life support that was about to be turned off.
“There was an immense amount of confusion and anxiety from the thought of Concordia possibly closing,” said David Smalls, a senior. “For many students, including myself, we were in a state of shock and anticipation as we didn’t know what this meant for our future.”
Students, alumni, and faculty rallied quickly. They wrote letters to the board, held prayer vigils, and started a social-media campaign. In addition to telling stories about how the university positively affected their lives, they questioned the need for cuts.
“We’re here all the time, and there’s a lot more students around on campus and so much good stuff going on,” said Kelly Matthews on a recent weekday while waiting to pick up her daughter, a senior, for lunch and some shopping. “I don’t understand this claim that Ann Arbor is in such a big financial mess. It just doesn’t make sense. We keep hearing how enrollment is growing. I wonder if there is some other reason they want to close this campus.”
Several others pointed to financial records they said showed the university was in good financial shape. Those records show the combined university finished the fiscal year ending June 30, 2022 (the most recent publicly available figures), $8.7 million in the black. The previous year, the university finished $37.1 million in the black. Separate figures for each of the two campuses were not included. University officials have declined interview requests.
The university’s administration pushed back against that impression in a February 23 letter to the campus community.
“... those documents include numbers (such as market returns for our endowment and restricted contributions) that do not necessarily help cover our ongoing and rising operational costs. That practice, along with the ‘fog’ of COVID and a long presidential search, has made the task of understanding the true financial position of the university more difficult over time. The new administration has implemented a modern and more sophisticated financial model that incorporates new financial health metrics, benchmarks, data points, and historical analysis to provide a deeper and more accurate understanding of the university’s financial position,” the letter said.
In a late-February town hall with faculty and staff members in Ann Arbor, Ankerberg said the Wisconsin campus covered about $5 million of Ann Arbor’s operating costs, not including various capital projects and administration costs. He said Wisconsin has contributed about $90 million to the Ann Arbor campus since the merger.
He also said the Ann Arbor campus doesn’t have enough opportunities for auxiliary income to help with a cash crunch, specifically calling out a shortage of dorm space. He noted the campus would need 500 to 1,000 new beds in “dorms fully paid for” to generate the income needed.
During that same town hall, Lonnie Pries, the Ann Arbor campus’s athletic director, asked if the campus could be bought by Ann Arbor residents. “I’d like to propose that you guys do an appraisal,” Pries said. “You guys come up with what this place is worth or what it’s gonna cost.”
Ankerberg said he’d consider it.
Then, on March 1, students, professors, and campus community members gathered in the landmark chapel for a mid-morning video announcement of their campus’s fate from the Rev. John Berg, chairman of the Wisconsin and Ann Arbor board of regents. With light streaming in from stained glass windows, they sat on the edges of their seats as a video of Berg’s message played on a screen in front of them.
“As you know, a recent financial-health analysis has alerted us to financial deficits that will impede our ability to live our mission and be well positioned for the future if we do not attend to those deficits on each campus,” he said, as those watching braced for bad news. “This situation is most acute at our Ann Arbor campus.”
Then, a smile flickered quickly across his face.
“I’m happy to share that Concordia University Ann Arbor will continue its momentum forward through the 2024-25 academic year and prayerfully beyond.”
The room erupted in cheers.
Berg went on to say the board would explore the option of spinning the Ann Arbor campus off into its own standalone university, which drew even louder cheers.
Berg did warn that budget cuts could still be coming for the campuses this coming year.
‘You Could Make a Lot of Money’
If Concordia Ann Arbor were to become its own college, it would undo the agreement that started back in the airport more than a decade ago.
In February 2009, a few months after the airport meeting, both presidents met again to talk about possibilities, according to a history written by Ferry in 2022. “The school is in a fair bit of distress … no minimalist solution will work, in my opinion,” Ferry wrote in his journal. “I suggested to Tom that we plan for something big or not at all. It is now in our court to develop a proposal for a viable model.”
For the next couple of years, merger talks didn’t make much progress, for a variety of reasons, including leadership changes at the Ann Arbor campus. Those talks picked up again in 2011, and last November, leaders from both campuses gathered in the Manor, a 1935 mansion at the heart of campus to solidify merger talks.
“The target was to formulate a plan to erase the debt of CUAA so that we could begin financially with a clean slate,” Ferry wrote in his history. “Provided all of the various constituent Boards and entities approved, CUW would then assume responsibility for operations at Concordia Ann Arbor and gain control of its physical assets.”
That represented a change in how the physical assets, including the land, were to be managed in the event of a campus closure. In the Concordia system, if one campus closes, the land would revert back to the Synod. But in the agreement hammered out by the two campuses, Concordia Wisconsin got the property rights if the Ann Arbor campus closed. It was included so that if the merger didn’t work out, Wisconsin could recoup money.
“Maybe I’m too cynical, but one of the first things I thought about when they announced a possible closure was how much the campus was worth,” said Matthews, the Ann Arbor mother. “I bet you could make a lot of money if you sold it to developers.”
The campus is along the Huron River and is sandwiched by popular parks that offer canoe and kayak rentals in the summer for river trips. The nearest neighborhood, across the river, has about 40 high-priced homes on land that is only a portion of the total size of the Concordia campus. The property is also a couple of miles from downtown Ann Arbor and the University of Michigan and the tech companies that have driven up property prices over the last decade.
While labeled as a merger, the reality of the acquisition hasn’t been lost on many in Ann Arbor.
It came up during a three-hour town hall with the faculty and staff and Wisconsin administrators. A member of the Ann Arbor faculty read questions to administrators from a lengthy list compiled from individual members of the community.
“If the property of main campus is sold,” one question asked, “where would the proceeds go?”
“I think it is really too early to talk about that,” Ankerberg replied.
The anxiety illustrates a fundamental truth in higher ed: “It’s very rare to have two equal partners” in a higher-ed merger, said Ricardo Azziz, executive director of the Foundation for Research and Education Excellence, who studies mergers. “All mergers will have someone that brings less to the table, but everyone brings something to the table.”
The situation around the merger a decade ago is commonplace, he added. Mergers should be done for strategic reasons, like the addition of a new market or bringing two colleges with strengths in different areas together. But that’s not always the case.
“In many cases, mergers are done because of financial” issues and done when it’s too late, Azziz said. Those mergers don’t often fix underlying issues, and “it’s not uncommon for one of the campuses to close” eventually. “Mergers have been on the upswing but not as fast as we’d like. Often when [colleges] are looking for mergers, it’s already too late.”
Once a merger is complete — especially if it has been in place for some time, like in Concordia Ann Arbor’s situation — it is tough to unwind it, Azziz said. That’s because all new infrastructure has to be created at one of the campuses and often underlying issues, like enrollment issues or lack of cash flow, aren’t simply fixed by separating.
That can lead to campus closures, something Azziz says could happen more and more down the road, citing an excess of several million undergraduate slots on campuses across the U.S. “We’re not going to be able to keep every campus open.”