The swift and shameful death of McNally Smith

St. Paul sold McNally Smith’s owners the building for $1, and excused the school from paying property taxes.

St. Paul sold McNally Smith’s owners the building for $1, and excused the school from paying property taxes. Alex Uhrich

Isaac Hendrickson fell in love with McNally Smith College of Music in spring 2016. Hendrickson had grown up in Sparta, Wisconsin, and was looking for a college that would fit his growing musical interests. On the suggestion of a friend from high school, Hendrickson visited the downtown St. Paul institution.

“It was such a different school than all the others,” Hendrickson says. “You got experience doing all the other things that were included in the music industry.”

Hendrickson enrolled in McNally Smith, and for almost four semesters, everything went according to plan. By the end of 2017, he’d settled in nicely as a bass performance major. He loved his teachers and spent free time playing in shows and recording around town with his metal band, Corrective Motion.

“I had two years under my belt,” Hendrickson says, “and things were going really good.”

Then everything changed.

One Thursday night in December, Isaac reported to his job as a school receptionist. Friday would be payday. He’d put in a lot of overtime the previous two weeks, and was counting on one last paycheck before Christmas.

“Everyone’s looking for answers,” says Liz Brooks, who graduated from McNally Smith in the nick of time, but has friends who didn’t.

“Everyone’s looking for answers,” says Liz Brooks, who graduated from McNally Smith in the nick of time, but has friends who didn’t. Alex Uhrich

Hendrickson noticed large groups of people standing around. It was unusual. A close friend of his came over and broke the news: McNally Smith was closing. Immediately.

“He gave me a hug,” Hendrickson says, “and then it was just hard to believe. I didn’t even know how to react for a couple of hours. And then I found out we weren’t even getting paid anything for the entire last pay period.”

It took a few days for the news to sink in, and a few weeks for Hendrickson to figure out what to do. McNally Smith left Hendrickson with little else to show for a year and a half of college except an outstanding student loan, which he’d used to cover the school’s $12,500 tuition. Because the college wasn’t regionally accredited, his course credits would not easily transfer. He’d have to start over somewhere else.

The sudden end of McNally Smith meant Hendrickson lost his job and didn’t get paid. The missing paycheck was supposed to cover Hendrickson’s expenses for the next “few months,” including a Christmas visit from family.

Instead, Hendrickson had to move out of his apartment, and quickly. He moved back in with his parents in the small Wisconsin town he thought he’d left behind.

All things considered, he handled it pretty well.

“At least I was able to find someone to take my spot on my lease,” Hendrickson said. “I lost a rather large security deposit, but it was better than having to stay for the full contract. I was able to move out within a month.”

It didn’t have to be like this. Almost every college that closes at the very least gives advance notice to students, faculty, and staff. But that wasn’t the case at McNally Smith.

The key question is, why did the school close when it did? So far, nobody has a good answer.

Today, more than two months since the announcement, few students and faculty can say they saw the end was near. Over the years, there had been declining enrollment, followed by corresponding budget cuts. But both students and faculty believed a plan was in place that would allow the school to navigate the rapidly changing worlds of higher education and the music industry.

A much-discussed proposal would have converted McNally Smith from a for-profit to a nonprofit, as colleges are traditionally organized. School administrators had gone as far as assembling a board of directors full of influential community members, and had spent years working diligently on efforts to gain regional accreditation, a lengthy process.

In light of the groundwork laid for this change, staff see the chaotic closure as unforgivable.

“Nobody saw it coming,” said Kevin Schwandt, who taught at the school for six years. “We had been told we were moving forward with a nonprofit conversion. It seemed like it was going into effect, and would allow fundraising and federal financial aid for students. We thought everything was going along just fine, and this happened, and we were just in shock.”

The school’s third-floor café provided the clearest example of the shutdown’s poor planning. For many students, the café was a center of campus social life, and they counted on the steady supply of affordable food. When the closure was announced, the café, lacking paid staff, simply stopped serving. Students went hungry.

Alex Huther used McNally Smith connections for drumming work, but is now looking for a school unrelated to the music industry.

Alex Huther used McNally Smith connections for drumming work, but is now looking for a school unrelated to the music industry.

“With all the infrastructure shut down, none of the students were able to purchase food on their cards,” said Shon Parker, who was a full-time voice teacher at McNally. “The last week of school, there was a tremendous amount of students with no food.”

Along with the kitchen manager, who also wasn’t getting paid, Parker raided the institutional-sized fridges and pantries. They extracted whatever they could find.

They cooked it all, serving up pulled pork, cold-cut sandwiches, gluten-free pasta, and more. Meanwhile, local businesses like Pizza Lucé and Trader Joe’s donated additional meals for the hungry, despondent students.

“It was completely volunteer work by all those involved,” Parker says. “A couple former students came in and helped, which was really awesome. It felt like a family to a lot of people, and when family’s in trouble you step up and help out.”

Other Twin Cities colleges have closed over the years, but none has been so badly managed as McNally Smith. When the nearby College of Visual Arts shut down in 2013, school officials gave everyone six months’ warning. Staff were available (and paid) to make sure credits would transfer to nearby schools, like the Minneapolis College of Art and Design.

At McNally, by contrast, students and staff had no warning and no help. And it all happened just before Christmas.

“All the students would have to be out [of student housing] by the Christmas Eve deadline,” Kevin Schwandt says. “It was one of the many different ways that McNally poured as much salt into the wound as possible. And residents life staff would be homeless, because they also lived there.”

Because the school was a privately held institution, there is no paper trail to fill in the backstory that led to its financial ruin.

Back in 2001, Jack McNally and Doug Smith, both guitar teachers who had started a school called MusicTech, were essentially gifted the vacant building that had formerly housed the Science Museum of Minnesota. The city of St. Paul sold the property for $1, and, as a deal sweetener, kicked in $1 million in city-backed financing. Within a few years, MusicTech was renamed to honor its two founders, who held the majority of its shares.

Today that building is worth between $13 and $19 million, according to county assessors.

As recently as 2013, the school was doing well enough that then-Mayor Chris Coleman declared February 15 to be Jack McNally Day in St. Paul. The two went way back—30 years prior, McNally had been Coleman’s guitar teacher—and the school had enjoyed special treatment since its founding.

Aside from its $1 price tag and $1 million signing bonus, McNally Smith was granted a property tax waiver, as though it were another of St. Paul’s many nonprofits. The exemption saved the school (and cost the city) about a half-million dollars a year.

But Jack McNally Day proved to be a final high point. Over the past decade, enrollment declined. Students grew used to overburdened staff and unannounced cuts to services.

Tom Loftus, who worked as the director of alumni services until 2016, saw the downward slide first-hand.

“Every summer I worked there, they were making big cuts across the board,” Loftus said. “They were hacking and chopping up marketing, student services, career services—left and right they kept cutting and cutting.”

When Loftus found out one morning that the student counseling staff had been quietly eliminated, he decided to leave. Even today, describing the distant decisions of leadership of McNally and Smith, Loftus is upset.

“When money was good, they were fine,” Loftus said, “but behind the scenes they made a lot of decisions that impacted the way that students were served.”

After the closure was announced, it transformed the lives of hundreds of people overnight.

Liz Brooks was one of the lucky ones, because she graduated with her music production degree just as the school closed.

“It sounds dramatic, but my life split into two halves,” Brooks said. “I wasn’t sure if I was going to still get my degree, and have a graduation ceremony, and what my friends would do. I worked at the school café for over a year and lost my job, and I lost my school in a three-paragraph email.”

Brooks still thinks every day about her friends from McNally who didn’t make it out, and how much they lost due to the timing of the closure. To make matters worse, many of her friends had already paid their tuition for the aborted spring semester. She describes how they lost their jobs, school, and health insurance.

“Everyone’s looking for answers,” says Brooks. “No one has ever heard from Jack [McNally] or Doug [Smith] except for [one interview with] MPR. They sit there and Jack will defend himself, and talk about the situation, but he hasn’t said shit to any of us.”

In fact, McNally refused to do a taped interview with MPR’s reporter, and declined to get into specifics about the school’s finances, aside from the fact that enrollment was down and costs were up. Asked about rumors he and Smith had become “millionaires” running the school, McNally laughed for “about 10 seconds,” according to the reporter, before saying the school founders were “just guitar teachers who decided to start a school, and it just grew and grew.”

Attempts to reach Jack McNally and Doug Smith through their bankruptcy attorney for comment on this story were unsuccessful.

McNally and Smith, who own the school outright, filed for Chapter 7 bankruptcy in February. The 112-page filing—with more than 100 of those pages taken up by a list of its hundreds of creditors—shows the school’s assets vastly outweigh its estimated debts. The difference is significant: Assets, which would include both the building and all of the school’s equipment, are listed as between $10 and $50 million, and debts are between $1 and $10 million.

The ex-students who spoke for this story each offered a different perspective on the end of McNally Smith. Though people’s ability to endure the episode varied, for most it was a huge financial, logistical, and emotional blow. Everyone wants answers.

Cathryn Davis, a 62-year-old composition student who moved from Washington State to attend McNally Smith, calls it “the cruelest, meanest thing that’s probably ever happened to me.”

She explains: “Most national universities will not accept credit from McNally Smith. It’s very limited, the schools that I can go to.”

Davis is looking to transfer to a local school in a smaller location. McNally’s lack of accreditation leaves her with only a handful of choices, including Lawrence University in Wisconsin and Berklee College of Music in Boston.

Until last December, 21-year-old Alex Huther was happy with the school. Today, he feels betrayed.

Huther is a Tennessee native who had counted on his McNally Smith network for employment as a drummer at local theaters. He was set to graduate with a degree in drumset performance in 2019, but is now looking for another school outside of the music industry.

“It kind of also made me cynical about higher education,” Huther said. “It feels like there’s people in positions of power that I’ve never met before making decisions that are going to affect me for years and years and we can’t do shit about it. A lot of bad decisions were made and maybe things could have been avoided. Things like this don’t happen overnight. This is millions of dollars, and it doesn’t just disappear.”

For international students it was especially troubling, as their visa status depended on being enrolled at the school.

Back in Sparta, Isaac Hendrickson is living with his parents, and he finally found a local job that will help him start paying off his student loans—McNally Smith may get to wipe out some of its debt in bankruptcy court, but educational lenders still expect payment from its students. He’s working on the details of transferring to Winona State University, though the specifics of the deal leave a lot to be desired.

“As far as I know right now, it sounds like none of my credits will transfer except for one English credit,” he says. “But I will be able to test out on most of my classes, so I’m not starting over entirely. I just feel like it needs to be said that there was a lot of things that could have been done, other than just closing the school down.”

His resilience bespeaks the optimism of ambitious youth. But unanswered questions linger for Hendrickson, Huther, and many others.

“I hope that at some point we get an apology or an explanation,” says Liz Brooks. “But I’m not going to hold my breath.”