Let me begin by wishing each you a very Happy New Year.   On behalf the staff, I want to extend best wishes to you and your family for a healthy and peaceful 2008.

As you are all aware, I am asked each month to comment on the challenges and opportunities that face our YMCA.  I attempt, in those monthly comments to hit the high points that might not be mentioned during the regular meeting in the hopes that each of you will be up to date on our business operations and our work with kids and families in the communities we serve.

At our January meeting I am asked to be more detailed in my comments and provide a recap of our work during the past twelve months and comment briefly about where we are headed in the next year and beyond.  To make certain I accomplish this in a complete and effective manner, I have scripted myself so that I will stay focused and have a written record of my perception of our current condition as a YMCA.

Let me begin by simply stating that I believe we are in a significantly better condition, in every area of our operation as a YMCA, than we were three years ago.   The sad reality is that our great performance is masked by the onerous debt load we assumed to construct our Fry and Field House Family YMCAs and the liabilities we assumed when we merged with the Aurora YMCA in 2000.  We have this tremendously effective YMCA that continues to serve over 20,000 members, and many more community participants, each and everyday.  We are recognized as having a renewed commitment to our mission work and we are instilling values in kids which will help them to make better decisions as they grow up and become our next generation of leaders.  Our business is about changing people’s lives and we are doing exactly that each and every day.

I am privileged to be surrounded by a staff which comes to work every morning believing that, by the time they return home at the end of the day, our kids and families will be a bit stronger and our communities a bit better because of what we are doing as a YMCA.  It truly does begin and end with leadership.

I work most directly with nine professionals who report directly to my office.   Jane Bowers, Walter Johnson, Ginny Maloney, Joe McBride and DeeDee McDevitt support and lead the work of the corporate office and Jen Bartels, RJ Bartels, Judy Ellertson and Jeff Piontek ably direct our branch operations.   Every one of these individuals is committed to making our YMCA one of the finest YMCAs in America and I am delighted to work with them.

Equally important is the quality of the volunteers that serve on our board of directors.  Each year our board has become stronger and more diverse.  The unique genius of the YMCA in America is that each of our 1000 YMCAs are autonomous operations directed by local boards of directors.  We can not reach our full potential unless we are led by a committed, talented and grounded board of directors.  Together we are faced with a number of significant challenges.  I am comforted by the talents, commitment and stature of our Board and I thank you for your service.

So then, what is the State of the Heritage YMCA Group?  Right or wrong, most of us assess the performance of the Y, or any other business, by looking at the financial performance of the operation.  This year, for the first time in the past three years, we did not break even on our annual operation.  You will see on our 2007 year end report that we were $104,344 below break even on a cash basis and $293,211 behind the budget we established a year ago where we had hoped to improve our cash position by $188,877.

In a moment I will share the reasons for this performance with you.  There are a number of ongoing operational issues which adversely affected our performance.  One additional factor which had a huge negative effect was the closing on our letter of credit one month early.  As you all are aware we decided at mid year to change our primary banking relationship from Fifth Third Bank to Citibank at the conclusion of our five year letter of credit agreement with Fifth Third Bank.  It was decided in late fall to move that closing date to December 20^th.  That decision brought a total of $81,376 of added expense into this year’s operation.  Over $65,000 of these expenses would have been budgeted for and incurred in 2008 under the anticipated schedule for the transfer of our banking relation.  Unfortunately there is nothing I can say that will change the result.  All we can do now is learn from the year end result and improve next year.

Everyone here today understands that one of the most important responsibilities that I have as your President and CEO is to deliver a balanced budget at the beginning of the year and then lead an effort that meets or exceeds that expectation.  We clearly failed to meet that expectation and that responsibility rests with me and the office I occupy.

I can not change the result.  It is important though to understand and appreciate the fiscal strength in what seems like a very bad result. 

In the development area, our year end result exceeded budget by $122,000.  That is $200,000 ahead of 2006 and $450,000 better that 2004.  Our Strong Kids Campaign exceeded our $400,000 goal by $70,000.  This is not only important from a financial perspective, it is vital for our future work because we raised these funds the good old fashion way; we sat across the table from donors, one on one, and explained why the YMCA deserved their charitable contribution and how their gift would make a difference in the life of a child or family.  We live in an events driven philanthropic community and our long term best interests are best served by focusing on raising money by telling our story, one on one, over and over and over again.

Our Branch operations were actually very healthy.  Jen Bartels exceeded her budget numbers at both Safe ‘n Sound and Oswego.  Judy Ellertson completed her first year at Fry and leads one of the most productive YMCA facilities in America.  On a cash basis that operation, excluding debt payments and corporate overhead, netted over $1,300,000.  That is an incredible result given the challenges we have experienced in ramping up our child care facility and given the very competitive market in south Naperville.  Even our 98 year old Kroehler facility, under the leadership of RJ Bartels, came within $23,000 of meeting an aggressive, budgeted net of $180,000.

On the expense side of the budget, the overall operation finished the year over $250,000 below our budget.  Our challenge was on the revenue side. 

There are three major areas in which we have been challenged.  The Children’s Early Learning Campus has experienced significant challenge in ramping up attendance.  We have discovered this to be a very competitive, highly regulated business.  The cash commitment to this start up has far exceeded our projections and it has consumed an extraordinary amount of time from all levels of leadership.  We have also discovered that the process of throttling down the facility operations in Aurora have been more complex and time consuming than anticipated.  No one for a moment should question the validity of the decision we made a year ago.  It was correct then and it is correct now.  The reality is that the legal entanglements we inherited with the merger in 2000 would challenge the talents of a partnership between Houdini and Henry Kissinger.  And finally, we began the year with a weak membership campaign effort which cast a shadow over every month of 2007.  We can attribute this result to competition, balmy weather during the campaign and lack of intensity on our part.  The membership results were also deeply impacted by the elimination of facility based membership in Aurora.

Our opportunity in the New Year is to learn from these financial results and get back on course this next year.

I believe that our membership numbers in December indicate we will begin 2008 in a strong position to meet our membership budget in the New Year.  We did enjoy a strong membership response to an early December promotion and it would seem our current membership campaign, which ends next Monday, will be successful.  We will hopefully enter February with near record membership numbers after you adjust for the loss of membership attributed to the closing of our Aurora facility.  Our job now is to retain these members and slow the cancellation numbers.  I do want to recognize Hunter Byington for his incredible commitment to assisting our membership staff team in their work in creating systems that encourage membership satisfaction and renewal.

I am also optimistic about 2008 because of our growth this past year in camp and program participation numbers.  Program and camp income account for over 25% of our budget and last year we saw gains at year end in both of these areas.  It is easy to become so bogged down in the numbers that we forget that these increased revenue numbers mean we are touching more lives and positively impacting more families.

Before I conclude I would like to very quickly summarize the successes we enjoyed in 2007.

In Oswego we now have an eight acre parcel of land for a new facility on Wolf Crossing Road.  This generous gift from Diane and Gary Blocker is now annexed in the Village of Oswego and will serve as the focal point of a capital campaign which is now in the early stages of organization.  I wish I could tell you that success in this effort will be a slam dunk.  In truth this will be time consuming and challenging.  But when we do succeed, the Village of Oswego will be forever changed in very real and important ways.

In 2007 we did complete the significant reduction of program operations in Aurora and committed our YMCA to addressing the most important program opportunities with a more responsible fiscal model of operation.  Jeff Piontek has done an excellent job for us on the ground in Aurora.  The opening of the YMCA Youth Technology Center at Jericho Circle was a high point for our entire Association.  If you want to define our heart and soul of what our mission work should look like, you can point with pride at our program at Jericho Circle.

While we are far from the finish line in our efforts to address parking at the Field House, the willingness of ComEd to provide a lease on their property west of the Field House is a huge first step toward making our Field House a more productive program tool.  We are now beginning work with V3, through Rich Lannon, to design a parking area on the ComEd property. 

Also on the facilities front, our Kroehler/North Naperville Task Force group has begun to thoughtfully consider how the Y should serve the north side of Naperville in the next 100 years and what facilities will be necessary to meet that need.  As we approach the 100^th anniversary of the Kroehler YMCA in 2010 we will want to take advantage of that occasion to feature the YMCA’s first century of service in Naperville and leverage this birthday to raise capital funds to assist with the construction of a new YMCA facility.

And finally, you should all be proud of our ongoing commitment to the Naperville Family Resource Center.  It would have been very easy this past spring when the Naper Trails Board of Directors decided to terminate our lease to pack up our tent and discontinue the programming for the kids and families at Scott and Madison Schools.  Through a great partnership with School District 203 we are now offering a stronger academic experience to kids at sites on the school campuses at Scott Elementary and Madison Junior High School.

The Heritage YMCA Group enjoyed great success in 2007.  Our challenge looking forward is how do we continue and expand our good work within the constraints of a budget that is obligated to principal and interest payments that exceed three quarters of a million dollars.  I have said this before and I will say it again, we have an incredible YMCA program led by staff and volunteers who understand the mission of the YMCA.

I wish that I could tell you that our most difficult times and decisions are behind us.  In truth they are not and the hardest work is yet ahead of us.  We will take what we have learned this past year and work to make 2008 more financially successful while maintaining a program that attracts and holds members and advances the mission and values we believe make our YMCA special and worthy of broad base support.

When I joined you on this journey three and one half years ago, I had no illusions this would be easy.  Through your good works we have made great advances.  But we are far from reaching the vision you outlined and desire.

One of the great realities of being your chief executive officer is that there is no place to hide when things go less than smoothly.  And that is as it should be.   My job is pretty straight forward.  I am entrusted by you to employ and supervise a great staff, assist you in creating a vision for the future and developing a financial model of operation that provides sustainability for the overall operation.  Please never question that I understand these expectations and expect to be held accountable for their attainment.

But even more importantly, please know that what keeps me focused and excited about coming to work is the sixth grader at Jericho Circle who now has access to a level playing field with first class technology and leadership, or the high school senior at Neuqua who is passionate about civic responsibility because of Youth & Government and believes there is still sanity in our democratic process, or the child in Y guides and princesses that is spending time with Dad and will grow up and model that behavior or the girl in our swim class that will never forget the power of example of her instructor.

There will probably never be day when this business is going to be easy.  But the reality is that at no point in the past has what we are trying to do today with kids and families in the communities we serve been more important.  We truly are far better than we used to be and it is a pleasure to work with you as we strive to build strong kids and strong families in communities that are far better because we care.

Thank you and Happy New Year.

Tom Beerntsen

President and CEO