A mental health clinic that serves thousands of low-income Glendale and Burbank residents will survive its financial troubles after a federal bankruptcy judge on Tuesday approved the sale of Verdugo Mental Health to a Culver City-based nonprofit.
Attorneys for Verdugo Mental Health asked for the sale to Didi Hirsch Mental Health Services after construction-related debt and a drop in revenues left the 54-year-old Glendale center on the verge of collapse.
“Back in October, we thought we’d be lucky to make it through the holidays without going dark,” Andrew Parlen, an attorney for the center, said. “Now we’re well on our way and we’ve crossed the biggest hurdle.”
In 2005 and 2007 Verdugo Mental Health, which provides crisis intervention, therapy, counseling in schools and mental health outreach, borrowed more than $6 million to expand its facility at 1540 E. Colorado St. But construction costs surged $1.9 million over budget as revenues from donors and state agencies dwindled, forcing the nonprofit to start looking for a savior this fall.
Didi Hirsch, which runs 10 mental health centers around Southern California, proposed paying $5 million of the $5.6 million Verdugo Mental Health owes its secured creditors, U.S. Bank and the California Office of Statewide Health Planning and Development.
On Tuesday, U.S. Bankruptcy Judge Peter Carroll approved the deal despite an objection from the Glendale Unified School District regarding the available cash. The Glendale, Burbank and La Cañada school districts, which jointly run a special education program that uses Verdugo Mental Health counselors, are owed $631,000 from a billing dispute with the center.
Bu under the plan approved by Carroll, it is possible the schools will not receive the money.
“We’re very concerned that we may not see the money needed to support our students,” said Glendale school board member Greg Krikorian. “At the same time, we are hopeful with Didi Hirsch that they are successful and we look forward to working with them.”
Parlen, whose law firm represents Verdugo Mental Health at no cost, said the center has substantial ongoing obligations it must pay before it can repay the schools or others.
“It is the hope there will be cash to be paid out to creditors pursuant to the bankruptcy code,” he said.
Didi Hirsch President Dr. Kita Curry said her organization will be operating the center by May 20.
“Before the end of the month, we’ll be in, continuing very needed services,” she said.
Her organization plans to keep many of the 64 staffers that serve the center’s 2,000 active clients, she said.
“We’ve made a point of ensuring we have staff on board who speak Armenian and Spanish, because there are quite a few clients where the parents or the client themselves are fluent in those languages,” Curry said.