Idealistic School Seeks Practical Money Answers : Education: Teachers and staff are adamant that this bankrupt learning center must find a way to regain its solvency.

Lunch recess hasn’t changed much at Los Feliz Hills School, a private campus quietly tucked away on a bluff near ABC Studios and the historic Shakespeare Bridge. Children scamper on a grassy playground as teachers, some clad in shorts and jeans, watch nearby or join in the frolicking.

But for administrators of the nonprofit school, it hasn’t been business as usual. Los Feliz Hills, burdened by heavy debts, anxious creditors and a troubled past, is in a state of bankruptcy.

An adamant army of teachers, parents and supporters of the small, scenic school say they are carrying on in typical fashion: providing innovative teaching, keeping parents directly involved and fighting to keep the campus afloat.

“We’ve had some really unfortunate mistakes financially, and we’re trying to overcome those,” said Donna Titley, whose daughter is a second-grader at the school--a calm, 6.2-acre oasis of grass, trees and five futuristic octagonal buildings at the end of a quiet residential neighborhood. “We love this school. And we’re going to do whatever we can to make it continue.”

The task won’t be simple. The school filed for reorganization Nov. 9. Under Chapter 11 of federal bankruptcy laws, the school may be allowed to try to solve its financial woes instead of shutting down. Los Feliz Hills administrators will meet with the school’s creditors Dec. 15, then submit a plan for paying $1.6 million in debts and balancing its budget to a bankruptcy judge.

The school owes almost $1.5 million in mortgages and interest, and about $83,000 in overdue taxes. It may be liable for nearly $40,000 in incidental debts. It even owes its headmaster, Chris Geissmann, about $8,000. Geissmann deferred part of his salary, he said, to help the school pay its bills.

But school officials say they are optimistic about the future of Los Feliz Hills. This year, Geissmann said, the school has begun meeting month-to-month expenses, paying its teachers consistently and insisting on prompt payment of tuition, which runs from $3,000 to $5,000 a year.

“We consider it a certainty we’ll stay open through the school year,” said Geissmann, a Harvard- and Yale-trained educator who became headmaster in January. “The question is next year.”

Most teachers and parents, who are encouraged to participate in the school’s administration, said they are concerned about Los Feliz Hills’ financial straits, but perceive bankruptcy as a necessary step for survival. Many said they considered it a positive move.

“I see it as just another phase,” said Gail Inagi-Everette, a first-grade teacher who left the Los Angeles Unified School District for Los Feliz Hills. “We’re not surrendering.”

Her husband, Lamont, also a former Los Angeles city schoolteacher, teaches a kindergarten class at the school, and their 3-year-old son is a preschooler there.

“I don’t feel at all like we’re struggling or fighting an uphill battle in terms of keeping the school going day to day,” she said.

Administrators are trying to cover debts by selling four acres of the campus, including a grassy football field near the parking lot, to developers for about $2.2 million.

That may not be easy. The campus was built on top of a landfill, and the soil covering it is loose, officials say. Earlier deals to sell the land fell through partly because of this problem.

The school last summer had negotiated with the Century Group, a Century City development company, over the land, but the deal ended in a lawsuit by the company.

Later negotiations with ABC Studios ended after the company offered to buy the entire property, including the school. Teachers, parents and administrators found the proposal unacceptable.

School officials said they are negotiating with several developers to sell the land, and could close a deal in time for the meeting in December. The school again is negotiating with the Century Group, which would build 50 townhouses on the property, a company spokesman said.

“There is a concern about what development will do to the nature of the campus,” said Joan Young, vice president of the school’s board of directors and mother of a kindergartener there. “But the school will really have a nice feel to it, no matter what happens to the four acres. It’s just a beautiful campus.”

Teachers, many of whom quit better-paying positions to join the school, say Los Feliz Hills insists on quality education but allows instructional freedom and emphasizes community. Parents volunteer as lunch and classroom aides, serve on the board of directors and work weekends fixing up the place.

“If you can set the dollars and cents aside, if you as a teacher can find an ideal place to teach, then that’s the place to be,” Inagi-Everette said. “That’s why my husband and I are at Los Feliz Hills School. It would be very easy for both of us to say, ‘We can’t go on teetering with this uncertainty.’ But we’re willing to go with the good times and the bad.”

The loyalty among educators, parents and students at Los Feliz Hills marks a departure from the school’s troubled past. In the 1970s, the school was known as the Apple School and was closely tied to the Church of Scientology. But differences over finances and power broke up the relationship in 1984, and the school lost all but 73 of its 335 students as parents loyal to the church pulled their children out.

In 1987, attempting to turn the crippled school around, school officials hired a new headmaster and replaced most of the faculty and administration. They began a new, experimental curriculum that stressed developmental, rather than structured learning, allowing children to learn at their own pace.

The efforts paid off in some ways. The school’s enrollment climbed to 220 students, and it won accreditation by the U. S. Department of Education. But debts began to mount, and the school was crippled by massive debts, chaotic financial records and declining enrollment.

“What we have is a combination of fallout from the previous school . . . and some dubious management and record-keeping and administration,” Geissmann said. “The fact that we’re in this situation indicates what those people weren’t paying attention to.”

Despite efforts during the past year to combat them, the financial problems have taken a toll. The school almost closed in the summer of 1988 because of the difficulties, directors said. This year, administrators dropped the high school program, grades nine through 12, because not enough parents planned to enroll their children. The school still is accredited, but only 89 students today attend Los Feliz Hills, which has 18 full- or part-time teachers.

School officials say they are certain that, given time, they can boost enrollment. Parents and teachers say they are prepared to help, and their efforts have proved powerful. A fund-raising campaign last year brought in about $30,000, and thousands more are expected from a computer seminar benefit scheduled in the spring, which is being given by a supporter of the school.

“I have a commitment to seeing this school survive,” said Vernita Mason of Atwater, a real estate agent who couldn’t afford to keep her son and daughter enrolled at Los Feliz Hills but remains on the school’s board of directors. “I have no uncertainty that we’re going to make it.”