CENTRAL LIBRARY
Frequently Asked Questions Regarding Completion of the Central Library Expansion Project
Why is the Library considering issuing bonds to complete the expansion and renovation project for Central Library?
Issuing the bonds is the only feasible option the Library Board has. The Interim Central Library facility is barely adequate to serve as the downtown branch or the Library’s hub. The longer we use this facility, the less able we are to serve the growing needs of the public. In addition, we face maintenance and other costs at the interim facility.
Issuing bonds and quickly completing the project also is the most cost efficient. The Library Board looked into the costs of delaying the project until money can be recovered from the lawsuits over the design and construction mistakes that delayed the Project. Such a delay would add more than $20 million to the final cost, and delay its completion by at least five years.
The Library has pledged that all funds recovered in the lawsuits against the guilty contractors will be used to pay off the additional bonds. The Library also will seek in the lawsuits to collect all additional expenses caused by having to go to the bond market including interest, legal and banking fees.
Problems at the construction site first came to light in late February 2004. They appear to be problems of both construction and design. The Library hired forensic engineers to assess the extent of the construction errors and the criticality of those errors. This process was greatly delayed by a lack of cooperation by some of the parties involved.
The Library is suing Thornton Tomasetti, the structural engineers, Shook, the garage contractor and Patriot Engineering, the inspection firm. We anticipate a drawn-out legal process.
In the meantime, the Library has had to negotiate delay claims with a number of the contractors.
We anticipate that the delay, along with its attendant claims, attorney and other consultant fees, repairs to the garage, etc., will require another $40 million and $45 million in funding. We have established a separate fund to maintain an accurate record of all expenses connected to the delay. In the lawsuits we are seeking a complete recovery of all expenses from the culpable parties and their insurers. There is no evidence that any staff member of the library or board member bears any responsibility for this situation.
Why is the Central Library so important to the system?
Central is the main library. It will house a third of the collection and will host a quarter of all library visitors. It is the neighborhood branch for the 25,000 or so folks who live in the downtown, or near downtown, as well as for the nearly 100,000 people who make their living in downtown Indianapolis.
When the current Central was built in 1917, there were five branches and a collection of 200,000 items to serve about 290,000 residents of Indianapolis. The annual circulation was 700,000 items a year. We now have 22 branches and a service area that includes 863,000 residents who borrow 11.6 million items annually. Central houses our special collections; historical materials; and the Library’s Literacy, Volunteer and Foundation offices. Its auditorium will host community events, concerts and lectures.
Since the original Central was built, the service area’s population has grown by 300 percent as has the number of circulated items. It is nice to know that despite the invention of the radio, talking movies, television and the Internet, folks are still borrowing books at about the same rate as before those technologies came along. The Internet has changed the way residents use the Library and how the Library serves them, but it has not and will not make the Library obsolete. In fact, the Library system’s computers provide tens of thousands of Marion County residents with their only Internet access.
The new expanded Central also will offer more than double the number of computers available to the public and allow for patrons to have full access to the collection without having to ask for help, as well as being fully compliant with the Americans with Disabilities Act.
The new Central will have additional meeting, study and reading rooms and off-street parking for 400 patrons.
The old Central drew 2,000 patrons a day. We anticipate that the expansion and the restored Cret building will draw 4,000 patrons a day. That is more than 1.8 million people per year -- almost three times as many as went to see the Colts last year. The transformed Central will house one third of the Library’s entire collection and will host one quarter of all visits to the system.
For these and a number of other reasons, the Central expansion project was endorsed by the Indianapolis Star, the Indianapolis Business Journal and virtually every neighborhood organization in Marion County. The City-County Council even appointed a Blue Ribbon Committee to look into the entire matter. The Blue Ribbon Committee endorsed the project.
The new expanded Central will be the latest addition to a downtown Indianapolis that has seen a tremendous revitalization over the past twenty-five years. It will be the exclamation point at the north end of the mall and will be a major center of cultural and intellectual growth in our city.
Why is the Indianapolis-Marion County Public Library experiencing shortfalls in its operating budget? Didn’t the library realize when it embarked on the renovation and expansion of the Central Library and the building of new branches that it would have additional operating expenses?
First, we want to make it clear that there is no connection between the Central Library constructions delays and the Library’s budget shortfall. The Library and virtually everyone else involved in the decision-making process knew that there would be additional expenses in the running of a Central Library that was essentially doubling in size.
In fact, in preparation for the opening of the expanded Central Library the Board of Trustees made a conscious effort not to levy for all of the property taxes permitted. By 2003 the library had a maximum allowable property tax levy of almost $31.1 million, but was only taxing at the rate of a little more than $27.7 million. The Board of Trustees was holding this nearly $3.4 million annual taxing capacity in reserve until it was needed to fund the increased operating expenses at Central when it was to open in early 2006, as well as the operating expenses for the final two new branches (Flanner House and Lawrence) anticipated by the 10-year capital plan adopted in 1996.
However, pursuant to the court-ordered overhaul of property tax assessment procedures, there was an outcry to “do something about property taxes.” As a result, Senate Enrolled Act 1 of the 2003 special session was enacted. This legislation limited library boards to a property tax increase to be calculated with a state-wide formula. In no case could the increase exceed 5 percent. The practical effect of the formula has been to restrict the annual increases to about 3.5 percent. Any increase that would exceed the calculated amount would have to be approved by the local fiscal body. Even more seriously, the base year for these increases became 2003. This meant that with the stroke of a pen the Library lost almost $3.4 million a year in property tax revenues. Had the Library irresponsibly levied the property taxes before it needed them, it would now have the funds needed to operate Central and the two new branches. Instead the Library did the responsible thing and now finds itself short of money for having done so.
In early 2005 the Library began instituting a series of cost-cutting measures to make preparations for opening Central. In addition to the elimination of all overtime, elimination of retirement health benefits and the capping of salary ranges, the Library undertook to lengthen maintenance schedules, further privatize non-professional functions and instituted an early retirement program reducing our full-time staff by 40 employees.
Weren’t these cuts enough to get the library to where it needed to be financially?
With a little more stretching and cutting, we might have been able to achieve the sound financial footing we needed. However, the legislature dealt one more blow to the Library in Spring 2005. The legislature, in SB 307, took away IMCPL’s ability to increase its property tax levy the 5 percent (or 3.5%) before having to go before the local fiscal body.
As a result of SB 307, the Library now has to go to the City of Indianapolis, Marion County City-County Council to have its entire budget approved. We are the only library in the state so treated. Not even the Speedway and Beech Grove libraries have to go before their local fiscal body for any increase in property taxes. This is despite the fact that there are 99 library systems in Indiana that have a higher property tax rate than IMCPL -- and despite the fact that IMCPL is one of the most efficiently run library systems in the country. Additionally, Marion County is the only county in Indiana that does not share its County Option Income Tax (COIT) revenues with its library system. If the Library received its fair share of the COIT funds it would have an additional $850,000 per year.
The Library went to the City-County Council in August 2005, requesting an increase in its property tax levy. What happened?
The Library has three property tax rates; one for operating funds, one for debt service and a Capital Projects Fund that is used for shorter-term capital projects. We asked for a slight increase in our operating rate to beef up our operating reserve, which had been spent down over the previous several years. Our actual operating budget request was for 2 percent less than what we are currently spending and the personnel portion of the budget was down 6 percent. Regarding the debt service rate, we requested a $1.5 million increase to pay for the final bonds to be sold to complete the Central renovation and expansion project.
In 2001, $55 million in bonds were authorized to be sold to pay for the public portion of Central. The other $43 million was to be raised from the private sector by the Indianapolis-Marion County Public Library Foundation. The Library Board decided that it would not actually sell the bonds until they were needed. Thus, $35 million worth of bonds were sold in 2002, and $8 million of bonds sold in 2003. The final $12 million worth of bonds were scheduled to be sold in late 2004, but because of construction delays the Board decided to save taxpayers interest expense by delaying the sale of the $12 million until construction resumed. Marion County taxpayers saved $80,000 in interest as a result of this decision.
Once construction resumed on the project in July 2005, the Board made plans to sell the final $12 million of bonds in late 2005. The issue was to be for a ten-year period and was to have an annual debt service of $1.5 million. The legislation that gave the City-County Council authority over the Library’s operating budget did not give them authority over the debt service portion of the budget.
The City-County Council, however, adopted property tax rates that in effect require the Library to take the $1.5 million increase needed for the bonds out of the Capitol Projects Fund, so that the combined over-all rate would remain the same. This caused the short-term capital projects that can not be postponed to be switched back to the operating budget. The overall effect is to cause the operating budget of the Library to be short an additional $1.5 million. Once again, had the Library been imprudent and sold the bonds in 2004 before they were needed, the increase would have occurred before the City-County Council had the authority to say “no.”
So where does this leave the Library?
First, we need to issue the bonds to complete the Central Library expansion and renovation project. This will allow us to serve the public’s growing and more technologically sophisticated informational needs while gaining efficiency from adding the expanded Central as the hub of our system.
At the same time we need to work out a solution to the operating budget shortfall -- a shortfall created by the state’s legislation and the City-County Council’s recent decision. If no action is taken, in addition to the $1 million shortfall in the 2006 operating budget, we estimate there will be a $3.3 million shortfall in the 2007 budget and in 2008 (the first full year of operating Central) we estimate the shortage will be $6.3 million. The estimated percent shortfall for these three years is 2 percent in 2006, 9 percent in 2007, and 14 percent in 2008. Clearly, the Library cannot continue at its present pace.
Couldn’t the Library operate more efficiently?
No doubt, every organization could operate more efficiently. However, IMCPL is already one of the most efficiently run library systems in the United States. Based on 2004 data from the Public Library Association, IMCPL is the sixth most efficient among the fifty largest library systems in the nation. In this comparison, efficiency was measured by dividing each library system’s total operating budget by its total circulation.
What was impressive about this efficiency comparison was that it came in a year when IMCPL’s circulation was down due to the Central construction project which forces patrons to use the Interim Central facility. In 2005 IMCPL had a total circulation of 12.2 million items. In the last full year at old Central our circulation was more than 13 million. Our numbers and rankings will improve even further once the new expanded Central reopens in 2007.
The nationally recognized Hennin Ratings, recently released its 2005 library system rankings. Among library systems with a population of more than 500,000, IMCPL ranked sixth in the nation. We have consistently ranked in that ranking’s top ten over the years. There are 76 library systems in our category.
