[BoulderCouncilHotline] Tuesday's Conversation About the Library District

[Wallach, Mark]

A few thoughts in connection with Tuesday’s discussion of the proposed Library District:

Let’s put aside for a moment the elephant in the room, which is the appropriateness of a 3.8 mill levy for the library district (the ”LD”) and its impact upon businesses, property owners and renters.  More on that later. For the moment I want to discuss the proposed intergovernmental agreement between the City of Boulder and the LD (the “IGA”) which sets out the terms and conditions upon which the district, should it be created, will operate. There are still issues to be resolved in the IGA itself, and I want to address some of those, as follows:

1) Do we convey our assets to the LD or lease them? It is important to note that there is no revenue advantage to the city either way. If we lease the properties, it is likely to be at something like $1.00/year for 20-30 years (similar to what we do with the Dairy). If we convey the assets, it is likely to be at the same price. But there are certain advantages to the City in leasing the properties and I believe that is the direction we should take.

If the properties are conveyed the City loses even the small controls that would be possible through a lease: the properties are sold and that is an end to it. If the LD fails to maintain the assets in good repair, we have no say in the matter. If the LD wants to mortgage them, potentially exposing them to foreclosure and ownership by another entity, we will have no say in the matter. If they do not maintain them as safe, clean, and welcoming spaces, we have no say in the matter.

A lease is not a back-door mechanism for control of the LD. Full responsibility for maintenance, repair and general operations is given to the LD, subject only to the general standards of the lease. And those standards can be quite generous. It is not uncommon in commercial leases for the tenant to have the right to perform certain repair or maintenance tasks with no approval required from the landlord, unless the work is structural in nature or above a certain dollar amount ($50,000? $150,000? Pick a number).  So, entering into a lease does not unduly restrict the power of the LD to operate the properties; it merely provides some protection to the City if they do not properly do so.

And the City certainly has an interest in any future sale or financing of the properties it has paid for; any financing could jeopardize the ownership of the building due to a potential default and foreclosure. And any sale of the asset puts it in hands other than the LD or the City.  A right of first refusal simply is simply inadequate to protect the legitimate interests of Boulder and would require us to pay for the same asset twice: once when we built it, and again to keep it out of a third party’s hands.

The staff memo argues that the advantage of conveyance of the assets is that maintenance can occur “without the complicated landlord/tenant relationship regarding maintenance and capital improvements.” First, there is nothing complex about a landlord/tenant relationship; most of the businesses in Boulder navigate that relationship quite well, as do organizations like the Dairy, BMOCA and Chautauqua. All operate under leases. There is no undue complexity here; the tenant generally may do anything not prohibited by the lease. How is that complicated? And, as I said above, a great deal of freedom on maintenance, alterations and general operations can be built into the lease. But at least there will be some standards.

The staff also argues that a lease would prevent pledging the property as collateral for certificates of participation or bonds. Well, that is exactly what I want to do. If the property is conveyed to the LD, we would have no control over these transactions in the future. The LD will start with a budget that is double what they are receiving now. On top of that they want the ability to either sell or mortgage these buildings, which exposes them to default and repossession? At what point do we characterize these requests as simply greedy?  We paid for these assets, and they should not be monetized. If the LD cannot get by on $19.5MM, they should go back to the community to approve subsequent tax hikes, not by selling or mortgaging properties that are community assets.

For all of the foregoing reasons, a lease of assets is the proper structure for this transaction.

2) How do we select future commissioners? The initial Board of the LD will be selected by the County and City of Boulder, but what about future appointments?   Obviously, the governmental entities that create the LD have a continuing interest in the quality of its commissioners. Otherwise, the Board can end up as self-perpetuating, and could fall victim to nepotism. Once in office, they will have broad discretion to operate the LD as they see fit, but future appointments should come from a joint committee of the Council and the County.

3) Section 4.2.4(c) is simply a non-starter. That provision states that the City and the LD “will have an equal partnership regarding management, planning and development of the Main Library Area of Influence” which is defined as the area “in and around the Main Library.” Frankly, the concept is absurd. While we would – and should - always invite the input and advice of the LD on any decisions made in that area, creating a partnership (which implies a veto power over decisions made by the other equal partner) with an unelected and unaccountable body relating to decisions beyond the four walls of the library is entirely unjustifiable. I have no idea where this provision came from, but it should promptly be made to disappear. Council should not be giving away its authority to make land-use decisions on property not leased to the LD. Those are Council decisions and should remain Council decisions.

4) The concept of putting the measure to establish the LD on the ballot multiple times is highly disrespectful to this community. If the measure to establish a district passes, fine, conversation over. But if it fails, the implicit message is: “Thank you for voting, but you got it wrong, and now we are going to do this again and give you another chance to exercise wisdom (as we define it)”.  Do we do this for anyone else? Would we even consider it? If the LD passes, would we give its opponents another opportunity to contest it? How about best of three? I know we love our libraries, but approval of the LD should be an up or down decision made by the community this November, and we should take our thumb off the scale.

And now for the elephant, the mill levy itself. The 3.8 mill levy is so aggressive that the LD will have a revenue stream that is twice what is currently budgeted for our libraries. The annual $19.5MM that the tax will raise is $7-8MM larger – annually - than what the recently enacted infrastructure tax will raise for the entire City of Boulder. The proponents could have chosen a more conservative level that is less punitive to the community, but they have decided to go all-in for maximum revenues. Is there an argument for why our libraries should be the only department in Boulder that receives everything it wants? Because libraries are nice? So is our fire department, our affordable housing programs, our programs to address homelessness, and our efforts to combat climate change.  And none of those departments operates in a world where they receive all that they can dream of. Every other department operates within budgetary restraints. That is the real world.

There are two ways the City can go on this, should the LD pass. We can spend the $10MM we were previously allocating to the library system, in which case this is a straight-up tax increase of $15MM (the revenues the LD will generate from the City of Boulder) with substantial impact to residents and businesses. Or we can attempt to make this revenue-neutral, by cutting our taxes and revenues to offset that $15MM.  However, since the tax will raise $15MM and we are only receiving a benefit of $10MM from off-loading the expenses of the library system to the LD, we would have to cut the budget an additional $5MM to generate full revenue neutrality. Any suggestions? Perhaps we can close some of those parks we enjoy, or limit hours at our rec centers. Perhaps we can sacrifice protected bike lanes. You get the idea.

The LD was originally marketed to us as a device to achieve more sustainable and predictable library funding. But we have never had the conversation about how we might do that outside of a library district (dedicated taxes, anyone?).  Instead, the LD has morphed into something far beyond addressing sustainable and predictable funding.  It has become a program to increase the library budget by a factor of 2, with substantial impact to the businesses and residents who will have to bear the tax burden. The community will ultimately decide whether it wants to go in this direction, but I am finding the argument unpersuasive. As currently structured, this is an interesting idea run amok.

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