Ann Arbor District Library board meeting (April 19, 2010): Facing a projected $200,000 shortfall for the 2010-11 fiscal year, the Ann Arbor District Library board discussed tapping its fund balance to cover the gap, rather than raising its millage or making additional cuts. The district is anticipating a decrease in tax revenues for the fiscal year beginning July 1, based on a drop in local property values. AADL director Josie Parker told the board that her staff had already identified $700,000 in expense cuts, but didn’t feel they could do more without service cuts or layoffs.
The board is expected to vote on its budget for the coming fiscal year at its May 17 meeting.
2010-2011 Budget Discussion
During her report of the budget and finance committee, board treasurer Prue Rosenthal said she and trustees Ed Surovell and Barbara Murphy had met with AADL director Josie Parker and library staff to discuss different ways to address the library’s projected $200,000 budget shortfall for the coming fiscal year. Rosenthal said the board has three options: raise the library’s millage, make additional cuts to expenses, or use part of the fund balance to cover the shortfall.
By way of background, last year the board voted to lower its millage rate from 1.92 mills to the current rate of 1.55 mills. (One mill equals $1 for every $1,000 of a property’s state equalized value, or SEV.) [See Chronicle coverage: "Library Plans to Lower Millage" and "Ann Arbor Library Board OKs Budget"]
At the board’s April 19 meeting, Rosenthal said the budget and finance committee unanimously decided to recommend that the board take money from the fund balance to balance the budget. Committee members felt this would be the best course of action, she said, since cutting the budget would mean cutting personnel and raising the millage didn’t seem appropriate at this time.
Ken Nieman – AADL associate director of finance, HR and operations – later noted that in order to make up for the shortfall, the library would use up only 1.27% 2.8% of its fund balance. At the end of March, the district’s fund balance stood at $7.258 million.
“Even if we take it out of the fund balance, we’d still be healthy financially,” he said.
At Parker’s request, the board briefly discussed the committee’s recommendation later in the meeting. Parker explained that although library staff had already managed to cut expenses by about $700,000, she didn’t anticipate them being able to pull off another $200,000 without service cuts or layoffs.
Trustee Carola Stearns said she would support spending the fund balance to cover the shortfall. Nieman informed the board members that there is also the possibility that the tax base will drop more than 6% and the shortfall will be more than the expected $200,000. He said the library will have the final numbers by the board’s May meeting.
Nieman briefed the board on details for the FY 2010-11 budget. The library’s proposed operating budget is $12.2 million, compared to $12.289 million for 2009-10. Nieman noted that the projected tax revenue at 1.55 mills for next year – $10.99 million – was calculated under the assumption that the library’s tax base will drop 6%.
Due to the anticipated tax base decrease, the budget for the new fiscal year includes some cuts. Nieman said IT and capital outlays are some of the areas that will receive less funding. The 2010-11 budget for capital outlays is $190,000 compared to $253,343 for 2009-10. Communications (which includes Internet expenses) is down to $200,000 from $212,433; and software licenses and maintenance has been cut to $130,000 from $154,007. Nieman explained that the library had bolstered those areas in the past couple of years, so the staff felt they could afford to make cuts in the coming year.
The funds allocated for library programming also will drop from $286,082 to $250,000. Nieman explained that the reduction will not result in a decrease in the number of programs the library offers, but in cutting back on the amount of program-related advertising. Additionally, the new budget includes a $30,686 cut for materials. Nieman said that decrease was a result of the library’s decision to no longer provide databases that patrons rarely used.
The 2010-11 budget also includes some increases. Circulation supplies are budgeted at $75,000 from $46,605, due to the library’s need for more library cards, book cards and other supplies to keep up with increasing circulation. The library hopes to keep other expense categories frozen.
Nieman said they have proposed no increases or cuts for employee salaries and wages. Salaries and wages are allotted $5.844 million in the proposed 2010-11 budget, compared to $5.822 million for 2009-10. Nieman also said the library would like to keep employee health insurance rates the same, although they won’t be able to determine the expense for sure until they get renewal rates at the end of April. Employee benefits are projected to total $1.562 million for the current fiscal year; the budget for next year is $1.5 million.
Stearns asked why the repair and maintenance budget had decreased to $265,000 from $280,371. Nieman explained that the library was trying to accomplish as many maintenance projects as possible by the end of this fiscal year in order to make cuts in next year’s budget. For example, Parker said the library aims to reseal its parking lots during Memorial Day weekend (since the library will have to close for a day for the resealing). [In addition to the lot where the underground parking structure is currently under construction, the library has a lot on the east side of its downtown location.]
Monthly Financial Report: March 2010
In addition to discussing the FY 2010-11 budget, Ken Nieman, AADL associate director of finance, HR and operations, gave his monthly financial report to the board. The district’s cash balance at the end of March was $9,699,319, down from $10,415,047 in February. Additionally, the library had received tax receipts for a total of $11,391,791 as of March 31, or 97% of the budgeted amount for the current fiscal year.
Nieman also noted that the library had a positive fund balance of $7,258,959. He said there was nothing out of the ordinary, although utility bills were higher than normal in January through March; the library will possibly have to move funds to that line item. Additionally, phone and Internet charges have also been more than the library expected. Other line items that are over budget through March include custodial (for carpet and window cleaning that took place in July and November) and supplies (due to archive shelving purchased in January). The board also unanimously approved various disbursements for the month of March.
Changes to Bylaws, Policies
Trustee Barbara Murphy reported that the policy committee met twice between the board’s March and April meetings to discuss a change in the board’s bylaws and two new policies.
The bylaws were revised in order to stay in sync with the Ann Arbor Public Schools Board of Education election schedule – this means members’ terms will start in November instead of July. Additionally, the board’s annual meeting has been changed from July to the first meeting of each new calendar year. Murphy said the board will vote on the bylaw changes at its May meeting.
In addition, two new policies were created after the IRS AADL auditors during an annual audit suggested that the library create specific guidelines for dealing with conflicts of interest and whistleblowers. Murphy said the committee members worked with the library’s attorneys, who drafted the new policies.
Proposed Conflict of Interest Policy
Murphy said the conflict of interest policy is new to the board; it was written by the library’s attorneys at the suggestion of the IRS library’s auditors. AADL director Josie Parker stressed that the proposed policy would not apply to all employees – only to those who could compromise the library financially. The section of the policy addressing how it should be applied reads as follows:
This policy is intended to supplement, but not replace, federal and state laws governing conflicts of interest applicable to the Library and its operations, with respect to potential conflicts of interest involving Library Administrative Employees (as defined below).
This policy applies to Library Administrative Employees with significant decision-making authority as follows: Director, Associate Director, Administrative Assistant, Manager, Staffing Coordinator, and Purchasing Agent (collectively, “Administrative Employees”). Persons covered under this policy, as well as their relatives and associates, may be referred to in this policy as interested parties.
The policy defines conflicts as occurring when “an interested party directly or indirectly benefits or profits as a result of a decision, policy or transaction made by the Library.” One example would be if the library agrees to lease or purchase goods, services or properties from one of the interested parties. Murphy noted that the library’s administrative employees would be required to sign a copy of the policy to indicate that they have received and read it.
Trustee Margaret Leary questioned whether the policy should also address conflicts of commitment, which concerns the amount of work employees do for entities other than the library. Parker responded that the library’s human resources division handles conflict of commitment issues. The board did not vote on the proposed policy.
Proposed Legal Compliance (Whistleblower) Policy
Murphy said the proposed legal compliance policy makes it clear that the library will comply with all applicable laws, and employees who report policy violations will be protected. The policy states that employees who have concerns regarding a suspected violation should report it to the director or the chair of the board of directors; furthermore, they will not be discharged, threatened or discriminated against for reporting the violation. The board did not vote on the proposed policy at its April 19 meeting.
Friends of the AADL Agreement
AADL board secretary Margaret Leary reported that the special issue committee had determined the library’s agreement with the Friends of the Ann Arbor District Library did not require any changes.
Later in the meeting, the board voted unanimously in favor of extending its space use agreement with the Friends of the Ann Arbor District Library by one year from its expiration date on May 18, 2010. Leary said the board members were all “very pleased” at how the agreement had worked out so far and that it had clarified the relationship between AADL and FAADL.
AADL board president Rebecca Head said the director’s evaluation committee had compiled a document to be shared with the board at a later date in closed session. Head said the evaluation would be finalized by the time of the board’s next meeting.
AADL director Josie Parker reminded board members that the previous week had been National Library Week and the library had held numerous events in its honor, including a FestiFools Parade Robot costume workshop and a seminar on coping with low vision as a health issue.
Parker also noted that the Ann Arbor District Library’s Traverwood branch was recently featured as the cover story in the Ann Arbor Observer. Parker said the Ann Arbor Ad Club also awarded the AADL Traverwood branch’s sustainable features brochure a 2010 Silver ADDY award in the collection material, brochure, four-color category. Karen Moeller Design created the brochure, with oversight from AADL staff member Jenny Hoffman.
Board members present: Rebecca Head, board president; treasurer Prue Rosenthal; secretary Margaret Leary; trustees Carola Stearns and Barbara Murphy. Also: AADL director Josie Parker.
Absent: Ed Surovell, Jan Barney Newman
Next meeting: The board’s next regular meeting is on Monday, May 17, 2010. The public portion of the meeting starts at 7 p.m. in the library’s fourth floor board room, 343 S. Fifth Ave., Ann Arbor. [confirm date]