Library Bond Moves Toward Nov. 6 Ballot

Ann Arbor District Library special board meeting (July 30, 2012): Setting language for a $65 million bond proposal was the focus of Monday’s special meeting, when the board voted unanimously to approve text for the Nov. 6 ballot. Board member Ed Surovell was absent.

Earlier this month, the board had voted to move forward on this bond initiative. If approved by voters, it would fund a new downtown building at the current site. At Monday’s meeting, AADL director Josie Parker stressed that the $65 million covers the cost of the entire project, not just the building itself. Other costs include demolition of the existing structure, moving costs and leases for temporary locations.

Passage of the bond proposal on Nov. 6 would result in an initial bond millage levy in July of 2013. It’s estimated that 0.56 mills would be levied in the first year, with an average annual rate of 0.47 mills over the 30-year period.

The new building would be on the downtown library’s current site at 343 S. Fifth Ave., on the northeast corner of Fifth and William. Parker gave a brief history of the site, to explain why that location is preferred. One major factor relates to the site’s previous ownership by the Ann Arbor Public Schools. Until 1995, the library was part of the AAPS.

A separation agreement with the school system gives AAPS the right of first refusal if AADL decides to sell the site. If the school system decides to buy it, AAPS would pay only 65% of the market value. If AAPS doesn’t buy the property and AADL sells it to another entity, AAPS gets 35% of the net sale proceeds. All of that factored in to the board’s decision to stay on the site, Parker noted.

Two advisors to AADL on this bond issue – James P. Kiefer of Dykema and Paul R. Stauder of Stauder, Barch & Associates – attended the July 30 meeting and answered questions from the board. Board members asked only a few clarificational questions, including some related to the millage rate, use of bond proceeds, and the possibility of local downtown development authorities capturing a small portion of the bond millage.

After the meeting, the library immediately posted a six-page information sheet with frequently asked questions about the project. The FAQ includes a chart showing estimates of how much individual property owners will pay. For example, the owner of a house with a market value of $200,000 is expected to pay $56 annually, based on a levy of 0.56 mills.

For additional background, see Chronicle coverage: “AADL Board: Renovation Not the Best Option” and “Campaign Launches for Library Bond.”

Bond Ballot Language

At its July 16, 2012 regular meeting, the AADL board had discussed and ultimately voted to put a 30-year, $65 million bond proposal on the Nov. 6 ballot to fund a new downtown library at its current location. The board also set a special meeting for July 30 to vote on specific ballot language for the proposal.

The sole resolution on the July 30 agenda related to the bond proposal question and informational language to be included on the Nov. 6 ballot.

This was the ballot language presented to the board for approval:

Shall the Ann Arbor District Library, formed by the Ann Arbor Public Schools and the City of Ann Arbor, County of Washtenaw, State of Michigan, borrow the sum of not to exceed sixty-five million dollars ($65,000,000) and issue its general obligation unlimited tax bonds, in one or more series, payable in not to exceed thirty (30) years from the date of issuance of such bonds, for the purpose of paying all or part of the costs of constructing, furnishing and equipping a new main library building to be located at the current site of the downtown library building, including costs related thereto?

The board’s resolution also included the following informational text to be included on the ballot:

The estimated millage to be levied in 2013 to pay the debt service on such bonds is 0.56 mills ($0.56 per $1,000 of taxable value) and the estimated simple average annual millage rate required to retire the bonds is 0.47 mills ($0.47 per $1,000 of taxable value). In accordance with State law, a portion of the revenue collected may be subject to capture by the City of Ann Arbor Downtown Development Authority and the Scio Township Downtown Development Authority.

Two advisors for AADL on this bond issue – James P. Kiefer, an attorney with Dykema’s Lansing office who specializes in public finance, and Paul R. Stauder of Ann Arbor-based Stauder, Barch & Associates – were on hand to answer questions from the board.

Bond Ballot Language: Public Commentary

Public commentary at library board meetings occurs at the start of each meeting.

On Monday, Lyn Davidge told board members that she was still trying to get more people to show up for public commentary. [This was a theme of her speaking turn at the board's July 16 meeting, too. Although a few members of the public attended the July 30 meeting, only Davidge spoke during public commentary.] She thanked the board for including the ballot language in the board packet, which was available online prior to the meeting. Her question related to words within the phrase “…for the purpose of paying all or part of the costs of constructing, furnishing and equipping a new main library building…” Davidge asked for clarification of the words ”or part of.” She hoped that clarification of that could be provided.

Bond Ballot Language: Board Discussion

Jan Barney Newman began the discussion by asking about the two millage rates mentioned in the ballot language – 0.56 mills and 0.47 mills. She wondered why there was a difference. Paul Stauder of Stauder, Barch & Associates responded that the rates are calculated in accordance with state law. The law requires an estimate of the first year that the millage would be levied, as well as an average millage rate over the entire 30-year period. To do that, certain assumptions are made, he said, such as an assumption that the overall tax base will grow. As the tax base grows, the millage rate is expected to diminish.

Newman clarified with Stauder that the calculation is made based on the number of properties that will be assessed.

Margaret Leary asked for clarification of the point raised during public commentary, related to the phrase “or part of.” James Kiefer of Dykema told the board that the phrase gives AADL flexibility. While AADL could spend the entire $65 million on the project, he said, if there is unexpected revenue from other sources – a grant, for example, or money bequeathed to the library in someone’s will – then the library wouldn’t be bound to spend the entire amount that could be raised from the bonds.

Leary noted that the language implies the bond proceeds can be used to pay for demolition of the current building. Kiefer confirmed that assumption – construction costs include demolition costs. AADL director Josie Parker added that the bond also covers the cost of moving and operating the library elsewhere during the construction period.

Rebecca Head wanted to clarify that the bond proceeds will be used for the new downtown library, not for other purposes. She said she wanted to emphasize that in the context of the earlier statement that only part of the bond proceeds might be used. If other revenue comes in and the entire bond amount isn’t needed for the new library, the bond funds wouldn’t be used for other projects.

Bond Ballot Language: Board Discussion – DDAs

Nancy Kaplan asked for explanation about the reference to the two downtown development authorities.

It’s very complicated, Kiefer replied. State law allows the a DDA to establish a baseline property value for its district, then capture taxes above that baseline on the increase in property values. A small amount of the library bond might be subject to that tax increment finance (TIF) capture, he said. State law requires the statement about DDA tax capture as part of the bond ballot language, he added, but he hadn’t researched the specific DDA plans to see how the TIF would affect the AADL bond. He noted that the library doesn’t control the amount that might be captured by the DDAs.

Prue Rosenthal asked who does control the amount? Kiefer said the county treasurer and local assessing units implement the TIF. To get more information about how the TIF would apply to the AADL bond, he would need to look at details of each DDA plan in terms of its baseline, duration and amount of tax capture, he said.

Barbara Murphy wanted to know about other types of TIFs, such as brownfield TIFs. Will those also affect the bond? No, Kiefer said. Under state law, only certain types of TIF districts are permitted to capture debt retirement taxes. In this case, only the Ann Arbor and Scio Township DDAs might be allowed to capture a portion of the AADL bond millage revenues.

By way of additional background related to TIFs, AADL director Josie Parker wrote an essay in July 2010 titled “Tax Increment Financing Development Erodes Library Millages.” And a TIF issue related specifically to the Ann Arbor DDA emerged in 2011, following a DDA board decision regarding “excess” taxes captured in its TIF district. See Chronicle coverage: “Library Weighs DDA Excess Tax Decision.”

Bond Ballot Language: Board Discussion – Site History

Margaret Leary asked AADL director Josie Parker to explain the history of the 343 S. Fifth Ave. site, saying it was indirectly related to the bond issue and that a question about whether to locate on the same site had been raised.

Parker replied that it’s actually directly related to the bond, because state law – the District Library Financing Act (Public Act 265 of 1988) – requires that the ballot language state how the library district was formed.

In 1994, Proposal A changed the state law so that public school systems could no longer operate public libraries using the school millage. When that happened, the Ann Arbor Public Schools and city of Ann Arbor moved to form the Ann Arbor District Library as a separate entity. In 1995, voters approved the establishment of the AADL with an independent governing board. At the same time, voters authorized a 2.0 mill tax in perpetuity to operate the library system. [Due to the state's Headlee Amendment, that 2.0 mills has been rolled back over the years to about 1.92 mills, which is now the maximum amount that AADL can levy each year. However, the library currently levies only a portion of that amount – 1.55 mills.]

As the library separated from the school system, Parker said, there were assets to consider, including land and buildings. Those issues were dealt with in a separation agreement between the AADL and the AAPS. The library system took ownership of the Loving branch on Creek Drive, which was later replaced by the new Malletts Creek branch on Eisenhower. The AADL also took over the lease of the branch at Westgate shopping mall, which was subsequently expanded and renovated.

For the downtown building, the separation agreement acknowledged the investment that AAPS had made, Parker said. The school system had taken on debt in 1991 to double the size of the downtown library. The library agreed to lease the downtown building from AAPS for $1 per year for 10 years, with the deed then transferring to AADL. The library took ownership of the building and land in December 2005.

But as an acknowledgement of the AAPS investment, the separation agreement included stipulations related to the sale of the downtown site, Parker explained. If AADL decides to sell the building and land, AAPS has the right of first refusal, and gets a year to make that decision. If the school system decides to buy it, they would pay only 65% of the market value. If AAPS doesn’t buy the property and AADL sells it to another entity, AAPS gets 35% of the net sale proceeds.

Parker noted that these factors had been considered by the special facilities committee in making its recommendation to build on the current site, rather than sell the site and build a new library elsewhere. [The details that Parker explicated about the downtown site were not mentioned in the six-page memo from special facilities committee that was submitted to the board, nor was the issue discussed explicitly during the board's public deliberations at its July 16 meeting.]

Parker said another consideration is the fact that the current site is larger than any other available parcels nearby. The size of the site is important because libraries in urban settings have certain security needs, she said. Having a larger building footprint means that each floor can be designed to give staff better lines of sight. The AADL’s new branches were constructed in this way. The alternative of building a taller structure would increase operating costs, because more staff would be needed on each floor. The goal is to have the safest environment for everyone, Parker said.

Bond Ballot Language: Board Discussion – General Information

Barbara Murphy asked whether the general information provided in the board’s resolution would also go on the ballot, in addition to the actual ballot question. James Kiefer replied that the informational language is also required by state law. The library will work with the Washtenaw County clerk’s office to finalize what goes on the ballot.

Murphy pointed out that there’s no indication in the informational paragraph that states why the AADL needs to build a new downtown library. Kiefer noted that some people would say it’s already a long run-on sentence, without including more information.

Outcome: The board unanimously approved ballot language to be placed on the Nov. 6 ballot.

Library Bond Proposal: Information for Voters

After Monday’s board vote, AADL director Josie Parker reported that the library staff had prepared a six-page information sheet with frequently asked questions about the project, called The Vision/The Vote. Questions that are addressed include:

• What will a new downtown library offer our community?
• What will the new library look like?
• Is $65 million enough?
• Why can’t you just renovate the existing facility?
• Why hasn’t the library board chosen to build the new library on the top of the underground parking garage on Library Lane?
• Why doesn’t the library board sell the property at Fifth and William and build elsewhere?
• Are libraries needed in the age of eBooks and the Internet? How many people use the downtown library?
• Why does the board think the public is interested in a new downtown library?
• What is wrong with the current building?

The handout also provides information about how residents can give feedback to the library – questions can be emailed to downtown@aadl.org. Another section of the handout addresses issues related to the Nov. 6 bond proposal, including the ballot language, rationale for the decision to pursue a bond proposal, and a chart showing how much taxpayers will pay based on the value of their property. For example, the owner of a house with a market value of $200,000 is expected to pay $56 annually, based on a levy of 0.56 mills.

If voters approve the ballot proposal on Nov. 6, Parker said, the tax would be levied for the first time in July of 2013.

Parker stressed that the handout isn’t an advocacy document – the library is prohibited by law from asking people to vote in a certain way. Rather, it’s intended to be informational and as conversational as possible, she said. It’s posted online and will be available in printed form throughout the downtown library and the AADL branches.

Although this was not part of Parker’s report, a separate campaign by community leaders to support the bond proposal was officially launched last week. The Our New Downtown Library campaign committee has been working informally for several weeks. Some of its members had attended the July 23 board meeting, when the AADL board voted to put the bond proposal on the Nov. 6 ballot.

Campaign committee members include Ellie Serras (chair), Mike Allemang, (treasurer), Sally Allen, Janis Bobrin, Leah Gunn, Debbie Herbert, Norman Herbert, Pat McDonald, Paul Morel, Omari Rush, Paul Saginaw, Ingrid Sheldon and Robin Wax. The group has already launched a website, Twitter account (@OurNewLibrary) and Facebook group. According to a press release issued by the group, they intend to hold public forums, use social media, speak at community meetings and mail information to residents in support of the bond proposal.

Present: Rebecca Head, Nancy Kaplan, Margaret Leary, Barbara Murphy, Jan Barney Newman, Prue Rosenthal. Also AADL director Josie Parker.

Absent: Ed Surovell.

Next meeting: Monday, Aug. 20 at 7 p.m. in the fourth-floor conference room of the downtown library, 343 S. Fifth Ave. [Check Chronicle event listing to confirm date]

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