Considerations on the Library Debt

Keep your eyes on the ball fiscally responsible progressive and conservative taxpayers. The total costs of the library expansion project becomes due upon execution of the signed contracts. The balance of cash-not-in-hand from donation pledges, pending state grants, etc., is the true amount of debt obligation. Total costs (including land, street closure and soft costs) will likely exceed $27 million.

In one paragraph in the agenda for tonight’s committee of the whole meeting the owner of a $150,000 home in DeKalb would pay an additional $40 in property taxes per year if the bond sales were actually limited to $7.5 million as advertised. In another paragraph it’s $53. In government expense projections always round up. So a typical DeKalb homeowner could see an increase of $150 per year on their tax bill — if only the library construction project was the only increase on that bill.

Here’s how.

From the February 25, 2013 agenda for the Committee of the Whole: [emphasis mine]

At the Committee of the Whole on January 28, the DeKalb Public Library Board President presented a plan of financing for the expansion of the library building. The Library will use $1M in Library fund balance and is planning to raise $6M in donations. The Library is requesting $1M from the City from TIF funds. For the remaining $7.5M, the Library will bond this amount, which will be a general obligation bond paid by property taxes. The City’s Financial Advisor, Elizabeth Hennessey from William Blair, presented that this bond issuance would not be out of line for debt ratios compared to similar communities.

On February 6, a contingent of Library and City folk drove to Springfield to meet with the Illinois State Librarian regarding requirements for the $8.5M state grant. This contingent included the Library Board President, Vice President, Library Executive Director, and Assistant City Manager. The State Librarian and her staff made it clear that for this grant is awarded, the DeKalb Library must secure financing for the rest of the project, which totals approximately $15.5M. The entire amount must be secured in bank accounts held by the library by June 30 at the latest, but they would prefer to have the funding in place by June 1. Once this amount is secured and confirmed by the State Librarian Office, a contract must be signed by the DeKalb Library by June 30 and construction must begin 140 days from the date of execution. Of the sixteen libraries throughout the state that have also been awarded the grant, only four have signed contracts with the State Librarian. There are twelve other libraries in the state, including DeKalb, that must secure financing before the June 30 deadline. In an effort to secure the $6M in private donations, the Library worked with a local bank that will advance this amount, with the $6M in donations to be raised and paid back within 36 months. This grant will be remitted to the Library when the project is 30%, 60%, & 90% completed. The Library is asking for a consensus of the Council to bring back a resolution for the $1M from the Central Area TIF Fund and an ordinance to issue $7.5M in bond proceeds.

OK, most paying attention can quickly see that $7.5 million in debt bonds ballooning to $15.5 million in no more than three years. But the contract with the state requires all matching funds to be in the bank and construction must begin within 140 days of execution. Then the $8.5 million grant is remitted to the library when the project is 30%, 60%, & 90% completed.

Should the city council consider the state not coming up with their share of the cash? Can the state pay its bills? Consider the following language into the Public Library Construction Grant statutes:

(30 ILCS 767/15-37)
Sec. 15-37. Carry over projects. If a public library has been determined eligible for a public library construction project, has arranged and approved all local financing, and is eligible to receive a public library construction project grant award in any fiscal year, but does not receive such award in that year due to lack of adequate appropriations, those public library construction projects shall continue to be considered for grant awards for the following fiscal year. (Source: P.A. 96-37, eff. 7-13-09.)

See how taxpayers can suddenly be on the hook for $24 million plus land acquisition and soft costs?

Ends Don’t Justify Means:

Excerpts from minutes of the November 14, 2011 public hearing held during the city council meeting: [emphasis mine]

• Mr. Clark Neher, President DeKalb Public Library Board of Trustees endorsed the expansion. He stated that the present library is not large enough and the library must accommodate the needs of the citizens for the next eighty (80) years. He stated that the Board searched DeKalb to find a place to move the library, but were unable to find a location. He added that they were offered an opportunity to purchase the lot next to the current library which would allow the expansion of the present building. He stated that there would be sufficient parking, handicap accessibility and the library would remain in the downtown area. Additionally, he said, it would be accomplished without raising taxes. He asked that Council approve the request.
• Mr. Mac McIntyre, DeKalb, Illinois said that he hasn’t talked to anyone opposed to the expansion if it doesn’t increase taxes or public debt. He asserted that the Library claims that Article 5 of the Illinois Local Library Act does not apply to them because they are not asking the City for any funding. At the same time, he added the Library is asking the City for $1 million in TIF funds to help pay off a nine year loan which would be obtained through general obligation bonds. He said that he doesn’t see how the Council can combine three issues (an intergovernmental agreement, vacation of a street and rezoning) tonight into one public hearing. He also asserted that the courts have ruled that limiting comments to three minutes and not allowing cross examination invalidates a public hearing on a rezoning matter. He stated that if the Library was following Article 5 of the Library Act, the Council would have the option to approve the Library expansion plans but reject the issuing of bonds, at which point a referendum would be needed to allow the issue of the bonds. He urged the adoption of that approach. […]
• Mr. John Anderson, DeKalb, Illinois asked how the two buildings will be connected. He added that he is concerned with the layout. He asked what the main function of the original building will be, type of construction on the addition and cost. He asked how it will be financed and what the operating costs will be. He added that until some of the questions are answered, he doesn’t know if Council can close 3rd Street and allow purchase of the land. Also, he said, when Sycamore built their library, they began with donations, and when those stopped, the cost went on the tax bill.
• Ald. Teresinski said that questions have been raised about the City having any financial obligations. Dr. Neher responded that in this land acquisition no taxes will be raised for the purchase. Ald. Teresinski asked if the financing will be clear in the future. Dr. Neher replied that the Board has no desire or plans to use tax revenue for construction. Mr. Frieders read a passage from the intergovernmental agreement that establishes the agreement as relating to planning and zoning issues and not financing of a new library. He added that the City is not making any financial commitments. Ald. Teresinski stated that he seeks assurance that the first steps don’t run the risk of obligating the City at a later date.

Hopefully the library board, city council and staff can rework their plans that call for so much more debt. If not maybe with a new mayor we can get a new library board with fresh ideas based on reality.