Some library coffers overflow
BY Teresa Auch Schultz email@example.com August 11, 2012 11:44PM
Bridget Null smiles as she finishes a puzzle during a visit to the Westchester Public Library in Chesterton Thursday Aug. 9, 2012. | Andy Lavalley~Sun-Times Media
Updated: September 13, 2012 6:18AM
Cutting spending is nothing new for local governments.
With revenues dropping, whether from businesses shutting their doors or from the state capping property taxes, government entities have had to get used to doing with less.
But several local library districts have cut spending so much that they grew their reserves from the beginning to the end of 2011.
For instance, the Whiting Public Library went from having $1.7 million in its operational funds at the beginning of last year to having $2.3 million — three times what it spent in 2011 — by the end of the year. That means the library could potentially operate for three years without taking in any more tax dollars.
Several factors are at play for some of the library districts, including the possibility of future building projects and fears of further drops in revenue.
No easy answer or formula exists for deciding when a district has saved enough, but experts say handlers of public money have to make sure they’re not overtaxing people when preparing for the future.
According to information from the Indiana State Board of Accounts, all the library districts in Porter and Lake counties saw their overall fund balances grow during 2011, and all but Westchester Public Library saw their operational funds grow.
Some of them saw the funds increase so much, though, that the leftover amounts were close to or more than the money spent in 2011. Whiting, whose director could not be reached for comment, had the highest such amount. Lake County Public Library had $31.9 million left in all its funds by the end of 2011, almost equal to the $34.4 million it spent that year.
Crown Point Public Library had $1.5 million in its operating fund by the end of the year, compared to the $1.3 million it spent.
Larita Killian, an accounting professor at Indiana University Purdue University-Columbus, said government entities play a balancing act in trying to save money. Having reserve money can help a government unit through a difficult financial time, she said, or help to keep to costs down during building projects by cutting the amount of borrowing.
At the same time, an entity can tax too much, she said. For instance, it’s one thing to save for a specific building project in the near future. But saving for an undefined capital project that has no real plans maybe isn’t the best use of taxpayer money, she said.
“On the other hand, you shouldn’t accumulate too much,” she said. “You’re either overtaxing or underutilizing.”
The Government Finance Officers Association has guidelines for helping officials decide how much money they should keep in reserve. However, John Fishbein, with the GFOA, said there’s no single answer.
“There’s a lot of ingredients that go into a decision,” Fishbein said.
For instance, in Florida hurricanes are a real risk and it would be smart to save for damage from one, he said. Entities must also consider how steady their revenue is as well as weigh the political and economic climates.
Saving to build, someday
Several local libraries are facing some of those very issues. Porter County Library has saved $5 million that will perhaps build a new branch in either Jackson or Porter townships, Director James Cline said.
The money is enough to cover the cost of building, he said, which would mean the library would not have to take out any bonds — or pay their interest — to build a new branch.
“The goal has always been when we do do a building, it will be paid for when it’s done,” he said.
However, the library does not have enough money to operate a new branch, so the money continues to sit in the library’s capital projects fund. Plans for the new building have been around for about eight to 10 years, back when the district bought two parcels of land. However, the district still has not been able to find enough money to operate another branch, and Cline said he doesn’t know when it will be able to.
“We keep hoping we’ll find a way to do it,” he said.
Cline doesn’t know when or if the library will reach a point when it finally decides the project is not feasible, he said. Until then, the district is trying to make good use of the money by using it to pay bills when tax revenue comes in late. That way, the library doesn’t have to borrow money and then pay interest on the loan.
Not only has the Westchester Public Library also been saving for construction work, it’s been trying to deal with a sharp decrease in revenue.
Director Phil Baugher said the library originally wanted to renovate its building in 2000. It held off, though, because Duneland Community Schools had recently passed its own bond issue to borrow money. Then the closing of Bethlehem Steel hit.
“We had to slash everything that was going on,” Baugher said.
The library lost about half of its tax revenue and laid off the majority of its staff. Ever since, the library has been slowly saving for the construction project, with the same goal of paying for the work outright, instead of taking on more debt. But the library also continues to operate with that scenario in its mind, that another cut to revenue could be in the future.
“Of course what we went through in 2001 scared the heck out of us,” Baugher said.
Lake County Public Library also knows what it’s like to face a fiscal emergency. The library had by far the most money, $31.9 million, in the bank compared to others in Lake and Porter counties last year. However, $13 million of that was in its construction fund, money that is going toward work on the main branch and a new branch at 45th Avenue and Colfax Street in Griffith. The library had $10.9 million in its operating fund at the end of 2011, compared to the $20 million it spent out of that fund in the same year.
Ana Grandfield, director of LCPL, said that even more money is slated to improvements at the branches, such as buying new furniture, books and other materials. Technology, she said, isn’t cheap, either.
“We have to buy a lot of new computers,” she said.
However, Grandfield said some of the money is set aside to cover emergencies, which have happened recently. For instance, the Munster branch was flooded a few years ago.
“If the roof blew out, we’d have to do something,” she said. “You have to plan ahead.”
No laws on extra cash
Incidents like those make it prudent for some governmental groups to plan ahead, Fishbein said.
Other Lake County libraries also have a large amount of money saved compared to their annual spending. East Chicago Public Library almost doubled the money it had on hand from about $750,000 to $1.4 million in 2011. Its operational fund quadrupled from $238,525 to $888,540, although that is about one-sixth of what it spent in 2011. Whiting increased the balances of all its funds by about $600,000 to $2.6 million — more than the $2.5 million total it spent.
Whether these amounts are needed, though, is hard to assess. The GFOA does recommend a minimum amount that should be kept, equal to two months of expenses from the general fund. Most library districts had that, but some had much more.
The state does not have many rules for libraries, either. According to the Indiana Department of Local Government Finance, state law does not have a maximum limit on how much money local governments can keep in their overall funds.
However, the state recently passed a law creating an automatic tax refund if the state saves more than 10 percent of its annual budget. That law only applies to the state government, however.
Fishbein said the ultimate decision must rest with library boards and taxpayers.
“There isn’t a correct answer,” he said.