Razed and Abandoned

In November 2000, the people of Minneapolis voted by a 2-to-1 margin to approve $140 million for the construction of a new downtown library and the renovation of community libraries around the city. Today, $9 mil-

lion and a very large hole in the ground later, city leaders find themselves debating whether to postpone or scale back their downtown project, and close or reduce library service in the neighborhoods.

While there is certainly a degree of incompetence involved, the Minneapolis library fiasco is more a testament to the souring economy and a regime change in state and local governments. Three years ago, when the city's eight-member library board was weighing the size and scope of their November ballot referendum, board members wanted to set a price tag in the $150-$160 million range, in part to pay off the debt service on the new construction. But according to Diane Hofstede, the library board member with the most seniority, officials in then-Mayor Sharon Sayles Belton's administration decreed that anything above $140 million would put too great a burden on the city's debt level.

Associate library director Jan Feye-Stukas and library board members also contend that the city agreed to raise the library's operating budget by four percent annually to cover any additional staffing and maintenance costs in the system. Because the design of the new downtown library stood to make it more efficient than the old facility, four percent seemed like enough. And because the city's tax base was growing by the billions each year at the time, the city likewise felt confident about its commitment.

¬ But about two years ago, the economic recession began gnawing away at the city's rosy budget projections. That loss in revenue was exacerbated by the state Legislature's decision to cut property taxes on businesses, rental property, and high-income homes. Meanwhile, improvements to some of the city's neighborhood libraries dramatically increased traffic at those branches. "Newly remodeled facilities have seen a huge jump in circulation and attendance, sometimes by as much as 300 percent," Hofstede says. "In places where we have added computers and programs, they have become real community centers."

And library officials now say they can't meet that increased demand with just a four percent annual bump in their operations budget. To make matters worse, the policies of Mayor R.T. Rybak and Governor Tim Pawlenty are imposing additional restraints.

The city's enormous budget deficit had become apparent when Rybak took office in January of last year. In response, he convinced the City Council to cap annual property tax increases at eight percent over the next five years, and stipulated that all city departments replace yearly budget estimates with a five-year financial projection. Although the library board operates independent of the city, it is acceding to Rybak's request for a five-year projection. But already, its preliminary calculations are that it will need a five percent increase in annual operating funds from the city just to maintain the current level of services, or it will face a $25 million shortfall through 2010.

Enter Pawlenty, whose proposed state cuts in local government aid (LGA) would deprive Minneapolis of an estimated $80 million in revenue over the next two years. The cuts would dramatically affect the library system, which has used LGA for more than 40 percent of its annual operating budget. State law currently prevents Minneapolis from raising local taxes beyond Rybak's eight percent ceiling, and it is possible that the Pawlenty administration will cap city revenue increases at an even lower level, essentially compelling drastic cuts in local government services. Including libraries.

By approving a $140 million referendum with 67 percent of the vote and patronizing branch libraries in record numbers, the citizens of Minneapolis have made it plain that they support a robust library system. But there aren't enough funds in the city coffers to operate it, and even if the citizens wished to raise taxes to meet the library's needs, they are prevented by state law from doing so--indeed, legislation forthcoming from the capitol is almost certain to further reduce library revenues and hamstring the system.

Compounding the frustration, the library monies available under the referendum can only be used for physical construction and improvements, not operations. And at this stage in the process, they have been spent on things that have reduced public access to library resources over the short term. In December, the city issued $9.5 million in bonding for the library project, the maximum allowed for 2002 under the terms of the referendum. Approximately $1.8 million of that amount is being used to pay for demolishing the old library. Another $2.8 million provided initial payments on the $10.1 million tab to design the new facility. Three million dollars more has gone to setting up and relocating the library in a temporary facility on Marquette Avenue and, because the temporary location is less than a third the size of the old library, storing most of its collection.


Yet it is only now, facing imminent cuts in LGA money, that the city is pausing to reconsider where it stands. No one particularly regrets that the old library is gone; by all accounts, the place would have required a massive infusion of money just to keep its doors open. (Among other things, the fire marshal had already threatened to shut it down.)

But library board members counter that keeping the project in limbo is as foolish as pouring money into an outmoded fire hazard. The millions of dollars being paid to rent the relatively tiny Marquette Avenue location can come from the referendum bonds. But the longer it goes on, the fewer resources will be available to build something new. "The rent for the temporary location actually exceeds the costs of operating in a new building," says library board member George Garnett. For this and other reasons, Hofstede estimates that every month of delay will take $100,000 off the new library's eventual bottom line.

The situation has created friction between library officials and members of the Rybak administration. At a time when the city is being forced to lay off police officers and firefighters, the mayor is impatient with the board's delay in making the tough decisions for financial austerity. For his part, Garnett calls it "outrageous" that Rybak would threaten to put the new library on hold and deplete the total dollars available for a new facility.

The complex financial negotiations involved in hammering out an agreement will almost certainly add to the delay and the enmity. Two examples illustrate the point. First, because of the way the city structured the referendum, there are limits on how much revenue can be bonded during the first two years of the project. In the interim, the city has been loaning the library money out of its general fund, to be repaid by future bond revenues at market interest rates. "Bear in mind [the library board's project] would have incurred interest anyway," says city finance director Patrick Born. "As it turns out, the market interest rate is low enough that they are paying us probably the same or less than what they would be paying the bondholders." Nevertheless, Born estimates that interest will amount to "between a half-million and a million dollars," paid by library referendum revenue into the city's general fund. Will that money immediately be routed into the library's operating fund or be spent on other city obligations?

A second potential area of contention involves $10.1 million in bonding that has already been issued and that, under the terms of the referendum, can only be used for the construction of a parking ramp beneath the new library. "The parking ramp is going to be owned by the library board, and its feasibility comes from drawing [library] customers to that ramp," Born says, but then adds, "The city's parking engineers believe there is demand for parking in that location. But I don't think the library board wants to be running a parking ramp unless the library is there, because it is a business risk. If we resize the library, we also want to reconsider whether the ramp is the right size." Does the library board want to take the business risk, and, if the parking engineers are right, reap more potential revenues, by running a full-scale ramp under a downsized library? At the moment there's no telling.

Meanwhile more than $100 million in bonding remains on the table, there is a hole in the ground, and tens of thousands of library items, many of them priceless, are moldering in storage.

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