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April 1, 2008

Property Tax Reform Update

This message is part of our continuing effort to keep you informed regarding the impact of recent property tax reform legislation, including Amendment 1, on the Library's FY 09 budget, which begins October 1, 2008.

The previous update indicated our very rough projection of the shortfall for next year's budget was around $3.5 million. That remains our best estimate at this point while the true impact will not be known until the Property Appraiser releases the preliminary property values at the end of May. The Taxation and Budget Reform Commission, which has the authority to place additional property tax reform and budget amendments on the November 2008 ballot, is actively considering a number of proposals, the effects of which are still being evaluated.

Since the last update, we have solicited both your input and that of our staff. After considering the responses to our surveys and your comments, the Library Board of Trustees was presented with a wide variety of options to address the anticipated shortfall for next fiscal year. These options were addressed at the March Board meeting, at which time the Library Board was asked to select items totaling about $5,000,000 and prioritize them. The following items, which were recommended by the Library Administration, were approved by the Library Board and will be used as guidelines when preparing the FY 09 budget:

Increased Revenues

Implement account settlement thresholds          $300,000

Primarily, this requires that a patron's account be paid in full once it reaches $10.

Increase fees and fines          $157,000

While both this item and the previous account threshold issue help reduce the projected shortfall, property tax reform was not the impetus for the proposed changes. Rather, it has been over six years since we last evaluated and increased our fees and thus, it was time to adjust them to reflect market conditions and the cost of doing business. Fees were not increased across the board but rather, were carefully reviewed and adjusted on an individual basis.

Pursue lease of Chickasaw Trail property          $160,000

Property, including a former State Farm office building, was purchased in 2006 to be remodeled and opened as an additional branch library. Due to property tax reform, funds to operate a future branch are not currently available. In order to generate some revenue and hold the location for a possible future branch, the intent is to try to lease the space for a short period (3 - 5 years).

Decreased Spending

Increase funding period for retiree health care          $311,000

A recent governmental accounting standard requires all local governments to reflect the cost of this benefit during the employee's tenure rather than deferring the cost to when the employee retires. After determining the actuarial liability for this benefit, the Library elected to fund the obligation over a ten year period to reduce the overall cost. Similar to a mortgage, the shorter the period, the higher the annual payments but the lower the overall cost. Instead of continuing with a 10 year funding period, this option will increase the funding period to 15 years, which will result in lower annual payments.

Eliminate funding for future branches           $4,000,000

In 2006, the Library prepared a Branch Development Plan which consisted of five new branch libraries to better serve the ever growing population of the Library District. By carving $4,000,000 annually out of the Library's Operating Budget and segregating these funds for future branch development, we had planned to construct/purchase three new branch libraries over an eight year period and operate them.

The above items will be incorporated into our FY 09 budget.

Both your responses to our survey as well as your comments were very helpful when we were evaluating options to address the projected shortfall. Our staff has also been helpful in providing a laundry list of ideas to address the property tax reform issue. We encourage you, our customers, to continue sending us your thoughts and comments. Tell us what you think!

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