Opinion: Show Me the Money! Jones Library Trustees To Negotiate With Town Concerning Jones $6 Million Building Project Pledge
Photo: flckr.com. Creative Commons
A motion was approved by the Jones Library Board of Trustees on August 13, 2020 to engage in negotiations with the Town regarding the Jones commitment to provide $6 million toward the proposed Jones demolition/expansion project, if the Town commits to fund $22 million. The $6 million would be paid to the Town at the time of payment of the last 20 percent of the state grant, which could be five years from the start of the project.
The Massachusetts Board of Library Commissioners (MBLC) provisional grant will be $13.8 million, but the Town will need to provide up to $22 million not including debt service, cost overruns, and any sustainability features. Although the grant process is on a one-year pause, libraries can vote to proceed before a grant is given if their town provides funding.
Attending the August 13 meeting were Trustees Austin Sarat (President), Lee Edwards, Alex Levebvre, Chris Hoffman, and Bob Pam (Treasurer). Trustee Tamson Ely was absent. Several guests made comments, including Kent Faerber (Co-Chair of the Friends of the Jones Library Development Committee), Matt Blumenfeld (one of the consultants overseeing the Friends’ capital campaign), and Cindi Harbeson, Special Collections Director.
The vote was 4 in favor and 1 (Treasurer Pam) against. Although this motion does not have a timeline, it will have the impact of pressuring the Town Council to make a decision concerning the project. The Council has yet to set priorities or financing scenarios concerning the Town’s four needed capital projects.
The final motion was not read in its entirety but is approximately the following:
“The Jones Library, Inc. (JLI) enter into an agreement with the Town of Amherst pursuant to which, if the Town will commit to the Massachusetts Board of Library Commissioners (MBLC) to provide the $21,751,789 balance of the cost of the renovation/expansion project to be funded by the Commissioner’s conditional grant of $13,871,314, JLI will provide $6,000,000 of that $21,751,789 total; such $6,000,000 to be provided simultaneously with the final payment from the MBLC. Any such agreement must be approved by the Jones Library Trustees.”
There was a long discussion of a memo by Faerber about how the library will fundraise and, if fundraising falls short of $6 million, how the Jones could take out a loan using the endowment as collateral with 10 years of figures. (See pages 3-5) Pam noted that such loans are typically at least 20 to 30 years and that the required payments from the endowment to the bank will increase each year.
The endowment is crucial to the running of the Jones Library system. The FY21 budget proposal calls for $2,640,183 in Library income and expenses. Of that sum, the Town allocation will be level-funded and provide the Library with 77.4% of its operating costs. State aid is expected to provide 3.3%.
The remaining 19.3% of the total budget is $511,609 of which $351,264 comes from the yearly endowment draw. Therefore, the endowment supports 67% of the Jones share of the library budget. Faerber admitted that if a loan needs to be procured, the endowment “would never catch up.”
Sarat will now appoint individuals as “negotiators” with the Town in the hope that a written agreement will be approved by the Town Council and the Library Trustees.
The Devil In the Details
The possibility of federal Congressional lobbying in D.C. and taking a loan on the Jones building, as discussed at a meeting last week, was not brought up again. Comments from Treasurer Pam, who was the lone vote against the motion, determined the flow of discussion, which was contentious at times. His comments include:
1) The Motion Is Premature
Pam reported that in May, the Director sent a letter to the MBLC saying that “if we get the grant this year, it will be rejected by the Town.” Pam agreed with this statement. He does not think it is best to push the matter now.
Sarat retorted that the motion under consideration does not say “when,” but it will “advance the conversation” and that “it is not premature, but late.” He joked that the Director does not have a crystal ball and referred to the 1948 Presidential election where Dewey was favored to win but Truman triumphed.
Sarat asserted that the Town cannot wait any longer. “We’re sitting on a powder keg of problems. We either need to take Path A (renovation/expansion) or Path B (refurbishment).”
2) There Are Too Many Uncertainties In The Faerber Memo.
Pam shared that before this meeting he talked to Faerber and Edwards, studied the Memo and did research on his own. In general, he felt that there were too many unknown factors. He is concerned that the actual cost of the building is not yet known, and there is no clear indication that if the Jones received a Community Preservation Act grant for $1,000,000 towards Specials Collections that it would “count” towards the Jones’ $6 million share. He added that, as Treasurer, he does not have the information he needs about how the library will meet its budget now, never mind functioning with possible future interest payments on a loan from the endowment. He is concerned about the financial health of the library for the next 75 years.
Sarat said that although he respected the “spirit” in which Pam’s comments were offered, and knows that Pam supports the building proposal, Faerber’s memo was “detailed and specific.”
Edwards added that it is very hard to fundraise without an approved project. There are several possible large donors yet they are reluctant to commit if the project is not definite. Without a clear goal, fundraising is “like a washing machine on endless spin cycle.”
Blumenfeld discussed the mechanism of Historic Tax Credits and provided new information that these would be applied for and awarded before the required Certificate of Occupancy so that such funds could be released immediately upon receiving said Certificate.
Some Trustees were curious if there is a list of valuable library art work or documents which could be sold to fund the proposed project. Harbeson is working on this list. A valuable Bierstadt painting was sold for $2.4 million to fund the 1993 addition that is now slated for total demolition.
This Motion will force the Town to take action during a time period when the financial picture at every level of government is uncertain. Even before the pandemic, Town Council had not discussed priorities for all the desired capital projects nor has it since provided any updated financing frameworks.
It is ironic that on March 9, 2017, Faerber wrote a letter to the editor in the Daily Hampshire Gazette concerning the Jones building project stating, “Adding the interest charges on that bonding serves only to frighten; when we buy homes we do not add mortgage interest to the price to evaluate our purchase.”
In actuality, interest is paramount in considering any loan. The interest and payback for a loan using the endowment as collateral will decimate the library’s ability to function. This should frighten us all.
As Pam asserted, “This motion is a mistake.”
Other meeting topics:
There were many other important topics in this long meeting including the Library Director’s yearly evaluation process, the work of the Sustainability Committee, an update on the Special Collections leak, the Director’s report concerning the library’s current functioning and the Director’s statement of disagreement concerning some the Treasurer’s demands and statements at this and the last Budget Committee meeting. Many of these topics will be discussed in future Indy pieces.
Terry S. Johnson is a retired Amherst teacher, blossoming poet, and a lifelong student of art, architecture, history, and languages.
As one can easily check with a mortgage calculator, a $10M loan amortized monthly over 30 years at 2.9% interest would have total payments of about $15M; at 5.3% interest, the total payments rise to about $20M. In other words, borrowing introduces cost factors between 1.5 and 2, assuming interest rates fall between 2.9% and 5.3% For a 30-year, interest-only loan, the cost factors would be considerably more (about 1.9 and 2.6, respectively). Since municipal bonds typically have “call” or “pre-funding” provisions, their cost factors would fall between those of monthly-amortized or interest-only.
Because a large public asset like a library (or a school or a sewerage system) will have different users over time, it’s more equitable to share its cost over the lifetime of the asset, rather than to pay the entire cost up front, and so it makes sense to issue bonds. The historically low interest rates make it even more attractive to issue bonds to pay for necessary capital projects (like refurbishing the Jones) now; however, it’s disingenuous to ignore those interest costs when explaining the financing to the public.
The library appears to be on shaky grounds in terms of being able to meet its pledged fiscal commitments to the demolition/expansion project. Borrowing from the endowment seems quite ill advised, especially since that endowment contributes substantially to the annual operating costs of the Jones. And since the Jones is already struggling to meet its annual operating expenses and is currently drawing aggressively from the endowment, how do the Trustees plan to meet the increased expenses that operating a much larger building will entail? Will they be asking the Town to increase its annual funding of the Library? Have they already broached this with Town officials? Will the likely added costs of operating a larger building impact the Town’s ability to operate the branch libraries? What will the library budget look like if/when the new building is opened? So many questions. So few answers. The taxpayers are entitled to know this stuff before the Town makes any commitment to fund this project.
Our branch libraries — the Munson in South Amherst, and especially our gem of a library in North Amherst* — deserve our primary attention, while the Jones** should be refurbished*** and preserved.
[*to incorporate restrooms, and to be made fully accessible]
[**clearly some serious work needs to be done on the Jones, particularly its HVAC systems, and around the problematic 1993 atrium; however, all that can happen within its existing footprint and superstructure, without destroying the historic interior and exterior features we cherish]
[***”refurbished” means cleaned up and repaired — not torn down and rebuilt bigger]
A refurbishment or perhaps a more modest renovation/expansion application with the MBLC, including keeping and upgrading the 1993 addition, is the sensible way to go. A study was never done about incorporating the 1993 addition in an expansion plan. The Trustees simply accepted the Director’s explanation that since the Atrium leaks and the site lines are not ideal, the addition should be demolished in its totality. Destroying 17,800 square feet, creating 1660 tons of landfill and expanding for a total of 35,800 sq. ft. of new construction does not make sense.
The library is currently running on a shoestring budget. Four full time retiree positions have not been filled in the last two years and a fifth retiree’s post may not be filled this year. Taking out a loan with the endowment as collateral is a dangerous proposition for the library’s long term future since it cannot meet its current financial needs.
The Trustees have not negotiated with the Town for a larger allocation nor have the Trustees worked on increasing the endowment. They voted to use the recent unrestricted $243,000 from the Van Steenberg estate towards the capital campaign.
Whether or not the library can fund services for such a large building has never been quantified. The Director has stated that no new staff members will be needed because the new $400,000 automatic book sorting machine with conveyor belts throughout the library will “save” staff yet no specific financials have been provided. However, Building Supervisor George Hicks, has stated that more staff will be needed for maintenance.