Sunday, October 14, 2012

Questions about proposal 1: the library bond issue

On our November ballot, voters within the Ann Arbor Library District will be faced with $65 million bond proposal for a new downtown library. The 30 year bond is projected to cost anywhere from $86.49 to $130 million with financing (See UPDATE). The bond will cost taxpayers 0.56 mils which is $56/year for a home with a taxable value of $200,000. Currently, there is one group supporting the bond proposal and three (!?!) groups that are against the proposal. At this time I am undecided on the issue. I think the pro-bond group makes some convincing arguments about the need for upgrades in the Downtown Library. On the other hand, I'm not sure it's better to demolish the current building and start from scratch rather than doing an extensive renovation. I guess, before voting, I'd really like to see a series of different proposals with the costs and benefits of each laid out clearly.

Here are a series of questions I have for both the pro-bond and anti-bond camp and I invite members of all groups involved to answer them, that is, if you read Damn Arbor.

For the Pro Proposal 1 Camp--Our New Downtown Library:

What are the specific upgrades the library needs?

Why why do the upgrades necessitate building a new building? Why can't we just renovate the existing building?

What does the $65 million get us? What is the plan, or vision? Why wouldn't say, $45 million work?

What will happen to the current library, and the services it provides, while the new building is being built?

What will be the long term change in operating expense due to upgraded mechanical systems?

What are the risks to the community if this bond proposal doesn't pass?

What are the risks to the community if this bond proposal passes?

What is your vision for the future of the Library?

For the anti-proposal 1 camp: Protect our libraries, Save the Library and the unfortunately named Love our Library (LOL):

How do you think the Library could best address its current deficiencies?

Would you support a bond proposal that would support a library renovation?

What are the risks to the community if this bond proposal doesn't pass?

What are the risks to the community if this bond proposal passes?

So yeah, if folks would like to address these questions in the comments section, I'd really appreciate it.

UPDATE--3:31 PM: Peter Baker has informed me that the $130 Million price tag for the 30 year bond repayment is a number that opponents of the bond proposal have been throwing around and that it reflects an interest rate of 5.25%. The pro-bond group says current municipal bond rates are 2-3%. The total cost for the bond at 2% would be $86.49 million. At 3% it would be $98.66 million. In fact, at 5.25% it would be just $129.22 million.


  1. Almost every one of the questions for the "pro camp" are answered on these three pages:

    The Current Facility:
    The Proposal:
    Other FAQs:

    As for the specifics of the differences in operating expenses, that won't be known until a building design is complete, which the library board didn't want to spend money on until they were sure they'd use it.

    And the library plans to set up library services in a temporary location downtown during the estimated 2 years of construction (which will *not* involve closing 5th Street).

  2. Oh, also, your article recites the exaggerated $130m cost. That would be with an interest rate of 5.25%, current interest rates are actually only 2% for municipal bonds, and then factor in inflation over 30 years (averaging 2%), and interest costs are nearly nill.

  3. Thanks for the links Peter. I've updated the article to reflect the more realistic potential range of costs.

  4. Another correction: "The bond will cost taxpayers 0.56 mils which is $56/year for a home with a taxable value of $200,000" - this should state for a home with "market value of $200,000" (the taxable value would be $100,000).

    Thanks for covering this issue and helping inform your readers. It's important our community gets facts and details about making this investment in our library.

    The AADL began this process five years ago and have considered this issue extensively. They hold open meetings with public input and have a high degree of responsiveness and transparency (as evidenced on their homepage: Leadership of the AADL has provided great value for our tax dollars, building three new branches from 2004 - 2008 and then voluntarily lowering their millage in 2009 to save tax payers money.

    The AADL has earned the respect and trust of many of our community's cultural, civic and business leaders (as evidenced here: I have full confidence in the AADL leadership to continue giving us tremendous value for tax dollars by building a great main library that our community needs and deserves.

  5. Regarding the claims of "exaggerated" cost estimates for the library bond that you allege that "opponents have been throwing around:"

    The following is from the Ann Arbor Chronicle, July 22, 2012, in a report on the AADL board meeting--Note the interest cost estimate came from the AADL itself, NOT opponents!:

    "Based on a chart provided to the board, a 25-year, $65 million bond would have an estimated interest rate of 5% and a millage rate of 0.59 mills. A 29-year, $65 million bond had a higher estimated interest rate of 5.25%, but a lower millage rate of 0.56 mills. [The chart did not provide information for a 30-year bond.] The total interest payments would be higher under the longer-term scenario – $64.669 million in interest for the 29-year bond, compared to $51.478 million for the 25-year term. Details on the interest and millage rates will vary, depending on market conditions when the bonds are issued."

    $65 million + $64.669 million is pretty close to $130 million, and that's only for a 29-year bond. The 30-year term will add millions more.

    The article goes on to describe one member of the board insisting on a 30-year term instead of a shorter, less-costly 25-year term:

    "Surovell said he thought he had convinced the committee that a 30-year term would be better, and he was “distressed and disappointed” that a 25-year term had been recommended instead. The period of 25 or 30 years exceeds the life expectancy of everyone on the board, he said. The point for any millage isn’t the total amount of interest that’s paid, but rather the amount that taxpayers must pay on their tax bills. As he pays his taxes this summer, he’ll be looking at the bill – not thinking about how many more years he’ll be paying each millage. He doesn’t care how long because he won’t be here...."

    Now THAT'S responsible fiscal policy! Mr. Surovell may not be around, but the authors of this blog, should they choose to stay in Ann Arbor long-term, will be. Municipal debt in Ann Arbor has skyrocketed over the last several years. It is irresponsible to add more to the total for yet another unnecessary capital project.

  6. Regardless of interest rate, these "total cost" numbers aren't taking account of inflation, so if you're talking total cost in 2012 dollars (i.e. dollars that are meaningful to us) the pure interest rate table doesn't give the real cost, only the nominal cost. Inflation has averaged 2% for the last 20+ years.

    I.e. If the bond has 4% nominal interest and inflation averages 2%, the *real* interest rate would be about 2%. If the bond has a 3% interest rate and inflation averages 4% over the next 30 years, the total cost would actually be *less* than 65 million in 2012 dollars.

    Of course, we don't know what the future rate of inflation will be, but it's highly unlikely that it will be zero, and all of these 'total cost' numbers calculated off of just the nominal sticker interest rate on the bond assume inflation is zero if they don't take it into account.

    Regardless, interest rates are super low right now and thus financing costs are as cheap as they're likely to ever be.

  7. Also, I support this new library precisely *because* I'm choosing to stay in Ann Arbor long-term (and yes, I pay property taxes).

  8. We're lucky to have one of the most innovative library systems in the country. There's a lot of concern about where libraries are going, but I think you can find out at AADL, because they're creating that future now. They've got amazing programing, I took my daughter to a barn raising the other week, they collaborate with the local maker community, they have engaging speakers and events like The Story Collider. You can sign out books, comics, frame art, DVDs, telescopes and electronic music tools. Their annual Summer Game engages everyone in using the library and is a national trend setter.

    But I think they're just scraping the surface of what's possible. Take a look at what other cities have done, like Salt Lake. We have the innovative library system to do something amazing, but they're held back by an existing building that is designed primarily to house the book, has a number of obsolescent mechanical problems, and lacks enough programming space. Books will continue to be important and a big part of the new building, but acquiring knowledge and culture includes things like hands-on learning and human interaction.

  9. I put a number of links in that comment but they're difficult to see.

  10. What will happen if the bond isn't passed? Services will limp along in the current building. More of the operating millage will be used for maintaining that building instead of providing library programs. We could continue seeing some library events held at Live! or other locations because they don't fit in the multipurpose room. But also opportunity will be lost.

    And maybe several years down the road, when the current building is even more untenable, there'll be a decision to rebuild. But with the recovery in full swing, what will interest rates be then? Construction costs? We're not likely to see interest rates hold at 2-3% forever.

    But aside from financial reasons, we'll be missing out. This isn't an oil town or a capital city. This is a university town, a town that attracts people who have creativity, who have ideas, who want to build their own businesses and families. The new downtown library will be a keystone of our intellectual and cultural infrastructure.

    1. The "services will limp along" argument is pretty tough to make considering the entire case for trusting the current administration with $130 million of our money is how successful the services they currently provide supposedly are.

    2. I think it's easy to see how spending more and more on maintenance of an aging building would take a larger and larger percentage of the library's total budget, thereby lessening the amount available for programs and services.

    3. Or they could simply increase the amount of the current operating millage to fund renovations a bit at a time--elevator this year, new snack bar next year, new roof the following year, new furniture, etc. No need to cry poverty when you aren't collecting the full authorized amount of the current millage. From what I understand, they are leaving about $1.6 million on the table each year that could be going toward replacement or overhaul of plumbing, HVAC, or other systems.

  11. It's hard to imagine a more wasteful, unnecessary, and poorly argued proposal than that for a rebuilt A2 downtown Library. I'm very concerned that there are many people here who will vote for it wither out of inexperience, excess wealth or based on a knee-jerk reaction to something that sounds de facto good. I don't personally know anyone who wants this plan happen, yet there is very little visible opposition - signs, ads, radio commentary, posters - compared to the subsidized, prejudicial and bully pulpit support that exists for this proposal. Name a single person or user group that is not served well by the current library or would be helped by much less expensive renovation and reconfiguration of its space. The entire first floor is a disgrace and an eyesore, even from a distance. Ann Arbor needs many many things before it needs a new downtown building. The awful design and use that's been made of the current building is proof enough that strong skepticism about new plans is well merited.

  12. I can imagine Ann Arbor with a great main library. And I hope it's something we invest in for greatly improving access to the AADL for everyone in this community. I know many people across a diverse spectrum who are strongly in favor of rebuilding the downtown library. There are many people and groups who value the AADL but are not adequately served with the current facility.

    I agree that the design of the current downtown building is poor, but believe it does not serve well as a framework/foundation for yet another renovation. Those design decisions were made 20 - 50 years ago, prior to the AADL becoming its own elected governing body separate from the public school system. For the past decade leadership of the AADL has a very strong track record for giving us tremendous value for our tax dollars. Rebuilding the downtown library is an investment in greatly improving our community's access to arts, culture, education, sharing, collaborating and shared resources.