April 20, 2002

TO: City Council

FROM: Friends of the Library

RE: FY2003 Funding Request: Additional Background and Follow-up Response to Questions at April 16 Worksession

Thank you for the thoughtful questions at the recent worksession. We realize that there was not sufficient time to provide detailed responses then and we are using this memo as a means to provide additional response and follow-up.

First, the community clearly supports the development of this new library. In the past week, more than 120 letters of support have come in from the community. They are still coming in. The key question now is whether the city council wants to make this project to work. If so, everything becomes clear and we all set about doing the rest of the work to make the library happen. main question is whether the we adopt a stance to make the library happen and build the team work between FOL and city to ensure that it does succeed.

We are responding the best that we can as new information has come in about the facility size, cost estimates, Artspace's construction schedule, and the timing of funding needs. There are still areas of some uncertainty about the funding timetable, but our present understanding is summarized in an attached table.

Much like the City has been challenged by the lack of a full-time manager, we have been challenged by the loss of our planner/general manager/fundraiser who recently made a permanent career move to New York state. Pending activation of the Legacy grant support for staff will help give us a needed backbone. Meanwhile, the project faces a need for local funding commitment and growing time pressure to raise additonal funds.

Bottom Line:

The project to develop a new library is not a community group special interest project, like a house tour program, it is an effort to upgrade a dilapidated city-owned building that provides a broad public purpose and can make a unique contribution to town center business revitilization.

If the council wants to support this project, the strategies, resouces, and team work needed to make it happen will come together. Without city support, the project still has a slim chance, but then faces a double challenge of a fast Artspace clock and public rejection by the city council, which will greatly damage the prospects for gaining other funding partners.

Questions:

  1. Why is thre uncertainty in the funding gap for building cost and leasing cost? (General)

    Council can earmark the funding for the library project into a capital reserve account. If the ultimate need for city funding for the library is less than the maximum estimated now, the unneeded portion of funding would remain in the capital reserve to be used for other city capital projects. For example, this could include improvements to the public works building, such as roof insulation to cut energy costs, or to buy public works equipment or city vehicles.

    With the reassurance of a written city commitment to fill a gap of varible size up to a fixed maximum, it becomes much easier to get funding commitments from other potential partners to reduce the gap. FOL is committed to public and private fundraising effort to minimize the gap. The Legacy grant supports a position for a fundraiser. However, without city funding, we don't see a way to close the gap in time for the Artspace construction start and then the liklihood of a delay in Legacy A&E costs and $200,000 in added building delay costs grows quickly.

    Resource Person: Tim Wanamaker, County Redevelopment Authority.

  2. How would City funding to fill the gap work?

    Building Cost. The state offers a bond pool mechanism that groups bond funding needs from local government so that the state applies for the funds using its bond rating, which ensures the lowest possible interest rate. The city used this bond pool mechanism for the loan used to fund the police station, and it may also have used it to help fund the city hall project. In essence, the state gets the funding needs up front at minimum cost, and then the city pays an annual debt service to the state.

    Resource Person: Dick Hillman at the state Dept. of Housing and Community Development can explain to the Council and/or its new manager how this process works and what the exact financing values are.

    Artspace Support/Lease Cost. This needs to be worked out through the MOU process. The first question is whether to own part of the building or to simply be a tnant.

  3. What would be the asset value of the New Library to the City? (Bryan)

    (A)Lease. Under a lease arrangement with Artspace, the lease would be the instrument of real value.

    (B)Ownership. FOL is very willing to work with the city to pursue a library ownership option with Artspace. Portland and Seattle arranged such a "joint ownership," but it required some special legal work for which FOL lacks resouces. Further, Artspace does not like this option, the city's power to grant tax exemption etc could be used in a creative way to leverage this option. FOL has contacts in Portland that could help identify strategies and experts to help pusue this option and reassure Artspace of tis practicality.

    Resouce Person: BFM Architects has identified an exppert that can help explain and strategize on these options.

  4. Would the County Library System (PGCMLS) formally agree to 30-year occupancy? (Bryan)

    The county system has operated in the current facility in good faith for many decades. It has expressed good faith in operating a library in the past and is very excited about continuing such good faith in a new facility. It does not guarantee occupancy for any of its branch libraries, but has a good faith understanding for all of them. A budget crisis is the only real threat to this good faith, and it could affect any and all branch libraries. We have asked PGCMLS to clarify this issue for the Council.

  5. What are the Other Prospects to Fill the Funding Gap? (Brooke)

    As shown in the funding outlook table, there are other prospects to help fill the gap, but without city funding, there would still be a gap of at least $900,000. The state Legacy grant includes support for a fundraiser that would help generate more local funding from businesses and doners, which would act as further leverage for funding from corporations, foundations, and other public sources.

    Again, lack of city funding support would greatly hurt the ability to raise other funds. On the other hand, city funding support and team work will greatly strengthen the ability to raise other funds.

    Funding Prospects

    The table given last week entitled "Funding Outlook" shows a conservative estimate of $100,000 to $300,000 in other funding. With city funding support now, prospects for other funding increase geatly. For instance, Kresge Foundation provides some funding for constuction projects. However, this is provided only on a matching basis, where the applicant has other funding commmitment for at least 20% to 50% of the construction costs. Thus, it is unrealistic to pursue, if the project does not have a commitment of construction funding form the city.

    Parris knows we are at the forefront of revitalizaton. The Community Legacy program ws based on our efforts and experiences, and was designed to address revitilizaiton funding needs. He helped the city with $2 million for the roundabout and $850,000 match for a "revitilization" project to develop a new police station in a rehabbed building.

    The state of Maryland does not fund library projects. But the Glendening Administration has found unique ways to fund the police station and library as revitilization projects. The opportunity and success at getting the Legacy grant for mixed-use library project is unlikely to be duplicated at any time in the future.

    At one point in pursuit of the Legacy grant last year, GCDC asked whether FOL would support locating a new libary project at locations on Route 1 in the other two Gateway towns. We saw this as another clear signal of the attractiveness of a new library as a desirable anchor project for commercial areas. As a smart growth revitilization project. This aspect should be a strong sell to some other funders.

    Early on, FOL had hoped that the amount of city support needed for the project could be minimized to near zero. Since then needs for the Artspace projects funding have closed doors for county funding prospects and created a competitive stance toward state funding prospects, especially bond bills. Bond bills are difficult (10 to 1 ratio of requests to funding) even in economic boom times, like the city had for the police station grant in 1998, and never provide more than a 50% for city funding for constuction projects.

    However, the library project is now runing out of options to avoid added delay costs, to keep the project on pace, and to continue buiding confidence for recruiting addition funding partners.

    Artspace's own project delays with tax credit application and slow response to the draft MOU created significant delay for the library project in estimating building costs, because the library would be an integrtaed part of the Artspace building and also to get Artspace estimates of its request for leasing costs.

    Every hour FOL spends struggling to get Council support for the funding gap is an hour taken away from other fundraising activities that can help reduce the gap.

    In our discussion about the MOU with Council last fall, FOL suggested that the city have its legal cousel review the draft MOU. Such support from the city legal counsel then may have helped move the MOU along more quickly.

    FOL's leverage with Artspace depends almost completly on the ability to obtain funding and on the popular good will that Artspace has received by advertising that a new community library would be part of its building.

    In contrast, the City has multiple sources of institutional leverage with Artspace that far outweigh those available to FOL. This includes its regulatory authority (including MUTC committee process and ability to seek waivers from the county for parking etc), tax authority, and endorcement power for application to state government etc. It also has leverage with public officials, like Councilman Shapiro and state legislative represenatives.

  6. Couldn't Library Project Planning Be Better? (Devon)

    Grassroots library efforts are open-ended, taking five years or more for a capital campaign and then seek major public money.

    The Artspace project offers a unique opportunity to create an innovative mixed-use setting for the library. This revitalization aspect is what convinced Governor Glendening to provide $200,000 Legacy grant as initial leverage capital. This money is extremely hard to come by, and would likely not be provided for a stand-alone library without the housing component.

    Artspace mixed use also comes with extremely fast pace and short term deadlines for capital funding.

    We believe the state's decision to fully fund the library project while not supporting $900,000 in other GCDC requests, shows the relatively strong viability of the library as a revitalizaiton project.

    Delays in Legacy grant start-up. State delayed announcement from September to December, with implementation starting in February. Meanwhile, Artspace had to go through a second tax credit application cycle. Also, FOL found out in late February that its fund raiser had moved away permanently and it would have to conduct a new recruitment process to fill this position.

Click here Funding Timetable