The Los Altos Community Foundation

PrimeTime Project Presents

LOS ALTOS INFORMS: IMPLICATIONS OF LIBRARY OPERATION

A study of operating expense and other factors for city-operated vs. special district-operated libraries in Los Altos

A Report by Karen Duncan and Norma Schroder

 

SUMMARY

In response to state budget cuts in 2011, the Santa Clara County Library District imposed an $80 annual fee for patrons who did not reside in the Library District. The fee was not optional; Los Altos citizens learned they didn’t have a choice as to whether to ask their non-resident neighbors to pay the fee.

Community discussions ensued as to the merits of gaining more control over decisions affecting its own library. One possibility was to withdraw from the Library District in favor of city-based management of the Los Altos Main and Woodland Libraries. But could the community afford to do so?

The PrimeTime Project of the Los Altos Community Foundation determined that several significant factors might affect such a complex decision. The logical first step was to examine operating expenses because the data were readily available. Accordingly, we launched a study that included a quantitative estimate of operating expenses, consideration of one-time expenses, the cost of transitioning to city-operated libraries, and several non-cost considerations.

Our primary focus was developing a methodology and factual analysis of potential operating expenses and, for planning purposes, on showing the dollar amount contributed by Los Altos and Los Altos Hills communities to the library district. Further analysis of additional factors may be required to support a definitive decision.

The assumptions and resultant costs calculated in this study do not suggest a financial advantage to Los Altos by leaving the Library District. If further studies did reveal a substantial personnel cost reduction, then the other issues described in the report about the costs of separation should be examined.

Ultimately, the community will need to balance access to a rich array of materials and services and the desirability of shared costs with its need for increased autonomy.

1.0 INTRODUCTION

Background information about the Los Altos Libraries organization and the Santa Clara County Library District is available here.

The $80 fee imposed on non-resident library patrons in 2011 by the Santa Clara County Library District sounded a wake-up call in Los Altos. The community realized that the County of Santa Clara actually operates its library under a Joint Powers Agreement (JPA) among the nine participating cities; Los Altans couldn’t choose to collect the fee.

Citizen reaction ranged from support for the fee to resignation and even outrage. In the end, patrons accepted the reality of the fee, and steps were taken to reduce the impact on our neighbors. But the sense of not having control lingered, and those concerns led to questions. How does this community influence decisions about facilities, staffing, hours, and programs? Is the community using its dollars wisely by being a part of the Library District? What would it be like if it operated its own libraries instead? Would the expenses be different, or the holdings or services? Would different contractual arrangements fit better with the community’s desire for self-determination?

2.0 APPROACH

As our community considered our future relationship with the Library District, we at the PrimeTime Project believed it would be useful to Los Altos library patrons and city officials to have an objective basis for considering their options. We designed this study to describe typical services and costs if we had city-operated libraries compared to sharing in the Library District.

Of course, we realize that there are several factors to consider in making such a complex decision. These factors are wide-ranging and include four cost categories: operating expenses, one-time expenses, capital costs, and transition costs. We highlight other factors that include how and what the community pays for library services; the type and extent of services currently received, and how that might change, and define community values.

Of the cost categories, only the operating and one-time expenses are developed quantitatively in this study to take advantage of available data sets. Much of the analysis is based on assumptions, which we carefully explain. The resultant numbers are offered as logical, based on these assumptions. Others are encouraged to use the framework developed in this report with their own assumptions and come to their own conclusions. From our point of view, the framework is as important as the resultant numbers.

The quantitative study approach we took is as follows:

First, we estimated the county’s operating expense to operating our libraries.

Second, we estimated the expense of operating our libraries as independent city libraries and compared it to the expense of the Library District’s operation of our libraries.

Third, we estimated the impact of one-time expenses.

Fourth, we estimated the amount we are paying for Library District services. (Note that this amount cannot be used directly in our comparison of estimated operating expenses, as explained later in our analysis; it is included to give the community an idea of the scope of the expense and the sources of funding.)

Finally, we identified several other factors that could affect the potential costs besides operating expenses to give a complete picture of the issues raised by transitioning to an independent library. These factors are discussed but are not part of our quantitative analysis.

3.0 SOURCES OF INFORMATION

This study uses actual data for some analyses, and estimates for others, as appropriate. These differences are explained in this section, along with our general sources of information and how and why we used each source.

We’ve used our best judgment in estimating the information provided, and we want the readers to understand why we chose the methods we did. As we explain our results, we’ll also explain each estimate’s benefits and shortcomings so that each reader can assess its value. This transparency is designed so that readers can provide their own assumptions and draw their own conclusions.

3.1 Cost Estimates

In general, cost estimates based on budget information are ideal for this study because a budget is itself an estimate for the coming year that reflects a reasonable use of information about past spending and plans for future spending. For some previous point in time, Actual cost, such as last year, is less useful because it only considers what happened in a particular year.

Accordingly, our estimates of expenses are based primarily on the Library District budget for the Fiscal Year 2012 (FY12: July 1, 2011 – June 30, 2012).

3.2 Pay-in estimate

Our estimate of our contribution to the Library District is based primarily on the tax levied on the assessed property value in Los Altos/Los Altos Hills. Other categories are estimated as annotated in our findings in the next section.

4.0 FINDINGS

This section describes the study results, using the methods we discuss for each task. In all tables, entries are shown in 1,000s of dollars.

4.1 Library District Expense to Operate Los Altos Libraries

This first estimate is based on the SCCL budget document for FY12 (July 1, 2011 – June 30, 2012). The budget includes operating and capital expenses (one-time costs), but this project’s scope is operating expenses. Working from the final column in the second table on page 3 of the budget document, we removed the capital expenses, leaving our estimates’ operating expense budget. Budgeted capital expense data was provided by Library District staff. The resulting total Library District budget and operating expense are shown in Table 1.

Table 1. Library District Operating Expense Budget (in 1,000s)

Expense Item	Total Library District Budget	Operating Expense Budget
Personnel	$21,456	$21,456
Books & Materials	4,000	4,000
Facilities	3,814	3,814
Supplies & Services	6,052	2593
Fixed Assets & Vehicles	371	145
Total	35,893	32,208

 

Our next task was to allocate a portion of the total Library District expense budget for Los Altos Libraries. This allocation has three components.

1. Los Altos Libraries personnel expenses and materials and books expenses are line items in the Library District budget.

2. An individual library’s share of Library District’s facilities expenses and services and supplies expenses are not a line-item in the budget, so we allocated headquarters expenses by two methods.

First, the Library District’s method of allocating funds to the individual libraries is according to “the formula,” an allocation negotiated by the cities and the Library District as a fair means of considering workload in the libraries, the possible citizens served, and the funds contributed by the property taxes collected in the city’s jurisdictions. This formula considers population, assessed property valuation, and circulation, giving the Los Altos Libraries a 16.87% share of the Library District’s expenses in these categories, as shown in the Library District budget document.

The second allocation method is based on circulation alone, a better indicator of actual work in the libraries, and the work that stand-alone libraries would need to accomplish. The allocation for this method is 16.93%. Circulation percentages are given on page 14 of the Library District budget document. In the Los Altos Libraries case, these two methods’ difference in allocation is negligible, as will be seen in the tables below.

3. Library District headquarters personnel expense as a line item, and we used the same two methods of allocation to determine Los Altos Libraries allocation.

Table 2 shows the Library District operating expense budget (excluding district-wide activities such as the bookmobile), the allocation method for each category, and the amount of the Los Altos Libraries (LAL) allocation. Information using circulation percentage in each category is in parentheses; the difference in allocation using the two methods is seen to be negligible.

Table 2. Library District Operating Expense for Los Altos Libraries (in 1,000’s)

Expense Item	Total Library District Budget	Los Altos Libraries Operating Expense Budget	Source or Method of Allocation
Personnel: local	$15,600	$2,751	Library District Budget pg. 8
Personnel: HQ’s	5,543	935 (938)	Formula (Circulation)
Books & Materials	4,000	635	Library District Budget pg. 8
Facilities	3,814	643 (646)	Formula (Circulation)
Supplies & Services	2593	438 (439)	Formula (Circulation)
Fixed Assets & Vehicles	145	24 (25)	Formula (Circulation)
Total	31,696	5,427 (5,434)

4.2 City Expense to Operate the Los Altos Libraries Independently

For ease of comparison, we used the same time period (FY12), so population and circulation could be considered the same regardless of the libraries’ operation. We assumed that the facilities, services and supplies, and fixed assets and vehicles categories would be about the same, no matter how the Los Altos Libraries were operated. However, for personnel and books and materials, we expected that our costs would increase substantially. Interested readers can modify our table below by selecting percentage increases that are different from ours.

In personnel, we would need to add several staff members to perform the functions now being performed at Library District headquarters. This includes management, business office, contracts and licensing, computer support, and technical and public services. From Table 2, Los Altos Libraries’ share of the headquarters personnel expense is $935,152 for 8.4 FTE (full-time equivalent employees). Because we would no longer share with other libraries the expense of the specialized personnel who provide these services, we increased this expense by 50%, totaling $1,402,728, for 12.6 new FTE in Los Altos Libraries.

For books and materials, the Los Altos Libraries house 307,487 items in their collection, free access to the entire Library District collection of 1,828,691 items. A non-trivial portion of the Library District collection, such as reference works, exists at only one or a few locations, and not necessarily ours. We expect that independent Los Altos Libraries would want/need to build their own collection judiciously at, say, a rate of 10% per year. From Table Two, our allocation for books and materials is $635,416. With an increase of 10%, our estimate of books and materials expenses for independent Los Altos Libraries is $698,957. The reader is cautioned that this low replacement rate would result in reduced resources and services.

Using these methods and figures, the estimated operating budget for independent Los Altos Libraries in FY12 is shown in Table 3. The total estimated increase in operating expense is about 10%.

Table 3. Estimated Operating Expenses for Independent Los Altos Libraries (in 1000s)

Expense Item	Library District Budget for LAL	Estimated Adjustments	Independent Los Altos Libraries
Personnel: local	$2,751	$2,751	No Change
Personnel: HQ’s	935	1,403	Increase 50%
Books & Materials	635	699	Increase 10%
Facilities	643	643	No change
Supplies & Services	439	439	No Change
Fixed Assets & Vehicles	24	24	No change
Total	5,428	5,959

4.3 One-time Expenses

Of course, the operating expenses are only a part of the total cost of operating a library. Additional one-time costs, such as replacing computer stations, vary each year widely, according to need and funding availability. In FY12, for instance, the Library District budgeted $3,684,840 for these kinds of costs. Although there is no allocation of this one-time cost to the individual libraries, Los Altos Libraries’ hypothetical “share” based on circulation would be $623,843.

4.4 What LA/LAH Pays

We used the relevant Library District revenue categories given on Page 3 of the Library District FY12 budget for ease of comparison. The categories, the Library District total budgeted revenues in each category, and the contribution from Los Altos/Los Altos Hills are shown in Table 4 and explain how we derived each entry. Note that some entries, such as property tax, are known while others are estimated.

This table includes extensive notes as to the source of each entry.

Table 4. Library District Revenue Budget and the amount LA/LAH pays (in 1000s)

Expense Item	Library District Revenue Budget	LA/LAH Contribution to Budget	Method of Allocation
Property Taxes	$23,607	$4,079	Calculation based on Assessed Value
Special District Parcel Tax	5,610	468	Actual
City (NCLA)/County Contribution	1,275	550	Actual
Fines and Fees	920	156	Estimate based on circulation
Other	796	5	Estimate
Total	32,208	5,258

 

The income items in this table are:

Property tax: We calculated the assessed value of property in LA/LAH as a percentage (17.3%) of the total assessed value of property in the county, according to the Library District budget document, page 14. We then used this same percentage to calculate the LA/LAH share of the total property tax paid to the Library District.

We do not attribute Los Altos, and Los Altos Hills any property tax revenue from any unincorporated areas since these amounts are assessed from properties outside these two incorporated cities.

Special (parcel) tax: Since these Library District-wide tax proceeds are returned directly to the Los Altos libraries to fund personnel and library materials, actual amounts are calculated by the Library District each year and included in the annual budget. Please note that this is a Library District staff policy but not required by the ballot measure approved by the voters.

City/county contribution: LA/LAH collects a special tax through the North County Library Authority. This tax, which according to Library District records totaled $550,000 in FY12, is paid to the Library District to increase the number of hours Los Altos Libraries are open and to supplement the budget for books and other library materials.

Fines and Fees: The LA/LAH percentage (16.93%) of circulation in assigned areas was used to estimate the fines and fees paid by LA/LAH. ‘Assigned areas’ include all geographic areas served by the Los Altos Area.

Other: This includes interest earnings, Homeowner Property Tax Relief Credit, Federal Medicare Credit, contract services to other libraries, and miscellaneous donations. Estimated LA/LAH indirect contributions in this category are negligible.

5.0 ANALYSIS

5.1 Summary of Quantitative Findings

The tables in our findings cover two areas:

A comparison of operating expenses for Library District-operated vs. city-operated libraries in Los Altos shows expenses of $5,427M with Library District operation and $5,929M expenses with city operation.

The amount of LA/LAH’s contribution to the Library District’s operating budget is $5,258M.

Note again that a direct comparison of operating expenses with what we pay is not valid for several key reasons. Operating expenses include the incremental costs of serving patrons who do not live in LA/LAH, whereas the amounts for what we pay are calculated for just LA/LAH.

Furthermore, operating expenses do not include one-time expenses, which in FY12 were allocated at $623,843. In budget years where the Library District has a surplus of budgeted revenues vs. actual expenses, the Library District transfers the excess to a reserve account (like a savings account). In subsequent years, the Library District transfers funds from reserve accounts to pay for one-time expenses such as new computers. Page 13 of the Library District budget document explains the budgeted reserves.

Because the money in these reserves would have been income to the Library District from the cities and county during previous years, it is not counted as part of the current year’s contribution.

Thus, both one-time expenses and the funds to pay them are not in our calculations. However, it’s important to keep in mind that one-time expenses can represent a substantial cost to the library each year. In FY12, for example, LAL’s share received for one-time expenses was about 11.5% as large as its operating expenses.

5.2 Potential Additional Costs of Transition and Operation

The cost of transitioning from a Library District-operated to a city-operated library could be high. It is beyond this study’s scope to determine even approximately the additional costs that might be incurred. Instead, we have highlighted for the city’s possible future study several possibly significant areas. These potential savings and costs would generally apply to a transition from the Library District to any other management arrangement.

— The Library District’s integrated, technology-based systems such as computers and software and library management systems would need to be replaced.

— The Los Altos Libraries are already bursting at the seams. The community would need to plan for physically housing the increased size of our collections and the increased number of personnel projected for independent libraries. LA/LAH would undoubtedly require additional space, either by expansion, rebuilding, or splitting up library services across multiple sites.

— Questions of equipment and materials ownership would need to be settled. The Library District receives property and parcel taxes and maintains reserve funds and assets. The legal fees to determine our rights and re-negotiate contracts are unknown but could be substantial. Also, if, in fact, the Library District legally owns the contents of the LAL, then we would need to replace these items.

— Finally, library personnel are employees of Santa Clara County, and all are union members. Disposition of personnel and re-negotiation of employment contracts could again lead to substantial unknown legal fees.

5.3 Potential Savings

— It has been suggested that savings on personnel expense could be achieved by hiring non-union staff and relying as much as possible on volunteers instead of library professionals. However, whether this would lead to significant savings is uncertain.

— Some savings might be realized by reducing our e-offerings. As Library District patrons, the community enjoys a rich user environment of specialized library software that actually creates an online community for patrons. This report’s readers are invited to explore the tools and e-collection of Library District materials for browsing, research, managing your reading, and interacting with other patrons at www.sccl.org. Tools include, for example, hundreds of online databases and magazines, genealogy, language modules, and help with homework or taxes. While it might be possible to continue using the Library District system or a similar one, LA/LAH may want to consider replacing it with a less costly system.

— Reductions in service levels such as the number of hours the libraries are open or reductions in programs offered may also result in savings.

5.4 Community Values

Besides financial concerns, community character is a significant factor in determining its patrons’ library. Should the library offer a state-of-the-art facility with extensive access to Internet-based resources and a relatively rich collection of the classics and invaluable reference works, children’s books and materials, and the latest DVDs? Should Los Altos offer free library cards to our neighbors who want them? Do our patrons believe that the current library services are needed, or does the community need more autonomy to do things differently?

6.0 CONCLUSIONS

The assumptions and resultant costs calculated in this study do not suggest a financial advantage to Los Altos by leaving the Library District. It is commonly argued that independent Los Altos libraries would reduce personnel’s cost, which is the largest in the budget. Testing this assertion is beyond this study’s scope and would presumably require comparing wage rates in the County and the City. Further, it would require a detailed study of library options to identify the tasks that volunteers could perform and some means of determining if such volunteers would volunteer.

If a future study did reveal a substantial personnel cost reduction, then the other issues described in the report about the costs of separation should be examined.

Ultimately, the community will need to balance access to a rich array of materials and services and the desirability of shared costs with its need for increased autonomy.

8.0 ACKNOWLEDGEMENTS

The authors are grateful to the PrimeTime Project’s volunteer analysts, each of whom had a relevant professional experience contributing to this study. Besides the authors, they are David Smith, Jan Masters, and Jack Kelly.

We are also grateful to the Santa Clara County Library District staff who generously shared their time and expertise. At the Los Altos Libraries, these were Jane Cronkhite and Jill Lakstigala. At headquarters, these were Derek Wolfgram, Gay Strand, and Chuck Griffen.

Several members of the Los Altos Library Commission and other community members contributed a wealth of background information and ideas during interviews in our work’s early stages. These are Elayne Dauber, Jean Mordo, Darwin Poulos, Bob Simon, David Struthers, Judy Suelzle, and Nancy Tucker.

We are most grateful to Los Altos Community Foundation staff Monica Davis, Hank Drew, Joe Eyre, and Roy Lave for their support.

Thanks also to Jean Mordo for sharing his earlier studies with us, Val Carpenter, for her insights on Santa Clara County Library District governance, and our reviewers and editors.

Finally, special thanks to the Los Altos Community Foundation for making this work possible. The PrimeTime Project is a Foundation program, which provided us with operating support, invaluable guidance, and steadfast patience as we developed the PrimeTime Project and this study.