Library district budget may require fix

Agency’s cash reserves could vanish without action by county

What do you do when you have too much money in the bank? On a personal or business level, there may be no such thing.

But when it comes to government entities, having too much in cash reserves, or unspent money that gets carried over from year to year as a “rainy day fund” is regarded by many as effectively hoarding taxpayers’ dollars for no good reason.

So, you spend it. Up to a point, when the rainy day fund starts to evaporate.

Definitions of how much is too much for a government entity to have in reserves, or “fund balance,” vary widely. The Government Finance Officers Association says many factors must be considered, but at least two months’ worth of expenses should be on hand, or about 16 percent. Credit agencies like to see more like 25 percent before handing out good bond ratings.

This was a concern almost 10 years ago for the Yuma County Library District, which legally is a separate entity from the county, overseen by the county Board of Supervisors. Now, that cushion of reserves is shrinking at such a rate that tax increases, budget cuts or some combination of the two will be needed to keep it from disappearing.

Two separate property tax rates collected by the county are charged to the library district, one for maintenance and operations and another for paying the debt from a $53.7 million bond issue approved by voters in 2005, for construction of three new libraries and expansions or upgrades to five existing locations.

Rising property values during the next few years meant the library district was collecting more tax

money for operations than it needed, even as the new facilities were opened and staffed, said Scott Holt, Yuma County chief financial officer. Values hit a countywide peak of $1.4 billion in 2009, a two years-delayed reaction to the housing boom.

By then, the library’s cash reserves had ballooned to about 150 percent of the annual operating budget, so the board of supervisors dropped the property tax rate for library operations by 6 cents, “with the anticipation that our tax collection would still be enough to more than cover our expenses, and anticipating that we didn’t need to collect as much, based on the new assessed values that we were given,” Holt said.

In 2010 the property valuations went up again, and the library tax rate went down again. “At that point, we started eating up that huge extra fund balance, and it was a decision that we would continue to do that until we felt it had gotten down to a reasonable fund balance compared to expenses,” Holt said.

So the library began spending more of its reserve cash on salaries and materials, which make up its operating budget. During the next few years property valuations were dropping as well, so the fund balance became more crucial to keeping the library operating at the same level of service.

“Our library budgets are somewhere in the neighborhood of $8 million, and we’re only collecting about $6.9 million. That’s why it’s eating up the fund balance, and that has been intentional. Because we felt we were over, we had overcollected the fund balance and realistically we felt we had too much money, so we started eating it down, gradually doing that over the last four or five years.” Holt said.

The library district’s expenses have risen only slightly during the same period, about $100,000 out of that $8 million total over the last four fiscal years, Holt said.

Susan Evans, Yuma County Library District executive director, said in an email Friday her staff has worked hard to keep spending level since 2013.

“Expenditures require justification for the need, and they are reviewed at several levels. If approved, then there is research to get the best price. We use sales, coupons, etc., just like the public. We negotiate with vendors. We are always very aware that we are working with taxpayer dollars, and we want to honor that trust and spend wisely. There is an additional level of approval once requests go to the County Finance Department, to ensure that all proper procurement rules are followed,” she said.

She said all of the library system’s buildings have been well-maintained: “even though the libraries opened in 2008 and 2009, they still look new, and nearly everything is still the original.”

Still, Holt points out that the newest libraries, Yuma Main and the branches in the Foothills and San Luis, are nearly 10 years old now, so their maintenance costs will inevitably start rising.

For the upcoming 201718 fiscal year, which starts July 1, the proposed budget has a projected $4.3 million fund balance, or just over half of operating expenses. At current spending rates, the fund balance will be about 36 percent of total operating expenses at the end of this coming fiscal year.

At current spending levels and assuming low growth in property values, that’s expected to fall to 20 percent at the end of fiscal 2019, down to 2 percent at the end of fiscal 2020. and fall into negative territory by the end of fiscal 2021, Holt said, leaving an unbalanced budget.

“We have done what we planned on doing. It’s just now, as we stated all along, and made recommendations to the board, at some point we’re going to have to equalize these numbers or take some very drastic action. And I don’t know how you would cut a couple of million bucks out of an $8 million budget. The only way you’d do that is you’d cut personnel, you’d cut hours, you’d cut buying new books, etc.,” he said.

“And we’ve always said, at some point we’re going to have to bring it back up, to stabilize it, but our goal has been not to make it a drastic hit.”

The board began raising the library district’s property tax rate slowly two years ago, and it now stands at .6202 per $1,000 assessed valuation.

The proposed budget document leaves that unchanged, but staff is also recommending the board consider raising the rate by a total of 2 cents over the next four years, which would raise an additional $533,000 over that period, assuming 1 percent growth in property values.

The Board of Supervisors is scheduled to discuss the library district during the first of two days of special budget meetings, which begin at 9 a.m. Tuesday and Wednesday in the Board of Supervisors auditorium, at 198 S. Main St., Yuma.

Russell McCloud, District 2 county supervisor, said Friday he’s not overly worried about the library budget, and is sure the board will come up with a solution to keep it out of the red.

But he has asked county staff to look at ways to cut library costs, even though it may not be the whole answer. “What are the options, what does that mean. What would you have to do to stabilize it? And that’s likely to be — excessive.” he said. “But we don’t know until we look at it.”