The city of Rhinelander finance, wage and salary committee is working to formulate a library funding proposal to counter a push by the library district's township members to amend the operating agreement.
The question of how to adequately fund the library in a way that's fair to the towns and the city has vexed all of the members of the library district for some time.
The library district is made up of the city of Rhinelander and the towns of Newbold, Pine Lake, Pelican and Crescent. The five municipalities signed a 10-year agreement in 2006 that governs library operations.
A particular sticking point in the existing contract is the funding formula. It has caused wide swings in what the townships have to contribute to the library's budget in recent years. Not only have there been spikes in how much the towns are levied, but the spikes have hit different towns in different years. As has been the norm for the past several years, the library budget issue went to arbitration this year where a final 2017 budget amount was set at $734,144.
Alderman Alex Young, who is a member of the finance committee and has represented the city at library district meetings, reiterated the reasons the city believes an amendment previously proposed by the towns is unworkable. He also provided the committee with a possible solution he theorized might make the spikes less of a problem for all five members.
On Dec. 16, representatives from the towns met, along with Young, finance committee chair Mark Pelletier and city attorney Carrie Miljevich, to vote on the proposed amendment. To be binding, all five municipalities must formally approve any changes, and the full City Council had already voted to direct its representatives to vote against the amendment. The representatives followed the council's directive and the measure failed on a 4-1 vote.
"Since that time, I have gone around and gathered quite a bit of data," Young told the committee. "I've spoken with a gentleman from the Department of Revenue and got the net new construction for the municipalities in the library district because that net new construction data is what was used in the towns' proposal so I wanted to be able to use that to calculate different options and calculate the impact of their proposal going back and forth."
He also gathered previous library budget information, to include the initial budget proposals from the library board for past years.
"Because the towns' proposal was you take the initial proposal from the board, run it through the formula and whatever excess is shared out," Young said. "So I needed those initial proposals from the board, not what was eventually approved."
He told the board that he wanted some guidance before he sat down with Miljevich and generated expenses to have legal documents drafted.
"The first thing that I kind of gathered in putting together a spreadsheet with some of this data is that over time, if you look at the last 10 years for example, the percentage splits between the different towns and the city don't change very much," he said. "From one year to the next, things swing around a little bit, but if you look at the long-term, the splits remain pretty much where the splits were 10 years ago. The population end moves around less than the equalized value end; the equalized value end tends to move around a little bit more."
He explained that the fluctuations from year to year, which are driven by changes in the equalized value, may be pretty even over a long-term view but are difficult for town to absorb from one year to the next.
"More so in the towns' budgets then the city's because their budgets are a lot smaller than ours," Young said. "And the overall increase in the budgets is difficult for all the municipalities, including the city's, because of levy limits."
Young said the easiest way to deal with the fluctuations would be to switch to a three-year average of the equalized value and population for each municipality.
"That way it smooths out the jumps around, but it doesn't drastically change the formula and it doesn't drastically change the splits," he said. "It just smooths out the back and forth that comes in the equalized value."
"Which is what the townships are worried about," alderman Mark Pelletier, who has also represented the city in library arbitration meetings, observed. "For the most part, what I saw was they have a year where they get hit bad, but if we take the fluctuations out, between all five of us, we're all supporting the same amount of money."
Young said a trickier problem is how to fit the overall increases into the towns' levy limits.
"I don't know the answer to that," he admitted. "The towns' proposal that ran things through the formula and then capped the increase to each municipality based on net new construction and then shifted the excess over to anyone who had levy limit capacity; I mean the shifting the excess to anyone who had excess levy limit capacity is immediately problematic, especially for the city because, looking back over the decade of net new construction, we've had a couple years where our net new construction was five, six, or seven."
He said the current formula, which is based half on population and half on equalized value, already causes fluctuations, and the introduction of a third variable will not even things out over the long-run.
"It is going to shift more costs to the communities that are, valuation-wise, growing faster over 10 year. whether that is desirable or not. I think it's not. I think the existing formula with half valuation and half population is a fair way to do it," Young said. "But that raises the question, if you don't cap it using net new construction per municipality, how do you cap it or do you cap it? I think if you are going to cap the budget requests, the only fair way to do it is to cap the initial request, not cap the splits for each individual municipality."
He said he attempted to do that by taking the net new construction of the library district as a whole and then first as an average for each municipality and secondly by dollar amount in each municipality and divided that into the dollar amount of the whole district.
"That is a way to do it. If the goal is to cap the increase of the library district somewhere near the levy limits or net new construction, that's probably the fairest and best way to do it," Young said. "I can tell you right away, the problem with that is I find over the last few years, that would be a squeeze for the library."
He also looked at somehow capping the increases based on the Consumer Price Index, but noted that figure swings "wildly" from one month to the next.
"So what month do you pick to use? If you arbitrarily say July, and July ends up double what the next month's number is, it just proved problematic to introduce CPI into it," he said.
Young said the towns have also talked about including their respective governing bodies in the library budget process at an earlier point. He said he didn't know if there was a "good way" to do that.
"My thought on that is you guys and the city appoint members to the library board. If you don't like what your library board member is doing (appoint a new one)," he said. "But that's not a really good answer. I don't know how that would look or how you would do that. I had one town supervisor suggest that one other member from each municipality be appointed just for the budget. But why then have a library board?"
Library board president Jan Baer pointed out there are state statutes that have to be followed concerning the library budget that would make that equally problematic.
Young said a hybrid solution he came up with was to cap the request at district-wide net new construction, but change the process somewhat.
"Right now, the board submits a request, any one of the municipalities can file for arbitration and contest it and then we get into the arbitration meeting," he said. "But if we could come up with a way to have the initial request capped, then if any of the municipalities feels it is a good year and we can give more money to the library, or there is exceptional circumstances for the library where they ran into additional costs, they can prevail on the governing bodies and say, this is a good year, let's call for a meeting of the towns and the city and see if we can get more this year."
He noted that in 2014 the city administrator called for a meeting of the towns and the city to renegotiate the terms of the contract, and that was rejected.
"I don't want the towns to see this as the city standing in the way of something happening, because even before the towns' proposal came up, the city was asking to sit down and we were turned down," he said.
Young observed that at the arbitration meeting this year to renegotiate the splits, he "was pretty sure the contract wasn't followed" although he doesn't have a professional legal opinion to that effect.
"The way the contract spells out the way the splits are done, the arbitration committee's entire job is to pick one dollar amount and the splits are determined by the contract," he said. "The vote that came out of the arbitration committee was these are the individual municipality's shares, these are the splits. What they did for this year's budget was they took their proposal that they want the contract to be amended to, that is not currently in the contract, and the arbitration committee decided to do that for this year."
He said he brought this up at that time, but did not want to make a "big stink about it" because it is one year. But he felt it important to bring it to the attention of the finance committee and City Council. By state statute and under the terms of the contract, the city is the fiscal agent of the library.
"One of the municipalities has to be the fiscal agent of the library, the city is the fiscal agent of the library," he said. "My concern is that we are deviating from the contract, is the city going to run into a liability issue? The splits determined by the arbitration committee do not follow the terms of the contract. Does the city end up in a position where we can make use of not following the contract by asking for and accepting the wrong dollar amount from these different municipalities that make up the district?"
Pelletier said that if this process continues, it "would become an issue." If the contract is amended, either by adopting the townships' proposal or whatever the city proposes, that new way of deciding the splits has to be adhered to going forward.
"Because that is the formula that has to be followed, period," Pelletier said.
Young said for the small amount of money involved this year, it wouldn't be worth "throwing a monkey wrench in the works."
"But going forward, what happened this year can not happen again in the future," he said. "And the city needs to make sure of that because we are the fiscal agent for the library."
"If you guys are going to be sued, we'd be sued first," Baer pointed out.
Young said that if the splits are going to be handled differently in the future, the contract has to be amended to the satisfaction of all five municipalities.
The towns have called for another joint meeting on Jan. 16, and Young wanted to have at least his averaging proposal ready to present to them in legal form for their consideration. This proposal was to be discussed by the full City Council at its Jan. 9 meeting which ended after deadline.
"I think it is so difficult to try to figure out any way to put a cap into the requests. I understand that is the main point in the towns' proposal, they put caps on their individual shares. I don't know if there is a good way for us to do that," Young said. "I also don't think there is any way to get any of us involved (in the budget request) earlier."
Baer agreed with Young's assessment that a cap would be harmful to the library.
"We have these average budget requests every year that we felt were reasonable, well-founded and well justified," Baer said. "And almost invariably, we expect them to be cut. For 2017, we got less than a third of a request that (library director) Virginia (Roberts) put forward. And when you're talking about a budget that is nearly $1 million, a $21,000 increase, considering how our costs have gone up, the cost was very reasonable."
"I'm acutely aware, as is everyone on the board - and frankly everybody in the library world - about levy limits," Roberts said. "We work under it, too."
Pelletier said that since the towns are up against the levy limits, they unfairly look to the city which has borrowing capacity that makes its limits higher, to pick up the slack.
Young said under the levy limits, there is nothing that can be done under the contract that is going to "drastically increase" the amount of money going toward the library's budget. He said the county's contribution has remained relatively static over the last decade, but that is something that has to be addressed by the county board. He said there isn't really a fair way of dealing with caps other than through arbitration.
He also mentioned the administrative costs the city provides to the library should be taken into account. He wasn't suggesting that the city's contribution be reduced by that cost, just that it would somehow be factored into the budgeting process.
"The contract, as it exists now, says that the city will do the payroll and so forth for free," he said, adding that it would make more sense for the city to charge the library the administrative costs, but to add into the contract that the city would provide that same amount more in its share.
"So the city's costs will increase by the amount of the administrative costs, only we wash it because we get it back in charging," Young said. "But at least on paper, in dollar values, it is showing how much the city is providing as an in-kind contribution."
He noted that state law does allow this cost to be taken into account to offset their contribution to the library.
"We have contractual conditions that contradict that, but I think we can fix that with language that says on a cash basis makes it wash," he said.
Miljevich repeated that since the district agreement is a contract, it would take the approval of all five governing bodies to amend it. And while the city had requested to renegotiate the contract in 2014, there was no obligation to do so at that time.
"It is nothing short of a miracle that this contract was signed in 2006. Now, in 2016, there is language in the current contract that says 'this contract shall be renegotiated every 10 years,'" she said.
She noted that the recent actions of the towns are in the spirit of the contract.
"Nobody can really say no, which is what these series of meetings over the last couple of months have been (talks to renegotiate the contract)," Miljevich said. "That being said, it is not a majority vote. The four townships can't strong-arm the city into approving the contract. The contract has to be approved by all five governing bodies and they have to sign it."
Because there are five signatories, there has to be some give and take between all parties so that the final product is something they can all live with going forward, she added
"In the meantime, in the absence of a new agreement having been negotiated, the library, the city and the four townships operate under the current contract," she said. "But in good faith, we have to continue these discussions."
Young and Miljevich agreed that the proposal to amend the formula to reflect the three-year average would be "a handful of lines of legal language," the two of them could have that ready for the council to vote on Monday to be presented to the towns on Jan. 16. The committee voted unanimously for that to happen.
Jamie Taylor may be reached at firstname.lastname@example.org.
The Northwoods River News | Walker Communications, LLC 232 S. Courtney Street, Rhinelander, WI 54501 | Office (715) 365-6397 | Fax (715) 365-6361
Corporate billing office: The Lakeland Times / Lakeland Printing Inc. | P.O. Box 790, Minocqua, WI 54548 | (715) 356-5236 | Fax (715) 358-2121 Members of the Wisconsin Newspaper Association, Wisconsin Community Papers, Rhinelander Area Chamber of Commerce, Minocqua Area Chamber of Commerce