The New Orleans City Council on Thursday voted to place a ballot measure on the Dec. 5 ballot that would realign how the city spends roughly $25 million in revenues from a package of property taxes that are set to expire at the end of 2021. The biggest loser from the proposed changes would be the New Orleans Public Library, which would see its funding cut by $7.5 million to $8.5 million — roughly 40 percent of the library’s property tax revenue and roughly 36 percent of the library’s total budget.
The proposal still has to be approved by the State Bond Commission before it can go on the ballot.
If voters approve the measure, the majority of the library’s lost funds — $4.5 million — would be transferred to the city’s Economic Development Fund. There would also be a roughly $1 million bump for the city’s infrastructure and maintenance spending, and another $1 million increase for the city’s housing and blight initiatives. If voters reject the measure, the current allocation will last through 2021, and the city would likely make another attempt next year to extend or reallocate the taxes.
City Council members and the city’s Chief Administrative Officer Gilbert Montaño claimed that the library services would not be affected by such a substantial loss in revenue.
“This is possible without detriment to the library system,” Councilmember Helena Moreno said. “This has nothing to do with defunding libraries.”
Councilmember Jay Banks went even further.
“The library will not be affected at all in terms of its opportunity to be able to provide services,” he said. “To be clear, not one hour of operation is going to be affected, not one less book is going to be bought, not one less thing is going to be done. … The library is not going to be detrimentally affected at all.”
That may be true in the short-term, while the library has a fund balance to draw from. But after that has been depleted, the system would face annual shortfalls of millions of dollars.
The director of the city’s library system, Gabriel Morely, broke the news to library staff on a conference call this week, calling it a “no-win scenario” for the library.
“We know the millage reduction in December will have its own long-lasting effects on the library,” he said. “Clearly, the library will not be able to operate at its current level with a 40 to 50 percent budget cut.”
Cantrell, Moreno and Banks’ offices did not immediately respond to questions from The Lens about how it would be possible to cut the library’s funding by 36 percent and expect the same level of services and operation.
At Thursday’s meeting, Montaño, Banks and Moreno argued that the library has more funding than it needs, while other city departments are facing broad cuts due to budget shortfalls caused by the coronavirus pandemic.
The library is primarily funded by two dedicated property taxes of similar size that roughly bring in a combined $20 million. The first one — the tax currently on the chopping block — was approved by New Orleans voters in 1986 and expires at the end of 2021. The second one was recently approved in 2015 with 75 percent of voters in favor. That tax expires in 2040.
A common critique of New Orleans’ tax system is that there are too many taxes dedicated to specific purposes, such as infrastructure or the city’s convention center. Those dedicated taxes can give residents more confidence that the money will be spent on its intended purpose, but it can also restrain local government from shifting resources from a well-funded institution or purpose to a poorly-funded one.
“The positive part about dedicated millages is that the money goes to an important dedicated cause,” Moreno said at Tuesday council meeting. “The negative part is that once they are dedicated, even when there are great surpluses, the money ends up getting stuck in special funds, and it’s really hard for us to get those funds out. We have seen this in particular with the dedicated millages for the library.”
Montaño argued that the library’s current tax allocation was larger than necessary using two main pieces of evidence — the library’s fund balance and it’s failure to spend all of the money it collects in property taxes. To start, he said the library has, on average, failed to spend 11 percent of the property taxes it collects since 2016, when the library’s second property tax went into effect. That’s led to a $11.6 million fund balance, he said.
“Numbers don’t lie,” Montaño.
Those numbers don’t tell the full story, however. The 11 percent average over four years is only so high because of the two years directly following the passage of the second library tax, when the library’s budget doubled. In 2016 and 2017, the library spent 18 percent and 22 percent less than what it collected.
However, the library appears to have gotten up to speed with its larger budget in recent years. Over the last two years, the library has spent just over 97 percent of the $39 million it took in through property taxes.
As for the library’s relatively large fund balance of $11.6 million, $8 million of that was accumulated in 2016 and 2017 as the library adjusted to its new, higher budget.
“The library has had roughly $2 million surpluses every year,” Moreno said on Thursday.
That’s only true, however, when you take the average of the last four years. Last year, the library had a budget surplus of only $642,000. The year before, the surplus was just $396,000.
Montaño’s presentation said that the library’s actual expenditures in 2019 were $19.4 million. On another slide, he says that 2019 personnel costs were $12.9 million and 2019 operational costs were $4.5 million, for a total of $17.4 million.
It wasn’t clear why there was a difference, but Montaño used the smaller number to calculate what the library’s budget should be going forward — $17.5 million. The proposed tax reduction will leave the library with $12 million to $13 million, according to the presentation.
Montaño noted that the library’s fund balance would be able to cover the budget gap “for at least two years.” After that, it’s unclear how the library would be able to cover the budget Montaño laid out. He suggested that the city has the option to create a third millage for the Library in coming years. He also said that the city could contribute money from the general fund if there were risks of branch closures.
Even with open answers on the long-term viability of the library’s funding, Montaño was comfortable claiming, in no uncertain terms, that the 40 percent funding cut won’t force any reduction in library services. He went as far to claim that services will actually be “heightened.”
“From a financial perspective, there is absolutely zero reason anyone should be laid off,” he said. “There should be no cuts in hours and no closures of any libraries.”
Banks asked Montaño to clarify that point.
“There will be no layoffs, no services removed, no people laid off, no hours cut, none of that is going to happen as a result of this, correct?” Banks asked.
“That is correct,” Montaño responded.