SUPPORTS ITEM NO. 3 CS&B COMMITTEE AGENDA MAY 8, 1997 ADMINISTRATIVE REPORT Date: March 27, 1997 H:WORK:REP:retent (hl) C.C. File No. 4004-1 TO: Vancouver City Council FROM: Director of the Vancouver Public Library SUBJECT: Retention of Revenues RECOMMENDATIONS A. THAT revenues from fines and photocopying, etc. continue to be included in the annual budget estimates for the Vancouver Public Library in order to offset the City's support of annual operating costs. B. THAT the Vancouver Public Library be allowed to retain 100% of all net revenues other than those previously identified (fines, photocopy, etc.) to be used at the discretion of the Library but within the Guidelines regarding service increases and new positions. C. THAT Council formally approve the Vancouver Public Library retain 100% net revenues received by fundraising in various forms for expenditure at its discretion, so long as those expenditures do not commit the City to ongoing operating costs without Council's express permission. CITY MANAGER s COMMENTS The City Manager notes that the report of the Director of the Vancouver Public Library identifies three classes of income -- those traditionally allocated to the City, referred to in Recommendation A, earned net revenues related to Library operations (Recommendation B), and fund raising (Recommendation C). Recommendation A maintains past practice. These amounts are built into the City s based budgets, and parallel a number of similar practices in other departments. With respect to Recommendation B, the City Manager is concerned that incremental revenue generation may become a moderately significant source of revenue for the City. All departments have been directed to identify potential fee for service areas in order to reduce budget pressures. It has been suggested that the City could earn revenues through sponsorship arrangements that may be sufficient to justify some effort in developing sponsorship agreements. There will be a report back on this subject later in the year, following Council direction last year. Many of these sponsorship agreements could be applicable in several parts of the City s operations. Accepting the Library recommendations for these revenues would simply favour those departments where the sponsorship generates revenue relative to those where it does not. It makes little sense from the City Manager s perspective to increase services in some areas because operating revenues or sponsorships can be arranged if core services in other areas are being reduced for fiscal reasons. To the extent that Recommendation C is intended to cover unconditional donations or donations requiring only limited donor recognition, the City Manager supports this. Donors are usually not enthusiastic about donating funds to cover operating costs to maintain existing levels of operation. The policy suggested by the Library will maximize their opportunity to obtain donations. However, if Recommendation C is intended to cover sponsorships in which a private sector organization will contribute funding in exchange for significant recognition a form of advertising the City Manager does not support it as written. Accordingly, the City Manager RECOMMENDS approval of an alternate set of recommendations, as follows: . THAT revenues from fines and photocopying, etc. continue to be included in the annual budget estimates for the Vancouver Public Library in order to offset the City s support of annual operating costs. (Library Board Recommendation A) . THAT the Vancouver Public Library apply net revenues earned from City funded operations to the base operations of the Library, reducing the cost of those operations. . THAT the Vancouver Public Library be allowed to retain two thirds of net revenues earned from operations which are fully funded by revenues. . THAT the Vancouver Public Library be allowed to retain two thirds of sponsorship funds arranged by the Library (those contributions established on a multi-year basis involving identification of a commercial supplier as a sponsor) to be used at the discretion of the Library but within the Guidelines regarding service increases and new positions. . THAT sponsorship funds arranged by the City on a global basis be directed to general revenue. . THAT the Vancouver Public Library retain 100% of donations from individuals and unconditional donations or donations requiring minimal sponsor identification from commercial organizations. BACKGROUND Since 1995, two things have come together to necessitate a review of the Guidelines between the City and Vancouver Public Library vis a vis revenues generated by the Library: 1) a requirement on the part of the City to actively pursue revenue generation; and 2) the revenue possibilities opened to the Library by the new Central Library. The Vancouver Public Library Board currently operates under two separate mandates, the first being the Library Act (revised 1994), and the second, a set of Guidelines agreed to by City Council and the Library Board in 1985. (copy attached) The Act states, with regard to revenues: CLAUSE 11 (1) The library board has, subject to the approved budget, exclusive control over the expenditure of (a) all money provided by the municipal council for library purposes, (b) all money given to the library board, (c) the revenue derived from any source, including (i) fees, (ii) fines and (iii) money recovered by the library board for detention, damage or loss of library materials, and (d) all money received by the library board under an agreement to provide library service. The Guidelines between the Board and Council are now sadly dated, but reflected a need of the day to agree on how the Library would relate to the City, particularly in the area of fiscal responsibility. While the guidelines do not specify what happens to revenues generated by the Library, the practice has been that additional income (except donation and gifts) is used to offset the City's contribution to the cost of operating the Library. The Library unlike the Park Board (which has an agreement of 66/33) does not have a specific agreement re revenue. Until 1996, the Library has had only two major sources of revenue - fines, and fees for photocopiers. Some income is received for charges for lost books, booksale, sale of photos and other items. Further to the above, all "gifts" of cash or kind to the Library have traditionally NOT been treated as line revenue. These funds have been expended as the donors have requested, usually on books for the system or for a specific branch or department. Since 1995, the Library has also been in receipt of funds donated by the Friends of the Library (formed at the time of opening of the new Central Library) - again these donations are not being used to offset operating expenses, but rather to purchase books in specific areas or equipment needed by the Library and not funded through recent capital funds. With the Library about to enter into an annual fundraising campaign, and with the potential for revenue generation at the Central Library growing, through Facilities and partnerships the Board needs to clarify with Council how those revenues will be handled in the future. Traditional Sources of Revenue: The Library Board does not wish to change the current arrangement regarding those revenues which are currently used by the City to offset the operating cost of the Library. These include fines, photocopying, 10% of net revenue from Promenade rental to the PEF, lost cards, lost books, etc. Recommendation: THAT revenues from fines and photocopying, etc. continue to be included in the annual budget estimates for the Vancouver Public Library in order to offset the City's support of the annual operating costs. Facilities and New Fee for Service Opportunities: The Library Board believes that other than fines, photocopiers, and facilities rentals, the Board's ability to generate revenues is quite limited. The Library does have a unique opportunity with the Promenade area of the new Central Library for rental and currently contributes 10% of these net revenues to the Property Endowment Fund. Through pilot projects such as fees for enhanced reference service and some insourcing of binding from other libraries, the Board is exploring its ability to charge fees for certain services. The Board is also exploring ways of making sophisticated services pay for basic services as we are doing with Internet Training courses: the more intensive course is charged for, and pays for the basic course which is offered free of charge (and for which donations are accepted but not required). The Library charges users of the computer lab on an hourly basis, and the revenue pays for the cost of the staff member, maintaining the Community Organization Directory, supplies, paper, software, and enough to provide a reserve for equipment and software replacement and/or upgrades with some profit. The Library however, may not charge for its basic services -the circulation of materials and the provision of reference materials - under the Library Act. What the Library HAS done is to provide as much self-service to users as possible in order to minimize the impact of user needs on the staff available. We are continually exploring ways to become more efficient and still provide good public service to our users. Because our potential is limited, the Vancouver Public Library proposes that it be able to retain 100% of all revenues generated from all sources other than those specified in the preceding recommendation. The Board would still be required to bring to Council for approval any upgrading in services that required ongoing staffing or other financial support, and to identify the funding which would be provided by the Library for such services. Recommendation: THAT the Vancouver Public Library be allowed to retain 100% of all net revenues other than those previously identified (fines, photocopy, etc.) to be used at the discretion of the Library but within the Guidelines regarding service increases and new positions. Fundraising: The Library Board believes that donors to the Vancouver Public Library will give because they believe in the Library and wish to support and enhance its services and collections. The Board believes that donors will not give if their gift will be used to offset the cost of operating the Library. The practice has been to allow the Library to keep donations and gifts. The Library will be keeping the Council informed of its plans for its first annual fundraising campaign, and of the vehicle designed to generate a lasting endowment for the Library. Recommendation: THAT Council formally approve Vancouver Public Library retain 100% of net revenues received by fundraising in various forms for expenditure at its discretion, so long as those expenditures do not commit the City to ongoing operating costs without Council's express permission. CONCLUSION The Board believes that permitting the library to retain 100% of new revenues and fundraising revenues would reflect the recognition that the Library has relatively limited access to such revenues, and would provide a strong incentive for the Library to generate new revenue alternatives. * * * * *