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Lexington library, city will discuss budget strife

A controversy is brewing between the city and the Lexington Public Library since the library refused the mayor's request to reduce its budget by $342,000 to help meet the city's $13 million budget shortfall.

The issue might come to a head Tuesday when library officials must appear before the city's Budget and Finance Committee to answer questions about library revenue, expenditures and last year's audited budget.

Urban County Councilman George Myers is particularly irritated that the library declined to help the cash-strapped city. In a financial crisis like that facing the city, "Everybody shares in the pain," Myers said.

The library "should not be a sacred cow," he said.

"When the city is responsible for public safety and all the other services the city provides," he said, "it doesn't make sense ... that the public library is of higher and better use than anything else the government does."

Library board chairman Larry Smith sent a three-page letter to council members Thursday saying Mayor Jim Newberry is "not asking for a return of funds provided by the Urban County Government, but a contribution to the LFUCG general fund from funds dedicated to libraries through the property tax."

The library reduced its 2010 budget this fiscal year by $746,000, or 5.4 percent, in planned expenditures.

The cuts meant $100,000 less for books and CDs, a hiring freeze except for critical positions, and indefinite delay of several renovation projects.

Anticipating revenue from property taxes will remain flat next year while costs continue to rise, the library is braced to cut expenditures an additional $462,000, or 3.3 percent, next year, Smith said.

The crux of the controversy is whether the library can legally contribute its funding to the city's general fund.

The library is an independent non-profit organization, but it runs on tax money. Thanks to a 1979 lawsuit by a library patron, and later court rulings, the library is guaranteed a nickel of every $100 in Fayette County property taxes.

Is that 5 cents a dedicated tax or not?

"State law says 5 to 15 cents of every $100 in property taxes goes to the library," Smith said. "If that is not a dedicated tax, I don't know what is."

Money collected for one purpose cannot be used for another, said Wayne Onkst, state librarian. "We see it has a dedicated tax. The city needs to follow state law."

The Fayette County sheriff collects property taxes and transfers the revenue to the city, which makes a payment to the library.

Smith said the city is simply used as a pass-through.

However, Myers sees it differently. The property tax money going to the library is an allocation from the city to the library, not a dedicated fund, he said. "That is a huge difference."

If the city chose, it could simply withhold the $342,000 from the library, Myers said. "It's not like the library got its money from some other source and now we're asking them to give it to us. It came to us first."

Also on Tuesday, Myers said, he intends to question the library about paying bonuses from the property-tax money it receives. And he wants details about the financial viability of the parking garage owned by the library.

Ralph Coldiron, a 23-year member of the library board, said Fayette Circuit Court, the Kentucky Court of Appeals and the U.S. Supreme Court "all ruled that this is a dedicated tax."

"Unfortunately, Councilman George Myers needs to review the conditions of the lawsuit," said Coldiron, a former Fayette County sheriff. "If this were not a dedicated tax, we would not have won this case in the highest court of the land."

In addition to flat revenue, the library last year faced unexpected legal and other fees after spending by its then-executive director, Kathleen Imhoff, came under scrutiny by the Herald-Leader. Imhoff, who was fired by the library board in July, spent more than $134,000 over five years on travel, gifts, meals and other items.

The library budgeted $250,000 for a law firm to act as an intermediary with the Herald-Leader and later with city auditors as they investigated library spending. The library paid about $120,000 to cover audit costs.

Additionally, the library has budgeted $45,000 to search for Imhoff's replacement which — like the legal and auditing fees — was not included in its original budget.