This session will cover the importance of local fund raising (in addition to tax income) for keeping technology as up-to-date as possible, and how that can be achieved most effectively. Speakers will discuss the Nebraska Community Foundation and its programs; Lincoln City Library’s fund-raising efforts through its Foundation; ideas from “Turning the Page;” and the establishment of “sinking funds.” The general idea is that keeping library technology must be viewed as part of the cost of doing business in a modern library.
2. Definition 13-518(5): “Qualified sinking fund means a fund . . . maintained separately from the general fund to pay for acquisition or replacement of tangible personal property with a useful life of five years or more which is to be undertaken in the future but is to be paid for in part or in total in advance using periodic payments into the fund. . . .”
3. A Sinking Fund by any other name In Nebraska state statutes, the more general term of “special reserve fund” is used and includes, among other types: Voter-approved sinking funds Statutorily authorized sinking funds We’ll discuss these two types later when we talk more about how to start a sinking fund.
5. What are sinking funds good for? Replacing computer equipment Replacing HVAC systems Saving for new building, addition, renovation Any larger capital cost -- you name it!
6. Another advantage of establishing a sinking fund: 13-520: “The limitations in section 13-519 shall not apply to (1)restricted funds budgeted for capital improvements, (2) restricted funds expended from a qualified sinking fund for acquisition or replacement of tangible personal property with a useful life of five years or more . . . .” That means it’s outside the taxing and spending lid!
7. Who may establish a sinking fund? 51-209: “ . . . . The city, village, county, or township may establish a public library sinking fund for major capital expenditures.” (This means the local governing body of each of these political subdivisions, not the library board, even if the library board is administrative/governing.)
8. Where do the funds come from to put into a sinking fund? The funds may come from a variety of sources: Money or property by donation, bequest, gift, devise (a bequest of real estate), or otherwise A tax levy of not more than 10.5 cents/$100 for up to 10 years
9. How is a sinking fund established? Earlier we noted that there are two types of sinking funds: Voter-approved sinking funds Statutorily authorized sinking funds Also we noted that assets consisting of either donated assets or assets from a tax levy can accumulate in a sinking fund.
10. Voter-approved, sinking fund assets Any time a new, local tax is to be imposed, a vote of the people is required, with all the careful steps necessary for that process. So that’s pretty clear – if a tax levy is to provide the assets for a sinking fund, that requires a vote.
11. Statutorily authorized sinking fund But what about this type of sinking fund – one authorized by state law? Does it require a vote of the people? What if no tax monies are involved? That is, if the sinking fund will contain donated funds only? Here’s where it gets sticky!
12. The stickiness of sinking funds (aka, the ambiguity in state statutes) Are you surprised that it is difficult to decipher what state law says on this question? Help from Gary Crumland, Assistant Director/Legal Counsel, League of Nebraska Municipalities
13. Ambiguity (continued) 19-1301: Says villages and cities can receive donated money or property “for the benefit of any one or more of the public purposes for which sinking funds are established . . . .” But it doesn’t say how to establish such a fund. 13-503(9): Distinguishes between “voter-approved sinking funds” and “statutorily authorized sinking funds,” and it is on this that we have to “hang our hats.”
14. An Attorney’s Opinion According to attorney Gary Crumland: 19-1301 is “ambiguous,” and will only be cleared through legislation. 13-503(9), with its distinction between two different types of sinking funds is open to interpretation of the local city or village attorney.
15. IT DEPENDS! So that’s the answer to our question about how to go about setting up a sinking fund: Talk to your city or village attorney; see if she or he is comfortable with recommending to the village or city board the establishment of a sinking fund. Decide whether the sinking fund is to contain donations, or tax revenues, or perhaps a mix, and what the implications of that are on the decision.