Frequently Asked Questions - Budgeting

Modified on 2020/11/20 16:46 by Jeremy Stroud — Categorized as: Budgeting, FAQ

May a public library use the Master Contracts Usage Agreement (MCUA)?

Yes. Nineteen (19) libraries are currently a part of the Master Agreement, including Fort Vancouver, Jefferson County; King County; Kitsap Regional; Mid-Columbia; North Central; North Olympic; Pierce County; San Juan Island; Seattle Public; Sno-Isle; Spokane County; Tacoma Public; Timberland; Whatcom County; and Yakima County Libraries.

Are taxing districts required to use the same rate on all taxable property within their boundaries?

Yes. Article VII, Section 1 of the Washington State Constitution requires that regular tax levies be uniform throughout the taxing district.

Is there a limit on the regular property tax levy?

Yes. Article VII, Section 2 of the Washington State Constitution limits the regular property tax levy on real and personal property to 1% of its “true and fair value,” or $10.00 per $1,000 of assessed valuation (e.g., $1,000 for a $100,000 home). This is the combined rate for all units of government (state, county, and special districts), but excludes voted levies, such as school special levies and bond issues.

When are taxing district boundaries established?

In general, the taxing district boundaries are those in existence on the first day of August.

See also RCW 84.09.030 and WAC 458-12-140.

Does a levy lid lift request have to go through county commissioners first?

It depends on how the library is established. As an example, if the library is an Intercounty Rural Library district, it would have to go through the county commissioners first.

See also RCW 27.12.120 and RCW 27.12.150.

Can the Timber Excise Tax be used as a source of funding for libraries?

Some taxes, such as the Timber Tax, may contribute to the support of public libraries, but these differ from area to area and are not reliable sources for regular library operations.

Is there a taxing authority for a non-charter city library?

In response to this question, a Legal Consultant from MRSC had the following response:

“Unfortunately, there is no taxing authority for a noncharter city library. The city library is a general fund responsibility, so unless the citizens vote to raise the property tax rate, the library has to be funded out of the city’s current budget. [A library district does have taxing authority, but a city does not.] Here is the funding authorization established for local libraries (RCW 27.12.240):

After a library shall have been established or library service contracted for, the legislative body of the governmental unit for which the library was established or the service engaged, shall appropriate money annually for the support of the library. All funds for the library, whether derived from taxation or otherwise, shall be in the custody of the treasurer of the governmental unit, and shall be designated by him in some manner for identification, and shall not be used for any but library purposes. The board of trustees shall have the exclusive control of expenditures for library purposes subject to any examination of accounts required by the state and money shall be paid for library purposes only upon vouchers of the board of trustees, without further audit. The board shall not make expenditures or incur indebtedness in any year in excess of the amount of money appropriated and/or available for library purposes.”

Could a city give nondesignated funds (e.g., log forest “windfall” monies) to the library?

RCW 35.22.280(19) allows for a city to include language in its charter that would permit this.

See also RCW 35.21.020.

After the library’s budget is approved, is the library director free to allocate funds as he or she sees fit?

Once the budget is adopted by the board or approved by the city authorities, the director has the authority to allocate funds within the budget allotment to accomplish the plan, though it is the responsibility of the director to discuss with the board or city authorities any significant budget revisions that may be necessary.

What role does the library board play in the budget?

Trustees are legally responsible for the finances of the library. (RCW 27.12.240) To carry out that responsibility, they both monitor the broad financial picture and authorize payment of funds that have been approved for library purposes. To oversee library finances adequately, the board should:

Read all materials related to the budget closely;
Ask questions;
Look for variances;
Make comparisons;
Ensure there are adequate reasons for any apparent contradictions;
Pay attention to any audits and attendant recommendations, thus maintaining its own as well as the library’s fiscal integrity.

What is the role of the library director in helping the board to monitor the budget?

To facilitate the board’s monitoring of library finances, the director must:

Present them with financial statements that the library board and other constituencies can understand;
Provide them with monthly financial reports that include:

Year-to-date revenues and expenditures compared to initial projections;
The total budget delineated by BARS (Budgeting, Accounting, and Reporting System) categories;
The balance of budgeted funds remaining for the fiscal year;
An explanation of any significant changes.

Who oversees a library capital facility area?

The governing body consists of 3 members of the county legislative authority from each county in which the area is located. If a county has more than 3 members of their legislative body, the 3 persons to serve on governing body of the library capital facility area are chosen by the full membership of the county legislative authority. Where the library capital facility area is located in more than one county, a county may be represented by less than 3 members by mutual agreement of the legislative authorities of the participating counties.

RCW 27.15.030

How much should a city or county have in general fund reserves?

The Government Finance Officers Association's (GFOA) provides guidance on unrestricted fund balances in their Best Practice, “Appropriate Level of Unrestricted Fund Balance in the General Fund (2002 and 2009) (BUDGET and CAAFR).” “GFOA recommends, at a minimum, an “… unrestricted fund balance of no less than two months of regular general fund operating revenues or regular general fund operating expenditures.” Bear in mind that no amount of reserves may be adequate in the event of a major financial crisis, natural disaster, or other extraordinary event.

Do nonprofit organizations pay or charge sales tax on their purchases or sales in Washington?

The Washington State Department of Revenue responds in the following FAQ:

“Generally, nonprofit organizations must pay retail sales tax on all purchases of tangible personal property and must collect retail sales tax on their sales of such items. However, nonprofits conducting qualifying fundraising activities may purchase goods and services that will be resold at such events without paying sales tax by providing a reseller permit to the seller. Additionally, the income generated from qualifying fundraising event is not subject to either retail sales tax or the business and occupation tax.”

WAC 458-20-169, in discussing fund-raising activities that would not be tax-exempt, states:

“(iv) Nonqualifying activities. Fund-raising activity does not include the operation of a regular place of business in which services are provided or sales are made during regular hours such as a bookstore, thrift shop, restaurant, legal or health clinic, or similar business. It also does not include the operation of a regular place of business from which services are provided or performed during regular hours such as the provision of retail, personal, or professional services. A regular place of business and the regular hours of that business depend on the type of business being conducted.

(v) Fund-raising sales by libraries. RCW 82.04.3651 specifically provides that the sale of used books, used videos, used sound recording, or similar used information products in a library is not the operation of a regular place of business, if the proceeds are used to support the library. The library must be a free public library supported in whole or in part with money derived from taxes. RCW 27.12.010.”

Confused? The Washington State Department of Revenue offers a very helpful video, “Nonprofits in WA” on this complex topic. Additional guidance may be found in the Department of Revenue’s brochure, “Nonprofit Organizations.”

Are MARC records subject to sales tax?

According to a response from the Department of Revenue, because a MARC record is an inventory or cataloging system that includes the purchase of prewritten software and software updates, retail sales tax should be charged on the purchase of MARC records.

Are digital goods and services subject to sales tax?

Although a tax was imposed on digital products and services during the 2009 legislative session, a provision in this law provided an exemption for libraries for “digital products or remote access software that will be made free of charge for the use or enjoyment of others.”

WSL’s web page, “Tax Information and SDL Project History,” provides additional information on this topic.

What process must a city or town use to accept a donation?

MRSC posts the following response:

“Every city and town in the state has the authority to accept donations. There is no specific process set out in state law, and a public hearing is not required before the donation can be accepted.

RCW 35.21.100 provides:

Every city and town by ordinance may accept any money or property donated, devised, or bequeathed to it and carry out the terms of the donation, devise, or bequest, if within the powers granted by law. If no terms or conditions are attached to the donation, devise, or bequest, the city or town may expend or use it for any municipal purpose.

Although this language can reasonably be interpreted to mean that a city must pass an ordinance to accept each and every donation it receives, many cities interpret it to mean that the city must establish by ordinance a procedure for accepting donations. Some cities authorize a particular city official, such as a clerk-treasurer or city manager/administrator, to accept donations on behalf of the city. Others provide that the council will do so, and, unless specified, that could be done by motion or resolution.

In the absence of a delegation of authority to accept donations, we recommend, at a minimum, that the city council pass a motion or resolution accepting the donation.”

Does state law require libraries to go out to bid for a periodical subscription service if it exceeds a certain amount?

Although RCW 39.04.190 provides a uniform process when using a purchase contract in lieu of formal sealed bidding, it does not specify a dollar amount to determine when this approach is to be used. It simply states the following:

“The state statutes governing a specific type of municipality shall establish the maximum dollar thresholds of the contracts that can be awarded under this process, and may include other matters concerning the awarding of contracts for purchases, for the municipality.”

An alternative approach would be to sign an interlocal purchasing agreement with another library. Information about using interlocal agreements and examples may be found on the Interlocal Purchasing Agreements page from Procurement Services at the University of Washington. The Bidding Book for Washington Cities and Towns and The Bidding Book for Washington Counties from MRSC, provide step-by-step, easy-to-understand guidance on going out to bid.

See also RCW 36.29.

Are charitable contributions to governmental units tax-deductible?

Yes, according to the Governmental Information Letter on this topic from the Internal Revenue Service, “Charitable contributions to governmental units are tax-deductible under section 170(c)(1) of the Internal Revenue Code if made for a public purpose.”

Are there any restrictions on library boards with regard to direct fundraising (independent of foundations and Friends groups)?

Lawyers at MRSC could find nothing that would prohibit a district library from direct fundraising and cited the following phrases from RCW 27.12.210, which they felt gave trustees broad authorization to do what is necessary to maintain a library:

(5) “Have exclusive control of the finances of the library;
(6) Accept such gifts of money or property for library purposes as they deem expedient;
(10) Do all other acts necessary for the orderly and efficient management and control of the library.”

However, they believed that a library under a city might be prohibited by city rules, although they were unable to find the same constraint for a self-governing library district.

May a public library charge user fees for the services provided by the library?

According to AG Opinion AGO 2005 No. 5, “Existing statutory law prohibits public libraries from charging fees for traditional library services, such as borrowing books or reviewing materials at the library. Libraries may charge fees for services which are beyond the traditional purposes of a library and are provided as a convenience for the public.”

This Opinion reaffirms AGO 1992 No. 31, which notes that the library can charge a fee to nonresidents.

Does a public library operated by a city organized under the Optional Municipal Code (RCW 35A) have authority to charge fines for overdue books and other library materials?

According to AG Opinion AGO 2005 No. 5, “[p]ublic libraries have authority to impose and collect fines for keeping library materials beyond their due date or otherwise abusing the right of free access to the library.”

Can a library charge user fees for services provided to non-residents?

MRSC posts the following response (Reviewed November 2013):

“Yes. AGO 1992 No. 31 reviews this issue, noting that basic library services must be provided free of charge to residents of the political jurisdiction which supports the library through taxation. The corollary is that public libraries can charge user fees to those who do not live within the jurisdiction which provides the tax revenues to pay for the library. In fact, if a public library provides services to non-residents without charging a fee, an argument can be made that the library is violating the "gift clause" of the Washington State Constitution. [ Article VIII, Section 7 – CREDIT NOT TO BE LOANED — “No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation.” ] Libraries can charge for ancillary services such as copying machines, phones, fax machines, etc. - that issue is also covered in the AGO.”

Who should hold title to property purchased by a rural county library district or intercounty rural library district using district funds?

An informal AGO Opinion issued 4/2/1952, signed by Assistant Attorney General Lyle L. Iversen and addressed to Maryan E. Reynolds, Washington State Librarian, states:

“It is our conclusion that property purchased by a rural county library district or an intercounty rural library district should be held in the name of the district and not that of the county… Rural county library districts and intercounty rural library districts are municipal corporations in their own right. As such they are authorized to acquire property and hold it in their own names. It is our opinion that such districts in acquiring property should take title in their own names and not in the names of the counties in which they lie.”

May a city that participates in a regional library keep and independently manage the proceeds of bond sales for regional library costs?

AGO Opinion AGO 57 – 58 No. 89 (1957) states:

“The treasurer of a regional library is the sole custodian of the proceeds of the sale of bonds, which bonds were issued to raise money for the construction of a regional library building… [B]y statute, and as a matter of contract, the proceeds of [all] bonds must be deposited in a common construction fund to be administered by the… treasurer of the regional library.”

May the board of trustees of a rural county library district or an intercounty rural library district file a revised budget with the county commissioners after the county budget date if unanticipated funds arise?

AGO 57-58 No. 231 (1958) states:

"The board of trustees of a county or intercounty rural library district may file a revised budget with the county commissioners after the approval of the budget in October to provide for the expenditure of unanticipated income not affecting the tax levy… No change can be made in the amount of the annual tax levy by the board of trustees of the library district after the final budget hearing held by the county commissioners… In the situation presented here the funds were unanticipated and thus not included in the budget submitted to the county commissioners and approved in October at the time the levy was made. However, the funds will be ‘available’ in [the same year], and it is our opinion that the library may legally use such funds during the course of the year even though such funds have not been included in the budget approved in October.

Does a library district hold the authority to contract for insurance coverage of library property?

An informal AGO Opinion issued 6/6/1975, signed by Assistant Attorney General Wayne L. Williams and addressed to Maryan E. Reynolds, states:

"It would seem to me to be a prudent and perhaps very nearly necessary part of the care of the property of a library, to insure that property against loss. For this reason, it is my view that one may safety imply from the language contained in RCW 27.12.210 the necessary power to secure such insurance coverage… It would appear to be reasonable for the district to exercise that power to employ an insurance broker if the district felt the need for expert advice as to the acquisition of such coverage."