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Neglect of maintenance can affect public health and safety, reduce productivity of public employees, and cause long-term financial losses as buildings wear out prematurely and must be replaced. Decisions to neglect maintenance, whether made intentionally or through ignorance, violate the public trust and constitute a mismanagement of public funds. In those cases where political expediency motivates the decision, it is not too harsh to term neglect of maintenance a form of embezzlement of public funds, a wasting of the nation’s assets.

Committing to the Cost of Ownership (1990)

During the Duluth city council’s committee of the whole meeting on January 26, 2015, councilors listened to Stephen Bellairs and Traci Lesneski deliver their final report on the library. Bellairs and Lesneski, architectural consultants with the firm of Meyer, Scherer and Rockcastle, were commissioned by the city in July to study the library and make recommendations for its future.

They were not enthusiastic about the library’s prospects. “It was designed based on late 1960s construction standards, in particular to do with the building envelope,” said Bellairs. “That, together with some very constrained maintenance budget items, has resulted in a facility that is very difficult to treat, in terms of its air quality, both heating and cooling. It is very difficult to move activities around inside the building, because there are a hundred and forty columns that invade the space. We refer to it as a ‘forest of columns.’” He stressed that the library’s energy problems were not unique to Duluth, but that many buildings around the country built in that era—the mid-1960s to early 1980s—were experiencing similar difficulties.

Currently, the library loses about $74,000 a year to heating and cooling that escapes from the building. Its support systems, including its HVAC and electrical systems, are nearing the end of their useful lives. The long, narrow shape of the building makes it inefficient for staff to get around. The design makes it difficult to adapt to changing technology. Little natural daylight gets into the building. You can hardly see the lake from the windows. And on and on. If anyone had any doubts about just how badly the library sucked, listening to the consultants dispelled them.

The consultants have developed four possible options for the library’s future. Two options involve varying degrees of refurbishment to the existing facility, from basic code upgrades ($15 million) to a full renovation ($31 million). The other two options involve tearing down the existing library and building a new one, either the same size ($35 million) or smaller ($25 million). The estimates for building new include the cost of demolition and an allowance for a temporary library facility while construction is taking place. They do not include the cost of maintenance.

A Citizens Steering Committee, composed mostly of city staff, library staff, and library board members, with a handful of other citizens tossed in for appearances, has been considering the various options, and will make a formal recommendation to the council on February 9.

When the consultants finished their presentation, City Councilor Joel Sipress led off the questioning.
“I think people in the community have a right to be concerned that a building that was built 35 years ago is non-functioning,” said Sipress. “I appreciate the fact that you pointed out that that is largely a product of the fact that it was built at a time when public entities built buildings on the cheap, and didn’t build buildings for the long run […] Are the cost estimates that you provided for Options C and D based upon building a building that is going to have to be replaced 35 years from now, or is that a building that, with proper maintenance and occasional updates, we could expect would still be here a century from now?”

“I appreciate that question, and I’m glad that you characterized it the way you did,” replied Ms. Lesneski, “—which is ‘with proper maintenance and updates along the way.’ Because that is also the issue with the current facility. It’s not only that it was built in a time when not enough attention was paid to quality, but it was also, over the years, not given the kind of maintenance attention that it really should have had. And so those two things compound an issue. […] We don’t want to say that it will for sure last 100 years, because we don’t know how it will be maintained, but with proper maintenance it should be a 100-year building.”

To say that the library has not had the maintenance it should have had is a delicate way of describing an ugly situation. Capital maintenance at the library has been neglected for decades—very possibly from the moment it was built. Part of MSR’s report consists of another report, developed by the national “energy service” firm Ameresco, that lays out the specific maintenance issues facing the library. After studying the main library and the West Duluth branch, Ameresco came to the following conclusion:

Excluding special funds, the renewal funding required for the two Duluth Library assets would translate to $380,000 annually. Presently, the average funding for the two facilities, allocated to deferred maintenance and capital renewal, is estimated to be $35,000 per year.

In other words, the city is currently allocating less than 10 percent of what is needed for capital maintenance at the library. Moreover, the $380,000 would only cover the most basic maintenance. “To maintain the facilities in a ‘Fair’ state of repair,” advises the Ameresco report, “about $597,000 will need to be applied annually for the next 30 years.”

Reading these numbers, one big question comes immediately to my mind: If we can’t maintain the library now, how will we maintain a new one in the future?

One might expect that city leaders and community members would ask the same question. But with only a single exception (that I am aware of), in all of the meetings and discussions and open houses that have been held since July, this question has not been asked. Bizarrely, everyone who looks at the Ameresco report seems to believe that the numbers actually justify a new library. The steering committee, when they make their recommendation to the council, will say as much.

The one exception occurred on December 16, 2014, in the library’s Gold Room, at a meeting of the Citizens Steering Committee. Committee members, guided by Bellairs and City Planner Keith Hamre, spent an hour and 50 minutes discussing the library’s options. Of that time, fully 2 minutes and 58 seconds were spent discussing maintenance. I here reproduce that conversation in full.

Angie Miller (Director, Community Action Duluth): Has anyone figured out how to prevent the problem that we’re in now from happening 15 years in the future, where we only have a tenth of what we need in order to keep up with maintenance and repairs, and so we won’t be in this situation again? It’s a big chunk of money every year that we need to set aside to keep up.

Stephen Bellairs:
Yeah, I think Ameresco ought to come up with a recommended plan of annual maintenance that should be budgeted for each of the options.
Miller: Yeah.

Bellairs: And that’s something they should be able to do. I mean, they probably know what that is already.

Miller: Yeah. But how do you find the money for that?

Jim Filby Williams (Director of Public Administration): You know, we’re ending a period of extraordinarily rapid and painful contraction of local government that was necessitated by financial challenges, and the long-term structural budget is stabilizing, and as we have seen in the most recent estimates for our growing property tax base, there will be opportunities for us to begin looking at what do we need to adequately invest in our road infrastructure, our public buildings, et cetera…but certainly it’s the belt-tightening since 2007 or so that has brought our ability to maintain public infrastructure to their normal level. It’s the right question.

Bruce Stender (Vice Chairman, Labovitz Enterprises): This is also kind of naïve, but I’m gonna say it anyway. When we’re thinking about funding the capital cost of a building, at least those of us that have had to survive in the private sector think ahead about depreciation accounts, or what’s known in the private college and university field as endowment, to fund the new capital structure that goes up. And one may contemplate how that might be done as a private fundraising effort, in addition to the bonding for the capital structure. […]

Keith Hamre (City Planner): And if we look at whatever grant sources are out there, and I think you raise a good point. I don’t know, on the public sector side, how do we create an endowment…

Stender: Well, the Library Foundation.

Carla Powers (Library manager): The Library Foundation has an endowment that’s, I mean…

Stender: It has a vehicle. It has a vehicle that we can support.
Powers: Right. Exactly. That’s not the purpose of the Foundation at this point, but the vehicle would…the process is there.

Stender: Which is good.

Hamre: Sure. It’s not all facilities have that kind of vehicle to look at, so that’s a good point to raise.

And that’s it. That is all the time the Steering Committee spent discussing the most important issue for the library’s long-term health and survival. And what was the best idea they came up with? Not that the city should fund capital maintenance, but that private donations should.

Clearly, nobody is taking this seriously. To fund capital maintenance, the Ameresco report recommends setting aside the national best-practices standard of 2 percent of the replacement cost of the building annually. This means, if a new library costs $25 million to build, we would need to set aside $500,000 each year for maintenance.

Do we really expect the Library Foundation to raise that kind of money? The Foundation is a nonprofit organization that was formed in 1990 to “supplement the library’s funding in a manner that does not diminish the need for strong public funding.” In 2012, the Foundation’s total income, before paying salaries or other expenses, was $155,687. After expenses, their net revenue was $76,363. To suggest that used-book sales and widows’ donations would cover a $500,000-per-year capital maintenance bill is not just “kind of naïve”; a better description might be “staggeringly ignorant.”

In any case, even if the Library Foundation could, by some miracle, raise the necessary funds, they should not have to. By reducing the city’s responsibility to support the library, such fundraising would directly contradict the Library Foundation’s mission. If the city builds a library, the city should be ready to support it.

According to Mr. Filby Williams, the city’s ability to fund capital maintenance is returning to its “normal level.” Unfortunately, in the case of the library, the normal level is virtually nothing. The library’s capital maintenance problems did not suddenly appear in 2007; they began decades ago. And although it is true that the property tax base is rising (slightly) and that “the city’s long-term structural budget is stabilizing,” this does not mean that we suddenly have a lot of disposable income to throw around. We have a smaller general fund budget today than we did eight years ago, and we are carrying more debt. Meanwhile, our needs have only grown.

The fact is—and this is why our leaders don’t like to talk about it—the city has no good source of capital maintenance funds for the library.

But let us not blame our leaders alone. The people themselves do not care a whit about capital maintenance. At a community open house held at the library on December 4, 2014, which was well attended, citizens were asked what they would like to see in their library, either now or in the future. Ideas flowed freely and the responses poured in: “extended hours,” “a large media center,” “improved WiFi,” “community gardens,” “a café,” “storytelling,” “movie screening,” “author visits,” “a fireplace,” and on and on and on, for a total of 46 different suggestions. But not one person mentioned up-to-date maintenance.

It’s all in the way you present the issue. When people are asked what they “want,” they become like children thinking about Christmas. Children want a pile of shiny presents under the tree; they do not want to insulate the house or update the furnace. Those things they take for granted. Likewise, people “want” many things from the library, but the library itself is taken for granted.

Thus does the city avoid living within its means—by giving the people exactly what they want. Thus do the city’s debts grow, and its physical assets deteriorate, year by year.

“It is unfortunate but inevitable that the construction of new facilities attracts far greater attention than the maintenance and repair of existing ones,” state the authors of Committing to the Cost of Ownership, a 1990 study by the National Research Council, a Washington, D.C.-based organization whose mission is to “improve government decision making and public policy.”
 
While facilities are designed to provide service over long periods of time, the substantial costs of construction are addressed all at once in public debate and management decision. In contrast, the yearly costs of maintenance seem small, although over the course of a facility’s service life they generally total much more than the initial costs of construction. The commissioning and occupancy of a new facility are a newsworthy event that attracts public attention, but the ongoing work of maintenance and repair receives little notice except when failures occur that affect the ability of a facility’s users to perform their work.

If the decline were more sudden and dramatic, the problem might be taken more seriously. But it’s a gradual thing that happens over decades. Just as nobody who built our library 35 years ago has to deal with the consequences of poor maintenance that we’re facing today, nobody who is in office today will have to deal with the consequences of not maintaining the new library. That lovely responsibility will be shoved onto Duluthians of the future.

A new policy

I have a simple idea that I think should govern all projects in the city of Duluth: No project should be built until a source of capital maintenance funds is identified. As Mr. Stender made clear in his remarks to the Steering Committee, this practice is standard in the world of private business. I see no reason why the city should not protect its investments in a similar fashion. We would be fools not to.

To be clear: I am not interested in vague speculation about where the money “might” come from, nor am I talking about maintenance funds that are dependent on private donations. I am talking about a guaranteed, iron-clad, city-backed annual funding source, in the amount of 2 percent of the replacement cost of the building. Having these funds in place would save us from enormous headaches in the future, and the benefit would only grow over time, as more and more buildings were covered by it.
Despite the deep common sense of this idea, it will almost certainly be opposed (or, more likely, ignored) by our leaders. Setting aside such amounts of money for maintenance would affect the city’s budget tremendously; by effectively adding to the price tag of projects, such a policy might slow down, or even stop, new projects from being built. Unfortunately, that is what living within one’s means is all about. I am talking about attaching a real price tag to projects—the price that we will ultimately pay.  

This would not be a quick fix, nor an easy one. Just as the problem took decades to grow, the solution would take decades to fully materialize. This is why a policy is necessary: To keep us focused on the problem. Without a policy, it seems unlikely that our leaders (or citizens) would be able to resist spending capital maintenance money on shiny new dreams. They never have resisted the urge before. A policy would provide our leaders with the justification they need to occasionally tell the people no.

Even if the stars aligned and such a policy were actually established, however, things would undoubtedly get worse before they got better. In addition to the vast physical assets of the city itself, we have a number of large tourism-related facilities—Spirit Mountain and the Great Lakes Aquarium among them—that the city is committed to supporting. Spirit Mountain has two chalets, several ski lifts, heavy equipment and multiple amusement park rides, as well as a new $7 million snowmaking system that is being built. The aquarium has two separate plumbing systems, one for freshwater and one for saltwater, and myriad pumps and other equipment required to keep the animals alive. Long-term capital maintenance funds at both places are minimal. What happens when the pumps and motors begin to fail? The prospect is not something we can shrug off into the distant future. The aquarium is already 15 years old, and most of Spirit Mountain’s physical plant is much older.

And what of the West Duluth branch library? Like the main library, Ameresco has rated it “Poor.” Based on the 2 percent rule, we should be setting aside $23,926 annually for capital maintenance at the West Duluth branch. The amount we are actually setting aside is $2,124. So what are we going to do? Tear that one down, too?

Building a new library without having maintenance funds in place would be wildly irresponsible—even a form of vandalism—yet that is exactly what the city is poised to do. Moreover, our leaders are characterizing this irresponsible decision-making as wise and prudent, and the citizens, insofar as they think about the matter at all, seem to be going along with it. The voices calling for maintenance, other than my own, are nonexistent. So I guess we can predict what’s going to happen.

Anyway, I just wanted to get that off my chest.

Are there any questions?