Tax revenues routed to economic development projects, a criminal fraud investigation and deep distrust between public officials are defining a battle over the financial future of the Detroit Public Library system.
A 152-page report released this week delves into a decade worth of financial implications for the Detroit Public Library. Irvin Corley, executive policy manager for the Detroit City Council’s Legislative Policy Division, described the analysis as “one of the most comprehensive” reports on the city’s libraries in a long time. It was drafted at the request of Council Member Scott Benson, who has advocated for shifting control and oversight of library operations from an independent board to the city amid debate around tax captures by the city’s Downtown Development Authority.
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“This is going to spur a conversation about how we move forward with the Detroit Public Library,” Benson said during a Thursday committee meeting. “I will say, not everybody is happy. I will say it is received as a fair and necessary report for the future of the library.”
Franklin Jackson, secretary and former president of the Detroit Library Commission, argues the report serves as thinly-veiled justification for a city takeover of the library. Jackson, a member of the library commission since 2011, described the library system as a vanguard of “old Detroit” that is under siege.
“I don’t understand why they are out to hurt the library,” said Jackson, referring to Benson and Mayor Mike Duggan’s administration. “You can’t revitalize this city without some institutions and you won’t revitalize Detroit without the public library.”
BridgeDetroit asked a spokesman for Duggan whether the mayor is supporting Benson’s effort to change the library’s governance structure, but did not immediately get a response on Friday.
Jackson said there’s little trust in city officials after it was discovered that hundreds of thousands of dollars were defrauded from the library.
The library had $685,221 stolen in 2021 when someone using the email of a library employee sent fraudulent wire instructions to the city, causing library funds to be transferred to a private bank account. Stephanie Davis, communications manager for the Office of the Chief Financial Officer, said $277,795 was recovered, leaving the library at a loss of $407,426.
Jackson claimed city employees are responsible, but Davis said that’s not the case.
“The Library and the City both are victims in this matter,” Davis said in an email. “Law enforcement has been involved but has not shared details of their activities with us.”
The Library Commission voted to refer the case to the FBI in 2021, Jackson said, but hasn’t heard anything since.
Fraud allegations are not mentioned in the financial report Corley presented Thursday to the council’s Neighborhood and Community Services Standing Committee.
But, the report does include a 10-year financial review and outlook for the libraries, which showed little growth in property tax revenue – the system’s main funding source. Meanwhile, taxes collected by agencies like the DDA steadily increased, raising concerns about the library’s long-term sustainability.
“A four-year outlook shows improved library finances in the near term, but the Detroit Public Library needs financial help,” Corley said. “Funding for public libraries is stressed in the face of all levels of government and non-government agencies competing for scarce public dollars.”
The library is projected to have $30.5 million in revenue this fiscal year, according to the report, with $27 million coming from local property taxes and $2.6 million from state aid and county revenue. Estimated expenditures are $33.5 million, meaning the library will operate at a deficit.
Council Member Angela Whitfield-Calloway asked the Legislative Policy Division Thursday to explore whether the DDA could send up to $3.5 million to the library to make up the difference. The DDA will have collected $35 million in tax increment revenue from the library from 2012 to 2027, according to the financial report.
“We’re simply asking to have some of our money back,” Whitfield-Calloway said. “We want $3.5 million of our money back to subsidize the entity that you are capturing (or) diverting it from in the first place.”
The report stresses that Detroit Public Library resources are crucial for residents, especially low-income and homeless Detroiters. The main library on Woodward Avenue, 21 branch locations and eight mobile libraries in the city’s neighborhoods serve as community centers for literacy support, cultural programming, technology classes, free internet and more.
Libraries offer all-ages programming, including storytime for toddlers, after school programs for teens and computer classes for seniors. They also serve as cooling centers during summer heat waves. The report argues public libraries also boost Detroit’s economy, by offering workspace and financial literacy training, and fill roles that were traditionally held by Black churches.
“As a significant number of Black church congregations in Detroit no longer reside in the city, DPL has become community centers where neighbors meet to address many concerns relevant to the community,” the report states.
Recommendations for the council and the mayor listed in the report include selling bonds on behalf of the library, creating a ballot proposal to fund capital improvements, scaling back the reopening of branch locations and creating a tax revenue sharing agreement with the DDA. The report also urges Duggan and the City Council to determine if changing the library’s governance structure would give the city “greater comfort” in providing subsidies.
DPL is largely funded through a 10-year, 3.9-mill property tax last approved by voters in 2014. The millage expires in 2025 and was last increased in 2004. The library system would be forced to shut down if the millage isn’t renewed, Corley warned.
The library has a fund balance of $26 million to use in case of financial emergencies. Reopening all branch locations would require $3 million from the fund balance, the report states. Fourteen of the 22 locations are open today.
“The city is the threat to our continued financial success and they will castigate us as a profligate while they help destroy us,” contends Jackson. “That’s not the behavior of an ethical fiduciary. You wouldn’t trust them with your house cat, let alone the library system.”
‘Handcuffing’ the library?
Thursday’s discussion at City Hall is the latest in a years-long debate over whether tax revenue collected by the DDA is coming at the cost of civic institutions.
The DDA, chaired by Duggan, supports private investments to improve economic activity in downtown Detroit. The bulk of its funding comes from a portion of property taxes collected by the city, public schools, state, Wayne County and library.
The process is referred to as “tax increment financing” because the DDA collects from the increases in tax revenue. Critics of the practice argue this flattens the earning potential of libraries, while proponents say tax increment financing allows for investments that raise the tax base overall.
The DDA captured $52 million in taxes from local jurisdictions in 2022. This includes $2.7 million collected from the library. Library captures are expected to increase to $4 million by 2027.
Benson, who organized a series of community meetings last year to explain the pros and cons of tax abatements, says tax dollars collected from the library were never DPL’s to use.
“When we talk about the DDA capture, that is not the library’s money,” Benson said. “We like to say that, (but) it’s not their money. State law dictates that capture. Those monies are a direct result of having a DDA.”
However, the financial report shows Detroit’s library system hasn’t necessarily benefited much from property value increases.
Property tax revenue for the library stagnated around $31 million each year, while property tax captures by the DDA and other kinds of abatements grew from $1 million to $3.5 million. The report argues this reduced the amount of tax revenue the library has to operate with.
Voters approved a 2014 library millage renewal that included a cap on the amount of tax revenue that could be collected. However, the Detroit Corporation Counsel issued a legal opinion at the time arguing that the language was unenforceable because it attempts to supersede state law.
Whitfield-Calloway disagreed, saying that the tax captures are “handcuffing” the library.
“We can’t expect the libraries to do what they’re supposed to do if we’re steadily taking from them,” Whitfield-Calloway said.
Council President Mary Sheffield had her own proposal last year to request Michigan lawmakers make legal changes to exclude the library and public schools from tax captures. The state previously excluded the Detroit Institute of Arts and the Detroit Zoo from tax incentives, which proved to be economically beneficial to both institutions.
The resolution was held pending a report on the fiscal impact. An October 2022 report from Chief Financial Officer Jay Rising advocates for tax captures, saying they allow Detroit to compete for economic development.
“Without these tools, Detroit would lose the opportunity for jobs-generating economic development activity, as the properties would remain vacant,” Rising wrote. “Thus, the fiscal impact to the City of Detroit of losing these developments would not only be future incremental property taxes, but also the incremental income taxes from both the construction jobs and the ongoing jobs once the development opens for business.”
‘We deserve the best’
The Detroit Public Library, like the city itself, is older than the state of Michigan. The original city library opened in 1817. The main library was built in 1921 and is listed on the National Register of Historic Places.
Benson argues the city should have a greater say in the financial management of the library because the council is responsible for approving the library’s annual budget.
Benson proposed last spring that the City Council should appoint members of the Detroit Public Library Commission, which is an independent seven-member board selected by the members of the Detroit Public Schools Board of Education.
“We’re responsible as the City of Detroit, yet we don’t have any governance,” Benson said in reference to the library board. “So it’s a very unique model, which I believe needs to be changed. (The library has existed) 160 years. If we’re not going to make any changes you may not see 170.”
Benson said he’s acting in the library’s best interests, but his proposal last year received heavy opposition from residents, school board members and library commissioners. Benson said he’s since had conversations with members of the school board about the proposal and is working to build consensus around changing the governance structure.
“We deserve the best and should provide the best,” Benson said. “Some of those library branches may not be providing the level (of service) they could be.”
Library Commission President Edythe Hayden Friley could not be reached for comment. Russ Bellant, who served 12 years on the library commission before his term ended last December, said his former colleagues are vehemently opposed to a city takeover.
“They all thought it was absurd,” Bellant said of the library commission.
Bellant, who challenged Benson in the last two City Council elections to represent District 3, said politicians should not have influence over library affairs. He told BridgeDetroit that a majority of the council does not support taking control of library commission appointments.
“Libraries should be independent,” Bellant said. “See these campaigns to ban books and literature in libraries from political actors? The library is not supposed to be in that mix or be part of those political games.”
The Detroit Public Library is established as an independent body under state law, which outlines the relationship between the city, library commission and school board. State law places the responsibility of budgeting and accounting in the hands of the City of Detroit, which has authority to approve expenditures during the budget process, but can’t control day-to-day spending.
“We have the power as Detroit City Council to change their budget and then approve it once it gets to this table. That means we’re doing something to a budget after the cake has been baked. I’d much rather be than making changes of this nature once we are baking the cake. It makes it much easier. It makes us part of those conversations, which then segues to the need for a governance modification,” Benson said.
But Jackson and Bellant said library commissioners just don’t trust city officials to be good stewards of vital community resources. The library, they said, was forced to eat the cost of the $407,000 that was stolen. Whitfield-Calloway asked the Office of Inspector General to investigate the allegations.
“If you turn it over to the city to control, you’re turning it over to people who have shown a very harmful negative posture toward the library and its funds,” Bellant said. “Why should the people causing the financial harm of the library be in charge of it?”
The library financial report also recommends a capital needs assessment to determine the extent of repairs and upgrades needed to library property.
The average age of DPL buildings is 57, and some are over 100 years old. The mayor’s capital plan for 2022-26 includes $9 million in projects to maintain current infrastructure, but Benson said that is a drop in the bucket.