Little Rock Delays Library Deal Until It Sorts Out Legality of Millage Hike

DALLAS - Little Rock will delay this week's negotiated sale of $32 million of library construction and improvement bonds until it determines if it can legally collect the tax supporting the debt.

Voters approved a 20-year, one-mill increase for the bonds and a separate 15-year 0.5 mill increase for operations and expanded children's programs in December 2007, with 65% of those voting in favor of the increases. The library tax went from two mills to 3.5 mills.

However, the election was held after the date established under Arkansas law when counties must certify the next year's property tax rate within their borders. Because Pulaski County had already certified the tax rate, County Judge Buddy Villines signed an executive order on Jan. 14 that changed the millage rate adopted in November to include the new rate approved by voters for the library.

The bond sale was questioned last week by the local newspaper, the Arkansas Democrat-Gazette, which quoted a Little Rock attorney who said the additional tax could not be collected until 2009 because of the late date of the election.

The library bonds are rated AA by Standard & Poor's.

Stephens Inc. is the underwriter. Wright, Lindsey & Jennings is the city's bond counsel.

Bobby Roberts, director of the Central Arkansas Library System, said the $32 million of bonds will not be sold until the legal issue is resolved. The library system is an independent public agency, with Little Rock appointing seven of the 13 members of the library board.

"It's confusing to us," Roberts said. "The election is not in question. When the people voted for that increase, they figured they'd be paying it with their property tax bill in 2008. The only dispute is whether we can collect this money in 2008, or if we have to wait until 2009."

"We will not be going forward with the bond sale at this time," he added. "If someone doesn't file a lawsuit over this in the next few days, we'll file our own suit and seek a declaratory judgment that the collection is legal and appropriate."

Roberts said if the bonds are not sold soon, the library system will go ahead with at least one of the projects to be financed with the bond proceeds.

The library has signed an $800,000 change order for finishing out a floor of the new Institute for Arkansas Studies, which is included in the bond project list.

"We have the authority to expend funds in anticipation of the bond sale, and we'd then be reimbursed after we do have the sale," Roberts said. "We'd have to dip into our operational reserve for that money, which we do not want to do, but I believe we're obligated for that project."

The more immediate problem, he said, is the property tax increase that was approved for operations.

"This is more imminent than the bond delay," Roberts said. "We've already hired 12 people for the new branches, and I'm not going to fire people that we just hired. We'll have to put in a hiring freeze and work with the money we have, if the tax is disallowed for this year."

The one-mill increase is expected to generate $2.8 million a year, and would be rolled back when the 20-year bonds mature. The 0.5-mill increase will generate $1.4 million a year. The new library taxes will cost the owner of a $150,000 home about $45 a year.

Projects to be financed by the debt include two new libraries for a total cost of $15 million, new books and computer upgrades for $9 million, completion of the fifth floor of the main library for $4.3 million, and acquisition of future library sites for $600,000.

 

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