The Environment and Public Space Committee recommends:
(1) the adoption of the following report (June 2, 1997) from the Acting Chief Administrative Officer; and
(2) that the Province of Ontario be requested to enact enabling legislation to allow the implementation of the initiatives referred to in the report:
Purpose:
This report summarizes findings from a study commissioned by the Chief Administrator’s Office (CAO) from Advanced Strategic Management Consultants on the user fee opportunities available to the Metropolitan Toronto Reference Library (MTRL) under three legislative scenarios, and recommends actions resulting from these findings.
Funding Sources, Financial Implications and Impact Statement:
The total cost of the Report on Library User Fees study was $15.8 thousand, including disbursements and taxes. Funds were provided from the CAO’s approved operating budget, with $5.35 thousand of the total funded in 1996, when the study began, and the remainder in 1997, when it concluded. While there are no immediate financial implications resulting from this study, it identifies a number of potential revenue sources for possible consideration by Metro’s public libraries following their amalgamation in 1998.
Recommendations:
It is recommended that:
(1) any new user fee opportunities identified for the Metropolitan Toronto Reference Library in the consulting study, Report on Library User Fees, be undertaken following amalgamation of the seven existing public library systems within the Metro Toronto area;
(2) copies of the consulting study, Report on Library User Fees, be immediately forwarded to the current Board of Directors of the Metropolitan Toronto Reference Library for information, and be forwarded to the future board of an amalgamated library system for their consideration respecting implementation; and
(3) the appropriate Metropolitan Officials be authorized and directed to take the necessary action to give effect thereto.
Council Reference/Background/History:
In 1996, the MTRL Board had a total operating budget of $23.5 million, of which $17.9 million was funded by Metro Toronto through the property tax base, $1.8 million was provided by the Province of Ontario in the form of an operating grant, and the remainder was generated from a variety of sources, including special project grants and user fees.
As a result of fiscal constraint at both the Provincial and Metropolitan levels of government, the MTRL Board has experienced significant budgetary reductions over the past five years. From 1992 to 1996, its operating expenditures declined by 19.1 per cent. or $4.2 million, staffing fell by 23 per cent. or 102 full-time equivalents, and service hours declined by 11 hours per week.
In 1997, Metropolitan Council approved a further reduction of $828.0 thousand or 4.6 per cent. to the MTRL and approved an annual operating budget of $20.5 million for the organization. In addition to Metro’s reduction, the 1997 operating budget reflects additional decreases in Provincial support and administrative revenues. While 1997 services remain at the 1996 level, staff has been further reduced by 34 full-time equivalents as a result of constraints.
When formulating its recommendations concerning the MTRL, the Budget Advisory Team (BAT), which advises the Metro Chairman, requested information on the potential for generating additional user fee revenues through voluntary annual memberships; charges for services to non-Metro residents, commercial enterprises and professional customers; and sales of information accessed through new technology. In making this request, BAT recognized the likely continuation of fiscal constraint in the public sector and considered user fees as a possible means through which the impact of these constraints on the MTRL could be minimized.
In November, 1996, Metro’s Chief Administrative Officer was asked by BAT to undertake a study of user fee opportunities available to the MTRL. At the time, BAT representatives suggested that new fees be implemented in 1997 so as to maximize their impact on the Board’s 1998 operating budget. The CAO convened a staff Working Group comprised of representatives of the Metro CAO and Finance Departments and the MTRL to develop terms of reference for the study, retain the necessary consultants and provide direction as needed.
Purpose of the Study:
Proposals were submitted from three organizations and assessed according to criteria included in the request for proposals. Advanced Strategic Management Consultants (ASM) was retained in November, 1996, to undertake the study under the direction of the Chief Administrator's Office. As outlined in the terms of reference, the purpose of the MTRL user fee study was to:
- identify and evaluate the full range of user fee options available to the MTRL under two legislative scenarios: one which assumed continuation of current Provincial legislative restrictions on the application of user fees in public libraries, and a second which assumed elimination of such restrictions;
- develop a comprehensive implementation plan for user fees recommended under each of the two scenarios that addressed administrative, staffing, space, technical and financial requirements; and
- develop detailed financial projections for each scenario that considered both one-time and ongoing operating and capital costs and revenues.
Discussion:
(a) Legislative Frameworks:
The extent to which libraries can levy user fees is restricted in Ontario by the Public Libraries Act. This Act prohibits the charging of fees for admission to libraries, use in the library of its materials and the circulation of most library materials. It does permit applying user fees to non-residents of the municipality in which a library is located (eight per cent. of MTRL users fall into this category). In the current system, free library service is also a condition of Provincial operating grants to the library community.
When the MTRL user fee study was commenced, new Provincial legislation governing libraries was anticipated. Consistent with the philosophy of the current Provincial Government and directions outlined in the Savings and Restructuring Act (Bill 26), it was anticipated that this legislation would reduce provincial grants available to public libraries while increasing the flexibility of libraries to levy both user and membership fees.
On January 15, 1997, Bill 109, the Local Control of Public Libraries Act, was introduced for first reading in the Ontario Legislature. Contrary to original expectations, this Bill continues to restrict the application of user and membership fees by guaranteeing free access to public libraries, free use of materials on library premises, free borrowing of printed materials by residents and free borrowing of special format materials for persons with disabilities. In addition, the Bill reduces the Province’s financial commitment to public libraries and places primary responsibility for the funding of these resources on municipalities.
As a result of Bill 109, which is now awaiting passage, terms of reference for the MTRL user fee study were augmented to include a third scenario, namely, that of the proposed legislation. While the cost of the study was unaffected, the time line for its completion was extended by two months to April, 1997, given the necessity of considering the third scenario vis-a-vis the user fees possible.
(b) Amalgamation:
On December 17, 1996, the Minister of Municipal Affairs and Housing announced the planned amalgamation of Metropolitan Toronto’s seven existing municipal governments into a single City of Toronto effective January 1, 1998. Accordingly, the seven existing library boards within the geographical boundaries of Metro Toronto are to be amalgamated into a single board on the same date.
As a result, it was concluded by both the consultants and the staff Working Group that the introduction of new user fees in 1997 was premature as such fees must now be considered in the context of an amalgamated library system.
The Context of User Fees in the Public Library System:
The history of a free public library system has been entrenched for several hundred years in both North America and Europe. In Ontario, attempts in recent years to achieve legislative changes that would enable a more liberal use of user fees by libraries have failed as a result of extensive lobbying on the part of library representatives, the public and supporters from corporate and other areas. While today’s fiscal climate has forced the MTRL and others to reconsider their position on user fees, a number of MTRL representatives at both the staff and board levels remain strongly philosophically opposed to the concept.
Recognizing the volatility and emotion surrounding the user fee issue, the consultants began their study by developing guidelines on which potential user fees could be evaluated from an economic, social and policy perspective. The following summarizes the guidelines used in their evaluation:
(1) no fees should be charged for children for the use of library services;
(2) fees should not be based on the medium in which information is provided;
(3) determination of the level of a user fee should consider cost-recovery requirements;
(4) public libraries must be accessible to all; and
(5) user fees must be administered economically and with reasonable simplicity.
User fees recommended by the consultants under each of the three legislative scenarios outlined earlier satisfy all or most of the above guidelines.
Detailed information, including revenue projections and implementation requirements for fees considered but not recommended as a result of parameters set out in the above guidelines, is also included in the study. As a result, should the Library Board or Council of the new city wish to revise the guidelines in a manner that would accommodate these additional user fee options, the necessary information is available.
Findings and Recommendations of the Library User Fee Study:
The Executive Summary of the Library User Fee study is attached as Appendix 1. Copies of the complete study are available to Members of Council upon request. The major findings and recommendations of the consultants for each of the three legislative scenarios examined are highlighted below.
(a) Current Legislation: The Public Libraries Act:
Following a review and analysis of existing user fees at the MTRL, the consultants concluded that the Library Board has already instituted most of the fees permitted under current legislation. In addition, they noted that the Board’s current catalogue of fees reflects the correct mix of cost-recovery and market-value pricing.
The Board’s success in this area is illustrated in its financial returns. In 1996, the MTRL generated gross revenues of $1.1 million or 6 per cent. of its total expenditures from user fee or fee-for-service applications. These fees included charges for faxing, photocopying, inter-library loans, and photographic services. An increase in gross user fee revenues of $66.0 thousand is projected in 1997 as a result of the introduction of new fees for Internet printing, the circulation of materials to individuals not resident in Metro Toronto and educational tours and programs.
(b) Proposed Legislation: Bill 109, the Local Control of Public Libraries Act, 1997:
Many of the user fee restrictions present in current library legislation are expected to continue with enactment of Bill 109. While the Bill prohibits charging library users for access to printed material, it permits the levying of fees on electronic and other non-print information however. As a result, the consultants recommended two additional sources of revenue under this scenario, namely, fees for accessing the MTRL picture collection, as well as charging fees for video rentals. Preliminary projections estimated that additional net revenues of up to $83.0 thousand per annum could be generated from these sources, with limited implementation costs and no additional staff requirements. Projections are based on current demand for these services, adjusted for an anticipated reduction in use as a result of the introduction of fees.
The consultants acknowledged that while these proposals satisfy most of the guidelines stated in this report, they violate the guideline which states that fees should not be charged based on the medium in which information is available.
(c) Elimination of Legislative Restrictions:
The final scenario considered by consultants assumed the elimination of all user fee restrictions related to the public library system. In such an operating environment, the consultants concluded that the most cost-effective, administratively-efficient and significant revenue source available to public libraries was that of an annual membership fee. As has been demonstrated in other library systems in North America, such a fee could be structured so as to satisfy all guidelines identified by the consultants. In addition, based on conservative assumptions, a membership fee at the MTRL could generate net revenues in excess of $1.5 million during its first year of application. This is consistent with findings in other North American libraries.
Bill 109 in its current form continues to prohibit the application of a membership fee for public libraries. The MTRL’s Chief Executive Office has requested from the Minister of Citizenship, Culture and Recreation an exemption from this restriction. The rationale for an exemption is that the MTRL plays a unique role as a reference facility and is unable, therefore, to generate revenue from late fees and other circulation-related activities. Unlike most other public libraries, very little of the MTRL collection circulates outside its premises. The MTRL request was submitted to the Minister in writing on April 11, 1997, but no response has yet been received.
Finally, the consultants made a number of recommendations designed to assist the MTRL, and ultimately an amalgamated library system, in maximizing revenue potential in a variety of areas, including user fees. The most significant of these recommendations was that cost centres be established for all existing and potential fee-for-service areas to facilitate an assessment of the true impact of fees on cost-recovery and the appropriate level of fees for specific activities.
Conclusion and CAO Recommendations:
The Report on Library User Fees study commissioned by the Metro CAO identified a number of revenue-generating options available to the MTRL under a variety of legislative scenarios. The study concluded that the only user fee through which meaningful revenues can be generated for libraries is that of an annual membership fee. Such a fee is prohibited under both current and proposed legislation.
While the study identifies a number of new user fee opportunities that could be implemented by the MTRL, it is recommended that any such initiatives be undertaken following amalgamation of the seven existing public library systems within the Metro Toronto area.
It is further recommended that copies of the consulting study, Report on Library User Fees, be immediately forwarded to the current Board of Directors of the MTRL for information and be forwarded to the new future board of an amalgamated library system for their consideration respecting implementation.
The Chief Executive Officer of the MTRL concurs with the content and recommendations of this report.
Summary Chart:
This report conforms with the following.
