Palo Alto City Council

City of Palo Alto

Palo Alto, CA 94301
Cc: James Keene

Subject: Estimated 30-Year Cost For Operating Palo Alto Library System
Date: 11.16.10

Elected City Council:

It would appear that someone in the Palo Alto library has finally begun to understand the
impact of e-books on the publishing world, as suggested from a recent public review of
the library upgrade now underway. However, from reading various newspaper reviews
of the recent public presentation of this information, it’s not clear that anyone in the
library has attempted to construct a long-range library financial plan. While this is not a
particularly difficult project, it is one that offers the library managers many opportunities
to consider the impacts of new technology in terms of library operations—which might
actually provide a bit of a challenge, given the rapid advances that are being made in this
area.

The following is a quickly contrived effort to put together a weak straw-man estimate of
the costs for operating the Palo Alto library system over 30-years, based on current
operational costs, and Measure-N expenditures and costs, spread over 30 years:

(Continued on next page.)

 30-Year Expense For Running Library System
(Expressed in Millions)

CPI 3.00%

2007- 2008- 2009- 2010- 2011- 2012- 2013-

08 09 10 11 12 13 14
Operating 6.821 6.385 6.521 6.717 6.918 7.126 7.339
Capital 5.2 5.2 5.2 5.2
Maintenance 2

2014- 2015- 2016- 2017- 2018- 2019- 2020-

15 16 17 18 19 20 21
Operating 7.560 7.786 8.020 8.261 8.508 8.764 9.027
Capital 5.2 5.2 5.2 5.2 5.2 5.2 5.2
Maintenance 2

2021- 2022- 2023- 2024- 2025- 2026- 2027-

22 23 24 25 26 27 28
Operating 9.297 9.576 9.864 10.160 10.464 10.778 11.102
Capital 5.2 5.2 5.2 5.2 5.2 5.2 5.2
Maintenance 10

2028- 2029- 2031- 2033- 2034- 2035- 2036-

29 30 32 34 35 36 37
Operating 11.435 11.778 12.131 12.495 12.870 13.256 13.654
Capital 5.2 5.2 5.2 5.2 5.2 5.2 5.2
Maintenance 5

2037- 2038-
38 39
Operating 14.063 14.485
Capital 5.2 5.2
Maintenance 2

30-Year Totals
Operating $293.2
Capital $140.4
Maintenance $21.0
Grand Total $454.6
Assumptions

There are many assumptions bound up in this particular estimate, so that it’s possible that
the estimated costs for this timeline are either too high, or too low. This particular model
was crafted just to make the basic point that all of the costs of running the library under
the current model will probably decompose into three basic areas: operating costs, capital
costs and maintenance costs. Values for these categories have been assigned based on
current values from the City’s 2010-2011 Operating budget, and an estimated total cost of
the Measure-N bonds, amortized over 30 years. (Maintenance costs are estimated, and
may be very different in the future from those chosen for this exercise.)

Other assumptions include: 1) continuing the five-branch system, 2) a significant

reduction in library use by the public, as e-books, and other Internet/WEB-based
information services become available, 3) new technologies become available that can
reduce the need for employees (such as service robots), 4) a modest, and predictable, CPI.

Certainly, given the number of assumptions in this model, there are many different
outcomes to the question of how expensive will it be to continue the 5-Branch model of
library services. Given the fact that e-books/e-magazines/e-newspapers, on-line
video/audio and ever-decreasing costs of personal electronics is allowing traditional
brick-n-mortar libraries to move onto the Internet/WEB, it stands to reason that the Palo
Alto library management would want to be looking at every conceivable way to reduce
costs in the coming years. Certainly, reducing the number of branches, by whatever
means, would be a good place to start. Also, developing a technology plan that
realistically integrates e-book/on-line video use into the use of the library so that
somewhat realistic estimates of future demand can be made within a couple of years—
giving City Management/Council members some sense of how people might be using
government-provided library services in the coming years.

Conclusion

The cost of public library service has been running about 5% of the total budget (on
average) for some time now. Given the backlog of infrastructure costs facing the City in
the coming years ($550M), it would make sense to think very hard about re-engineering
the service delivery model for library services, based on a shift to electronic distribution
of information. If it were possible to possibly reduce the cost of library services by 30%-
50% in the coming years, this might free up anywhere from $150M to $225M to pay for
the necessary infrastructure refurbishment. The possible savings are so large, that it
would be criminal not to be considering this approach to the use of public money, rather
than thinking about more public financing through additional bond sales.

Wayne Martin
Palo Alto, CA