Meeting Notes
RLSC Financial Planning Meeting

Definitions for the purpose of these notes:

• Building host: the institution where RLSC is located (presumably OHSU or Linfield College)
• Fiscal agent: the institution that owns the building and is ultimately legally responsible for the operation of RLSC.
• 501c3: a non-profit corporation (specific model undefined) separate from member institutions

See list of participants below.

Helmer presented an overview of the Orbis Cascade Alliance and RLSC.
Orbis Cascade Alliance: Document
RLSC: Document
PowerPoint

Additional issues explored:

• Growing importance of cooperation among library storage centers. A northwest node on such a national network of storage centers is desirable.
• Facilities originally built to serve one library are increasingly investigating ways to serve groups and become regional centers
• PSU has experienced large increases in the cost of leased warehouse space
• PSU also estimates that the cost of relocating stored collections is ca. $250,000
• OSU estimates that a new campus building to store collections would cost ca. $2 million
• Potential for use of RFID (Radio Frequency Identification) chips instead of barcodes
• Potential use of robotic shelving and retrieval systems
• Huge investment in library collections and the importance of preserving these cultural assets
• Potential for selling duplicate copies (probably not possible for public institutions)
• Need to create a program statement for preservation and digitization services

Ellis presented an overview of organizational models: Document | PowerPoint

Two major themes emerged as the group discussed organizational models:

1. There is an interrelationship between financial plan, location, and organizational model. Determining any one tends to determine or limit the range of choices for the others. The group determined that financing for capital construction should probably be the primary determining factor for RLSC.
2. There are policy, governance, and risk factors that need to be determined and codified regardless of what organizational model is selected. For example, such factors would be reflected in articles of incorporation for a 501c3 or in a Memorandum of Understanding between the fiscal agent and other participants if RLSC were legally part of a member institution.

The fiscal agent can be a member institution if governance issues can be addressed without asking the host to delegate beyond their ability. Governance issues include the definition of which institutions oversee RLSC (e.g., determination of budgets and policy) and representational voting (e.g., one vote per institution? votes determined by volumes deposited? votes determined by fees paid?).

Bonding

• There are legal and financial costs to issuing bonds
• RLSC construction costs are relatively small so bonds would need to be packaged with other projects to reach a minimum economic threshold
• Any institution that issues bonds for RLSC would experience an impact on its bonding capacity
• A new 501c3 with few assets probably could not issue bonds
• A state institution can secure bonds under the most favorable financial terms
• F bonds (in which the total principle and interest must be paid off) are relatively easy to issue but require a confirmed revenue stream; G bonds (partially paid by Oregon State general funds) require a 50% upfront match which may be difficult to achieve
• Within the OUS system, it makes the most sense for one of the universities to issue bonds as opposed to OUS. UO currently has a bonding placeholder for RLSC.
• The fiscal agent will need to have commitments from participants prior to issuing bonds.
• Question: Would a decision to issue F Bonds preclude formation of a 501c3? Answer: Oregon public institutions are limited in the extent to which they can hold equity in an LLC or 501c3.
• Question: Could the state build RLSC and lease it to a 501c3? Answer: This could pose a tax issue but probably not if the corporation is a nonprofit. Later email addition to this topic: “…A question was raised at the meeting about whether the State of Oregon acting on behalf of the Oregon University System (University of Oregon), could issue tax exempt bonds, the proceeds of which would be used to construct the facility, and then lease the facility to a private non-profit corporation. The answer is that this would constitute private activity subject to the rules of the Internal Revenue Service. "Private business use" is defined as use "in a trade or business of a nongovernmental person." Treas. Reg. § 1.141-3(a)(1). UO could probably enter into a management services contract with a private non-profit, however, if the contract was properly structured. I think that the key point is that the method of financing will have a substantial impact on the way the facility is governed and operated. If the issuance of tax exempt bonds is seriously contemplated, we will need to understand in advance the limitations such financing will place on the operation of the facility. This is the province of bond counsel. I would be happy to arrange for OUS's bond counsel to brief the group, either in writing or in person, at a future date.” -- Randy Geller, 12/16/2005

UO as Fiscal Agent

• Question: Given UO’s current role as fiscal agent for the Alliance and largest potential RLSC depositor, what is UO’s preferred organizational model? Is UO interested in extending its role to include RLSC? Answer: Ideas put forth in this meeting pull in various directions but the UO does not have a particular approach in mind. UO is not dissatisfied with the current role as Alliance fiscal agent and is willing to consider an expanded role for RLSC.
• Question: If UO were fiscal agent, to what extent could it delegate powers to a group overseeing RLSC? Answer: UO has considerable latitude to delegate through the use of contracts
• Question: Does the potential inclusion of non-members inform decisions about the organizational structure? Answer: Only if non-members are going to be part of governance.
• Determination of governance should take in to account how non-members participate and how new depositors are included in governance.
• Question: Is the ability to make a funding call important? For example, if there were an emergency shortage of funds or desire to build a second module, could/should members be asked to contribute? Answer: It seems likely that an emergency call would follow whatever operation funding model is adopted. Based on what we have seen at other facilities, the financial model(s) for constructing subsequent modules may be quite different from the model used for the initial construction.
• RLSC fiscal agent should probably contract with the building host site for computing support, network service, telecom, and security.
• There is some convenience to having the fiscal agent close to the facility

Risk management:

• In terms of risk management, it is not clear that there are any advantages or disadvantages to any of the organizational models under discussion.
• Fiscal agent would need to take on risk management and bill out additional insurance costs
• Property insurance is more important that liability insurance

Dissolution

• Question: Can members recover their stake if they withdraw from RLSC? Answer: No, this needs to be understood as a risk factor. The only way to enable such a financial recovery would be to establish RLSC as a for-profit entity.
• Any project such as RLSC will exist on a continuum from “collaboration” to “outsourcing.” The collaboration end of the scale is much more palatable for participants and potential funding agencies.
• Policies and legal agreements will need to specify what happens to shared collections if the owner withdraws from RLSC.

Human resources

501c3 as employer: Participants agreed that RLSC staff could be employees of the host or fiscal agent but should not be employees of an RLSC 501c3. Reasons include the large fixed costs of creating an independent HR structure for a small staff and the advantages of including RLSC staff in a large benefits pool.

Fiscal agent as employer: The UO (probably others as well) has much experience with staffing programs that are outside the main campus area. If RLSC is pursued as an extension of the current Alliance, supervision would be more straightforward if all consortium staff are UO employees.

Building host as employer: It may make sense for the building host to serve as employer of staff (e.g., easy access to HR support, temporary replacement staff, access to student labor, etc.).

Other HR notes:

• It is also possible to form a 501c3 that is staffed by employees of a member institution.
• Choice of employer will impact the cost of benefits and other terms of employment
• The board must feel that they have sufficient control

Foundation Support (King)

King presented an overview of discussions to date. The list of foundations distributed at the meeting lacks a few important foundations and includes others that would only be able to contribute small amounts.

Our challenge is to conduct a collaborative RLSC fundraising effort that can coexist with the fundraising initiatives of individual member institutions.

Member institutions are not prepared to change their institutional priorities to include RLSC. At its option, the UO library has the latitude to direct library donors toward RLSC.

RLSC is a very attractive concept if correctly packaged to emphasize private/public collaboration, preservation & digitization of cultural resources, and northwest participation in the emerging network of regional service centers. Collaboration is a very strong selling point. One participant noted that “a lot of people would be happy just to know that this meeting is happening.”

Porter suggested two potential approaches:

1. Consortial fundraising. Under this approach, a few (ca. 4) development staff develop a group approach to major foundations. For example, involve a few university presidents and ask four foundations for $2 million each. The group agreed that it is better to ask major foundations (e.g., Ford, Mellon, Kresge) for relatively large contributions rather than seeking a large number of small contributions. Such an approach would be strengthened by the inclusion of funds from founding depositors. The first step would be to have development staff meet to outline an approach, then check in with foundations to determine their interest level.
2. “Chip in” institutional funds. Under this approach, each founding depositor would contribute according to a funding model. Each institution would raise funds in whatever fashion made sense for that institution.

Question: Would foundations care about location or organizational model? Answer: No, but both aspects should be determined so that RLSC can be presented as a solid proposal. Current Orbis Cascade Alliance model would probably be most attractive because it has been in place and very successful for more than 10 years.

Participants varied in their sense of the risk that consortial fundraising would pose for institutional priorities. This approach will need to be summarized in more detail and each founding depositor asked to determine their comfort level and willingness to participate.

Question: Should the Alliance hire development staff for this project? Answer: No, this would take a long time and be difficult to do. Also, under current circumstances, such a staff person would be a UO employee.

King briefly reviewed proforma financial statements. Unfortunately, lack of time precluded a detailed discussion. Document | PowerPoint

Helmer reported on an October 2005 Alliance Council decision to form a new RLSC leadership group (see meeting minutes, # 5.3). This group’s first task is to recommend a site to Council. OHSU and Linfield College are both concerned that this decision be made quickly. It is also clear that RLSC progress on several fronts requires that a site selection decision be made soon. Helmer believes that a decision can be made in February 2006. Note: the day following the RLSC Financial Planning meeting, Alliance Executive Committee identified Carver as chair of the new RLSC leadership group. Carver accepted the appointment.

Next steps (Vance)

1) Public Bonding
Dyke will initiate a discussion among library directors and CFOs from OSU, PSU, and UO to discuss which institution would take the lead should the project pursue the issuance of public bonds.

Timeline: to be determined

2) Consortial fundraising
Porter, Hanawalt, Helmer, and Carver will draft an outline of how a consortial fundraising effort might proceed. This draft will be sent to UO, OSU, PSU, Reed, and OHSU for comment and a decision about the willingness and ability of each institution to participate in an initial exploration.

Timeline: Description of consortial fundraising effort complete by mid-January. Institutional feedback concerning participation in initial steps by early February

3) Site selection
Alliance Council and the new RLSC leadership group are encouraged to move quickly to select a building site.

Timeline: Council will receive a full briefing on the RLSC Financial Planning Meeting on January 12-13, 2006. Site selection should be complete in February 2006.

4) Organizational structure
Financial Planning Meeting participants make the following recommendation to Alliance Council:

Having discussed the merits of the following potential fiscal agents for RLSC

• Private member institution
• Public member institution
• Building host site
• New RLSC 501c3

the RLSC initiative should progress under the assumption that UO will serve as fiscal agent. In order to accomplish such an extension of the current Alliance organizational model, a revised or additional MOU describing RLSC governance and member responsibilities will be required.

Timeline: This recommendation will be discussed by Alliance Council on January 12-13, 2006.

5) RLSC Memorandum of Understanding
Vance, Ellis, and McFarlane will analyze the current Alliance MOU and suggest modifications needed to support RLSC.

Timeline: to be determined

Central Washington University
Thomas Peischl, Dean of Libraries
Member, RLSC Task Force

Linfield College (H)
Carl Vance, VP Finance & Administration
Susan Barnes Whyte, College Librarian
Chair, Alliance Council
Member, RLSC Task Force

Lewis & Clark College
Denis Ransmeier, VP Business & Finance/Treasurer
David G. Ellis, VP Secretary & General Counsel
Jim Kopp, Director, Watzek Library
Member-at-Large, Alliance Executive Committee

Oregon Health & Science University (H D)
Brad King, VP & CFO
Linda Getting, OHSU Foundation
Jim Morgan, University Librarian
Member, RLSC Task Force

Oregon State University (D)
Mark McCambridge, VP Finance & Administration
Karyle Butcher, University Librarian
Member, RLSC Task Force

Portland State University (D)
Lindsay Desrochers, VP for Finance & Planning
Helen Spalding, University Librarian
Member, RLSC Task Force

Reed College (D)
Edwin McFarlane, VP/Treasurer
Hugh Porter, VP for College Relations
Vickie Hanawalt, College Librarian
Member, RLSC Task Force

Seattle University
John Popko, University Librarian
Chair-elect, Alliance Council
Member, RLSC Task Force

University of Oregon (D)
Frances Dyke, VP Finance & Admin.
Randy Geller, Director of Policy & Legal Affairs
Deb Carver, University Librarian
Member, RLSC Task Force

Willamette University
Deborah B. Dancik, University Librarian
Member, RLSC Task Force

Orbis Cascade Alliance
John F. Helmer, Executive Director