INTERIM REPORT
OF CITY COUNCIL LIBRARY STUDY COMMITTEE
TO THE CITY COUNCIL
OF
On February 10, 2003 the
Springfield Library and Museums Association (hereinafter called SLMA) announced
that it was firing 42 employees (18 from the libraries and 24 from the museums)
and closing the Forest Park, East Springfield and Liberty branch libraries
because of being informed that its budget was being reduced by $200,000 for the
balance of fiscal year 2003. The closing
of the three branches was done without any notice to or consultation with the
City Council or any of
Several protest gatherings took
place followed by a City Council meeting on
The City Council order provided
that each neighborhood council and civic association could designate one member
of the committee and that the nominations should be completed on April 1. On
On that same day of April 9, the
SLMA board of trustees culminated several months of secret negotiations with
the Urban League for the transfer of the
a) set forth certain facts about the SLMA that we have
already determined
b) convey to you the facts we have discovered so far about
the
c) outline the rest of SLMA=s
blueprint or plan for the extermination of further branch libraries
d) set forth certain principles of
e) make interim recommendations to you for your
consideration and action
1. Over the years the
City Council has been generous to SLMA.
It is clear that this Council and its predecessors feel that our system
of one central library and nine branches in various neighborhoods of this 31
square mile city is essential and must be maintained and supported. It has not been easy over the last several
years and significant relief is not yet visible on the horizon even though we
all know that our economy runs in cycles as it alternates from good to bad and
eventually back to good again.
By the budgetary decisions of the
City Council,
An examination of the financial
statements of SLMA over the last seven fiscal years indicates that in each one
of those seven years the revenues of SLMA exceeded expenses. Indeed, the aggregate amount of surpluses
over said seven years was $18,090,301.
This astonishing and welcome piece of news is further accentuated when
one realizes that the $18,090,301. result was achieved even though one of the Aexpenses@
deducted from revenues was the non cash expense of
depreciation. This so-called expense
totaled $8,526,106 even though there were no out of pocket payments reflecting
the depreciation amounts. In other
words, if the depreciation item were not deducted as an expense, the SLMA would
have had a 7 year accumulated surplus or excess of revenues over expenses of
$26,616,407.
More good news in a tough economy
is found by noting that SLMA=s
financial statements in that same seven years reflected a gain in their net
assets from $18,176,257 in 1996 to $57,123,545 in 2002. Most organizations, whether business or
non-profit, would be delighted with a tripling of their net assets over that
particular 7 year period of time. And
yet, the mere reduction of $200,000 in February has resulted in a steamroller
being activated which has already (in 2 short months) claimed 4 branch
libraries as victims and shortly threatens, as we shall inform you, 3 more
branches in the immediate future.
The detailed information as to the
annual operating surpluses and the tripling of net assets is found in Exhibit
3.
2. Even though we are
still waiting for some of our production of information requests to be honored
by SLMA, we can tell you in very general terms that the total cost
of our library system according to SLMA in fiscal 2001 was $6,612,968 and in
fiscal 2002 it was $6,689,383. We need
to be able to analyze the component parts of these figures thoroughly in order
to make judgements as to how many central office expenses are being charged to
the libraries and whether or not said charges are fair or unfair, in line or
out of line.
3. The initial response
of Mr. Carvalho to our specific requests for information was extremely disappointing.
We were expecting and hoping for the kind of assistance and cooperation from
Mr. Carvalho and his staff that he had promised in his public statements.
To date it has not been forthcoming.
Our initial request of April 10 for some 30 areas and the cover letter
accompanying it are marked Exhibit 4.
A supplementary request of April 17 for 7 areas of information with
respect to the
A review of these documents will
illustrate that the SLMA willingness to produce information is so limited it
can be termed grudging. From a
substantive point of view it is inadequate and does not furnish to the
Committee the information necessary to responsibly carry out the Council=s charge to us. We hope for a change in attitude on the part
of Mr. Carvalho.
Two areas especially should be red
flagged for you at this juncture. The
first is their unwillingness to give us any
The
On
In
1998 the SLMA came to the City Council and represented to it that $1.2 million
was needed for capital improvements to renovate the
On
The
closing and sale of the
This
refusal to divulge or consult with its own advisory committee occurred in spite
of the fact that the Advisory Committee was created some years ago by the Board
of Trustees for the specific purpose of giving advice to the Board of
Trustees. The next day, after the fact, Emily Bader confessed to members of the
Advisory Committee that she had been going to inform the Advisory Committee
about the Urban League deal the preceding day but did not do so because it
appeared to her that Donald D=Amour
did not want the matter disclosed to the Advisory Committee.
As
of
According
to members of the Advisory Committee who were at the meeting, Mr. Carvalho told
members of the Advisory Committee on
The
assessed value set by
It
is ironic and nonsensical that the branch which has the most substantial
endowment of any of the library buildings, including the Central library, is
being marked for extermination. The
Curran fund has been of substantial assistance to the
It
is submitted by your study committee that the Urban League deal which had been
in the works for several months is outrageous.
It is a cruel and unwarranted blow to the citizens of the greater
SLMA=s Plan for the Closing of Three More Branches
For
a city that loves its libraries the way
These
closings were the result of decisions made by an out-of-town board of trustees
(8 of 32 members are
On
Mr.
Markey asked Mr. D=Amour to
convey to the trustees the strong preference of the Advisory Committee that if
the libraries had to be closed at all that they should be closed only
temporarily. He stated that he expected
the state=s economy
to improve at some time in the future and that he could not fathom how a one
time 20% cut in city funding would require the permanent closing of six
libraries. He concluded by saying that
he would hate for us to be in the position of no longer having branch libraries
when additional funds for such libraries became available in the future.
This
is grim news! Three were closed when
only $200,000 was cut in February.
You,
especially the five of you who voted for the library renovations bond in 1998
and 1999, have got to ask yourselves what kind of primrose path did they take
you down. Not only did you vote $575,000
for
SLMA
has never had its business decisions or its judgments challenged. The fact that its meetings are private and
unreported, along with the unique relationship it has had with the Springfield
Newspapers, have served to cast its activities in a warm, feel good light. But perhaps it is time for a more penetrating
analysis as to whether or not they are effective managers. It is clear right now that staff morale is
very low, that 4 branches are down and 3 additional branches in significant
danger.
The
accumulated surpluses of the last 7 years and the tripling of net assets should
have given SLMA enough strength to weather our present Arainy
days@. If in fact they were so close to the edge
that a $200,000 reduction would cause a total of 4 to drop by the wayside, and
a potential 20% cut knock out 3 more, they never should have asked you in
January 1999, only 4 years ago, to vote a total of $2,800,000 in bonds for the
branches in question. Seemingly, all
that was accomplished was to spend a lot of money we did not have to put the
buildings in first class condition before we close them and eventually sell
them.
Certain Principles of Law Having Applicability to This Study
We
have thoroughly researched the
1. Fiduciary relationship
SLMA
clearly has a fiduciary relationship with the City. This can be established on either of two
separate grounds: partnership/co-venturer or trust and confidence. For over 100
years the City of
While
there appear to be no written contracts of memoranda of understanding between
the City and SLMA as to their respective rights and responsibilities as
partners and coventurers, the partnership and co-venturer relationship has
remained essentially the same throughout their long relationship.
Annually
the SLMA officials prepare a budget for the operation of the entire library
system and request the City Council to appropriate the necessary funds. Earlier in this report we have quantified the
substantial amounts they asked for and you provided. The City Council and past
City Councils of the City have paid out these vast sums of money without any
written contractual undertakings by the SLMA because it believed in the many
statements and, indeed, protestations of candor, cooperation and loyalty to the
City which have been and are being regularly made by the officers and trustees
of SLMA. In a word, the City Council over the years has put its faith, trust
and confidence in SLMA's expressions of partnership, coventure and stewardship.
The SLMA knew of said trust and confidence on the part of the City Council and
encouraged it to exist and flourish.
The
partnership arrangement between SLMA and the City left the SLMA with the
responsibility of making day by day operating decisions with the understanding
that major policy decisions could not and would not be made without agreement
between the City and SLMA. Obvious examples of major policy decisions were the
decisions to build the main library and branches in Forest Park, Memorial
Square, and Indian Orchard prior to World War I, the decisions to create new
branches in East Springfield and Liberty Heights between the two great wars,
the decision to build and staff the Mason Square branch in the early 50's, the
decision to create the Sixteen Acres branch in 1965, the decision to create the
Pine Point branch in 1970, the decision in the 1980's to close the Memorial
Square branch, sell the building and relocate the branch library into the
public school serving the same neighborhood, the decision in 1998 to create a
new branch in East Forest Park, double the size of the Sixteen Acres branch,
make major capital improvements in the Indian Orchard and Mason Square branches
and finally the decision to close the Central library in 2002 and 2003 for a
$3,000,000 renovation to that facility. These major policy decisions in each
and every instance were made by both the City and SLMA acting in
concert. Indeed, because of the nature of the partnership and coventure it
would have been unthinkable for either the City or SLMA to do any one or more
of these projects unilaterally. The above decisions involved very significant
expenditures by the City and appropriations by various City Councils and were
carried forward by the City only after importunings, requests and presentations
by SLMA and representations that the facilities in question would be used in
carrying out the joint mission of the partnership to provide first class
library facilities to the people of Springfield.
We
can look at several cases to see what duty is owed. In De Cotis v D@Antona,
350 Mass, 165, 168 (1966) it is stated that AWhile
the enterprise continues, joint adventurers, like partners, owe to one another
the utmost good faith and loyalty.@ This duty is amplified in Meehan v
Shaughnessy, 404 Mass. 419, 434 (1989) where the court added with respect to
one partner=s duty to
another A(partners)
were obliged to consider their copartners=
welfare, and not merely their own.@ The case of Markell v Pfeifer Foundation,
Inc., 9 Mass App. Ct. 412,443 (1980) is noteworthy for the following: AApart from the strictly fiduciary
relationships (trustee-beneficiary, executor-legatee, attorney-client,
guardian-ward, etc.), the law recognizes the existence of fiduciary
responsibilities arising out of other relationships of trust and confidence and
provides a remedy against one who abuses the confidence reposed in him by
another turning it to his advantage.@ Finally, we call your attention to the words
of the eminent Judge Cardozo in the case of Meinhard v Salmon, 249 N.Y. 458,464
(1928) wherein he wrote AJoint
venturers, like copartners, owe to one another, while the enterprise continues,
the duty of the finest loyalty. Many
forms of conduct permissible in a workaday world for those acting at arm=s length, are forbidden to those bound
by fiduciary ties. A trustee is held to
something stricter than the morals of the market place. Not honesty alone, but the punctilio of an
honor the most sensitive, is then
the standard of behavior. As to this there has developed a tradition that
is unbending and inveterate.@
2)
The duty to Disclose
The case of Reed v Little Co., 256 Mass 442,
448 (1926) states that AThe
duty of honest advice and full disclosure arises where one party
reposes confidence in the integrity of another...@ On page 449 the Court says AIn the case at bar the parties did not
deal at arm=s
length...When confidence is reposed and accepted, the person trusted
...is...liable for concealing facts which by reason of the relationship he
should disclose.@ It is clear that SLMA had a fiduciary duty to
the City Council as the appropriating body of the City to disclose its
intentions to close the 4 branches in question and an even more significant
duty to disclose that it was negotiating to sell the Mason Square real estate,
without any bidding, at a price that was open to question and was going to
retain all of the proceeds of the sale.
Shelley v Smith, 271 Mass. 106, 115 (1930) reiterates the familiar rule
that partners owe each other the highest degree of good faith and fair dealing
in all partnership matters and continues Anone
could rightfully violate that duty for his own advantage. The duty devolved on each to disclose
to the others any material facts to transactions connected with
partnership interests.@ The Markell case, cited above, also states on
page 444 that AWhen
confidence is reposed and accepted, the person trusted is...liable for
concealing facts which by reason of the relationship he should
disclose.@ The fiduciary duty owed by SLMA to the City
has been significantly breached by its non-disclosure.
Our
courts view the fiduciary relationship as a very serious matter. A breach of the fiduciary duty is dealt with
in harsh terms. The court has gone so
far as to state in Samia v Central Oil Co of Worcester, 339 Mass. 101,113
(1959) that a Amere
failure to reveal may be fraudulent where there is a duty to reveal.@
Jamesbury Corp. v Worcester Valve Co., 443 F.2d 205, 209 (1st Cir. 1971)
held that silence can be fraudulent concealment by a person, such as a
fiduciary, who has a duty to disclose.@ To the same effect is
4)
Constructive Trust
Barry
v Covich, 332 Mass. 338, 342 (1955) is authority for the following
propositions: AA
constructive trust may be said to be a device employed in equity, in the
absence of any intention of the parties to create a trust, in order to avoid
the unjust enrichment of one party at the expense of the other where the legal
title to the property was obtained in violation of a fiduciary relation...@
The Court went on to say AIt
is difficult to define the exact scope of this remedy because of the diversity
and variety of the different forms which came within its sweep.... This equitable doctrine has frequently been
employed, and our present tendency is to extend its availability....where there
has been a breach of a relationship long described as fiduciary.@
Another way of stating this doctrine was employed by Cardozo, J. In
Beatty v Guggenhein, 225 N.Y. 380, 386 as he stated AWhen
property has been acquired in such circumstances that the holder of the legal
title may not in good conscience obtain the beneficial interest, equity
converts him into a trustee.@
The
law of constructive trusts has powerful significance with respect to ownership
interests in the library facilities and collections which nominally may be in
the name of SLMA. To the extent said
facilities and collections are the result of expenditures by the City rather
than SLMA, the city=s
interest should be recognized and protected on a pro-rata basis.
Of
more pressing interest is the application of the constructive trust rule to the
1.
The prime recommendation as of this moment is to enact an ordinance which would
create a municipal library department.
This should be put in place immediately so that the Council will have an
alternative vehicle at budget time to the SLMA for the library funds it
appropriates.
It
is too early to say what the final recommendations of this study will be
relative to the City assuming control of some or all of the libraries. It is evident, however, that SLMA has washed
its hands of
It
is prudent to get ready now, so that the City will have an entity in place if
it is necessary to appropriate some or all of the funds for libraries to some
group other than SLMA.
We
would recommend that said department have its affairs managed by a library
board composed of 5 citizens of
2. We recommend further that the City Council
pass a resolution which objects in the strongest possible terms to the closing
of the
3. We recommend finally that the City Council
President and the Chairman of this Committee meet with ChairmanD=Amour and President Carvalho to tell
them of the community=s
strong opposition to the
__________________________________________
Charles
V. Ryan, Chairman
[1]This was especially disingenuous of Director Bader
for she was well aware that