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Sunday, 10 May 2015 22:00

Jakel drove key changes that erased deficit, bolstered Grand Rapids Public Library’s finances

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Don Jakel, Grand Rapids Public Library. Don Jakel, Grand Rapids Public Library. PHOTO: KATY BATDORFF

As a decline in property values from the recession took a toll on the Grand Rapids Public Library’s revenues and led to a sizeable budget deficit last year, the organization decided that cutting hours or branch locations wasn’t an option.

The board overseeing library operations wanted to maintain service levels as best as possible. To do that, the library required a restructuring that would trim staff, improve efficiency and get leaner.

“We had — for about the last five years — a steady decline in our property tax revenue that makes up about 90 percent of our budget,” said Don Jakel, the business manager at the Grand Rapids Public Library who is MiBiz’s CFO of the Year for 2015 in the Nonprofit Organization category. “That tax rate was the same but with the assessed values going down, our revenue went down.”

On top of the slide in tax revenues, the library system had aging facilities that required more maintenance, requiring trustees to set aside more money each year.

By 2014, the Grand Rapids Public Library faced a budget deficit of nearly $1 million. What resulted was a “fairly major” restructuring of staff, which declined in a few years from 117 full-time equivalents to 97 through a handful of layoffs, attrition, exit incentives and people moving to other jobs with the city.

The library systems also restructured benefits, changed job descriptions and duties, reworked lines of reporting, and put a greater emphasis on lean processes to drive operating efficiency.

Trustees and administrators had little flexibility to attack the budget issues, with 80 percent of operating costs tied to personnel, Jakel said.

“There wasn’t much of an alternative but to downsize our staff and try not to impact service to the patrons. We wanted to be able to keep the same hours, the same branches and provide the same level of service, but just do it with fewer people and do it more efficiently,” Jakel said. “We really are in good shape at this point.”

Over a six-month period, library staff led by Jakel erased the deficit and “worked to create a new business model that was sustainable into the future,” according to Jakel’s nomination.

It continued: “Don guided the library board and staff to understand the new financial reality of the library. The result was a restructuring of library staffing and operations, creation of an asset management plan and a sustainable budget — none of which would have been possible without Don’s financial knowledge and leadership.”

The 20-year asset management plan allocated future funds for capital needs without a new millage levy for facility maintenance. An existing 20-year capital millage expires in 2017.

A decline in property values resulted in the library system’s tax revenues falling 15 percent over five years. To cover a gap in projected revenues from the capital millage and payments over the next four years on bonds that financed capital improvements, Jakel worked with the city’s deputy city manager and CFO on a transformation plan that included using $1.85 million from a transformation fund.

The 65-year-old Jakel joined the Grand Rapids Public Library eight years ago after closing a real estate development business that built lakefront and vacation homes up north. The decision to shut down Woods & Water Development Co. after 15 years in operation came as the recession loomed and the real estate bubble that had been brewing for years began to show signs that it was about to burst.

“It was a good time to end it in 2006 when real estate took a tank,” Jakel said. “It didn’t look like we were going to be able to do much for a while.”

Prior to real estate development, Jakel worked in the banking industry. He spent 10 years as CFO of the former Prime Bank in Grand Rapids, where he helped to lead a conversion from a mutual savings bank to a commercial bank, as well as a 1986 stock offering that took the company public.

Jakel previously worked at the former Kalamazoo Savings and Loan for five years prior to his tenure at Prime Bank, which he left in 1991 following its acquisition by the former First of America Bank. The acquisition of Prime Bank signaled the coming merger wave for the banking industry that Jakel opted not to go through, he said.

“That’s when I decided to retire from banking, because there were so many mergers taking place that I figured, well, I’d keep working my way up to the top of a bigger bank and in time, it would get bought out again,” Jakel said. “I just wanted to do something different and the real estate development business appealed to me and building appealed to me, so I just started my own (company), and I’m glad I did.”

Prior to banking, Jakel started his career in finance as a CPA following his 1972 graduation from Western Michigan University.

Jakel counts the Prime Bank IPO — accomplished as the bank was losing money — as one of the biggest achievements of his career.

“That was quite a feat to convince people that we were going to become profitable,” he said.

The bank did eventually hit profitability after selling its downtown Grand Rapids building on Monroe Avenue at a profit and reducing operating expenses. By the time of the First of America acquisition, Prime Bank’s stock traded at six times the IPO price.

At the Grand Rapids Public Library, overcoming the financial challenges that emanated from the recession and helping plan and implement the system’s restructuring are easily his top professional accomplishments of the last couple of years, Jakel said. However, he’s quick to give the credit to his co-workers.

“I would run the scenarios,” he said. “They did the hard work. I was just the one that was saying, ‘OK, if we do this, this is how much it’s going to save us.’”

Key to the restructuring, he said, was a willingness to address the library system’s financial problem directly and having a clear direction from the trustees on priorities.

“With revenue declining and expenditures increasing, that doesn’t make for an easy way to manage an organization. But once you have a philosophy of saying, ‘We’re going to balance it and we’re going to make it happen,’ then it’s just figure out the best way to do that.”

While the financial problems were deep, Jakel said he’s learned over the years not to allow worry to creep into his thinking, especially away from the office.

“I don’t worry about things. What I do is I look at a problem. Any problem that I can have an effect on and try to improve, I do that,” he said. “If something’s out of my hands, I don’t worry about it.”

Read 3840 times Last modified on Sunday, 10 May 2015 21:20
Mark Sanchez

Senior Writer

msanchez@mibiz.com

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