In the midst of the North Shore Library’s capital campaign to construct a new building, the library is suing its fundraising arm over the entity’s alleged refusal to hand over around $820,000 in donations pledged for the new building.
On behalf of the library and its board, North Shore Library Director Rhonda Gould alleged that The North Shore Library Foundation and its president, Paul Pedersen, has ignored several requests to transfer funds from the foundation to the library since May 2023, when project leaders held a groundbreaking for the One North development, a five-story building that would house the new library and nearly 100 multifamily apartment units in Bayside, per the suit filed May 15.
Pedersen and the foundation argue they raised valid questions that the library left unanswered regarding the project's viability.
In particular, they wanted assurance the library, which serves Glendale, Bayside, River Hills and Fox Point, had raised enough money for the $13 million project before handing over the funds, the foundation's attorney, Gary George, said.
The lawsuit is just the latest event in a contentious, yearlong dispute between the two parties that’s included accusations, injunctions and attempts to control boards and bank accounts. Here’s what we know:
Fundraising page says library has raised more than $9.6 million
For years, the library has held that its current facility, located at 6800 N. Port Washington Road in Glendale since 1986, is too small to handle current demands and in need of modernization.
The library's public Donor Spotlight page says the library has raised $9,684,279 as of May 29 for the new building, though it's unclear what portion of those funds are readily available.
The library argues the foundation is sabotaging its ability to meet fundraising, construction and occupancy goals by holding a significant portion of the funds hostage without legitimate reason, according to the suit.
As a result, the library is seeking to dissolve the foundation, which would release all the foundation's assets to the library, per the foundation's articles of incorporation.
Foundation questions funds on hand for new building, alleges library is late on payments
In a statement to the Journal Sentinel, George said the foundation suspects the library is already late on scheduled payments for the construction. However, he said they don't have the financial statements to prove as much because of a records request stalemate both entities are stuck in.
He said the foundation's utmost concern is ensuring the donations are utilized in alignment with the donors' wishes and preventing taxpayers from being on the hook for extra costs to the project in the event fundraising is unsuccessful.
"There were a lot of unanswered questions about this project," George said at a May 21 injunction hearing. "If you showed us proof that the library is going to be built ― in other words, that you have the rest of the funds to meet (the developer) La Macchia's demands ― we are prepared to transfer the money."
Attorney Stephen Kravit, representing the library, has argued the foundation has no authority to withhold funds over these concerns, regardless of whether they are valid, and the library contends that they are not.
But George argued in court that the foundation has the fiduciary duty to ensure the funds are administered properly on behalf of the donors, which he said includes investigating the overall project's viability.
Library alleges foundation holds $820,000 hostage, says delays could add to the new building's cost
Since the May 2023 groundbreaking for the project, the library holds that it has asked several times for the foundation to transfer the $820,000 in its bank account, including a $650,000 legacy gift specifically for the new building from a donor who died in 2019.
The $820,000 has long been needed to start setting up architectural bids and contracts to stay on schedule, Kravit said at the May 21 injunction hearing.
If the library can't raise $7.5 million for the build-out by mid-August, it could lose a donation from developer Bill La Macchia of La Macchia Holdings, LLC, who agreed to offer the OneNorth building's first floor for the new library location for free.
Otherwise, the library would need to rent the first floor from La Macchia for $24,608 per month.
Additionally, if the library doesn't open to the public 18 months after construction starts on the interior in August, the developer would have the option to purchase the 24,608-square-foot space for $1.
Kristi Laufenberg, senior vice president of operations at La Macchia Holdings, said the firm had no comment when asked about the donation agreement.
A plan to remove library influence from foundation board stymied by a temporary restraining order
Days before the library filed the suit, the foundation planned to sever the library's influence within the foundation's board ― influence George maintains is a conflict of interest.
In a proposed resolution included in the foundation board's annual meeting agenda (scheduled for May 17, noticed on May 7), the board planned to amend its bylaws by making the required library director and board member seats non-voting, among other changes that would consolidate the board.
The foundation argues the library's influence was always a conflict of interest. Affidavits from two former library and foundation directors said they both agreed the library shouldn't be able to "vote on [the money] on one hand and accept it with the other," as George put it.
But two days before the foundation could hold the May 17 meeting, the library filed its lawsuit. On May 16, the court granted the library a temporary restraining order against the foundation, halting its activities. A ruling at the May 21 injunction hearing extended the order.
The lawsuit alleged the changes would have stripped the library of any power and retroactively excused several of the foundation's failures to comply with state laws governing charitable organizations ― and the group's own bylaws, which include an expressed purposeof handling gifts and donations to support the library’s endeavors.
A yearlong dispute included a record request stalemate and a bank account battle
In October 2023, Gould tried unsuccessfully to assume control of the foundation's bank accounts, according to a resolution passed by the library board to do so on Sept. 25, 2023. Ultimately, the bank refused to change the signatories on the foundation's bank account.
The suit alleges several of the library's attempts to request the funds, meet with the foundation and request records were ignored and even met with hostility, including on January 25, 2024, when the library again requested funds, along with financial records.
In response, the foundation sent its own records request on Feb. 9, asking for evidence verifying the financial viability of the project before it would agree to meet.
The suit also alleges Pedersen of "abrasive and curt" communication since May 2023, saying he blocked the phone number for Library Board President Margaret Zitzer and suggested that if the library needed fundraising, it should create a “sexy librarian calendar."
Library still accepting donations, next hearing schedule for July 10
In a May 24 press release in which the library announced the lawsuit, Zitzer thanked all the donors who have contributed so far and said the library is "very desirous of further gifts at this critical time."
While the litigation's outcome is pending, she asked that donations be addressed directly to the Friends of the North Shore Library, an organization whose mission is to provide volunteer and financial support to the library, according to its website.
For now, the temporary restraining order against the foundation will remain until the next court date scheduled for July 10, according to the circuit courtschedule.
Editor's note, 6/4/24: This story has been updated to reflect that the next court date was moved from June 4 to July 10.
This article originally appeared on Milwaukee Journal Sentinel: North Shore Library sues its fundraising group over donation dispute
