Gifting to Universities

Xiliary Twil, ASA of Art Asset Management Group sent me a very good article from WealthManagement.com and the Breus Group blog on gifting to universities.  It is an article most professional and qualifies appraisers should read. The article looks at not only valuing, but how the institution looks at the gift as well.

Breus Group reports

One of your clients has donated or plans to donate an archive to a university (for example, letters, copies of letters and various business-related documents that make up an academic resource), your client will need to get an appraisal of that donation for tax and estate-planning purposes.

An appraiser will need to establish the fair market value (FMV) and possibly assess the university’s ability to maintain the integrity of the archive. FMV is defined as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”1

Let’s assume a publishing house donates an archive to a university, consisting of a total of 3,000 copies and original letters to and from the publisher. This donation consists of diaries, notebooks and interviews, as well as a trove of private material relevant to the building of the major publishing house over the last 50 years. Here’s how the appraisal might proceed.

Value of Collection

A library collection is a unique resource built up over years, in which the value of every item is enhanced by its relationship to others in the collection; all items will have been selected for donation to meet the particular goals and needs of a particular university library and the library’s patrons. In valuing a library collection rather than a museum collection, the major considerations are: What’s the value of this collection to the university, its researchers and students? What does it contribute to the library? What would it cost to replace the services the university and the library obtain from the collection?

Deprival vs. relevance life values. “Deprival value” is neither the product of any particular valuation tech-nique nor a valuation methodology in its own right, but instead focuses on the useful life of an asset. It’s based on the legal notion of compensation for loss during the period of useful life. “Relevance life,” on the other hand, is defined as the period during which content or subject matter is relevant to a library’s user population; it’s that period between acquisition and obsolescence.

The National Park Service’s NPS Museum Handbook, Part II (2008) (the Handbook), suggests the strategy for appraising archival and manuscript materials is to demonstrate the current value in one or more of the following areas: evidential value, informational value or associational value.

Evidential value. This term refers to a record of the activities, goals, policies, programs, administration and organization of the archive’s creator. Such records constitute evidence of the actions taken or considered by the creator that reflect his activities and thoughts. This background information, or evidential value, can be found in, for example, a copy of the first year balance sheet, notebooks, interviews with the owner on publish-ing and various appropriate newspaper clippings.

Informational value.
Here’s what the Handbook says about informational value:
. . . an archival collection has ‘informational value’ if it contains information on historical events, themes, issues, and eras. In evaluating a collection’s informational value what is sought is unique Information. Information contained in a collection is unique if:
• It’s not readily available elsewhere (such as, in books, or in newspapers, or in other archival
collections), or
• The collection contains information from a par-ticular perspective that is not available elsewhere.
This information is usually available in copies of letters to and from authors, media and arts figures and publishers.

Associational value. This term refers to a collection’s relationship to a person, organization or event whose history compliments the subject matter researched or taught at the university. In our example, the university finds great value in the research material concerning the development and history of a successful publishing house. For example, the collection may include financial notes and reports dealing with the development of a publishing house. These records contain “administrative value” which refers to the usefulness of a part of the col-lection for purposes of management and development.

The associational value is also considered part of the definition of evidentiary material discussed above regarding the development of a publishing house’s poli-cies, finances and procedural documents, as it concerns the development and history of the publishing house.

Associational value may be available in the form of copies of original and photocopied letters to the owner from writers, publishers and individuals in media and art worlds, all of which could be of great interest to researchers in varying academic disciplines.

Related use. The appraiser must look to see if there’s a related use for the archive. How else can the archive be used by the university? For example, the university in our example not only can use the archives for existing students to do research, but also can use the archive to attract new students who may be interested in exploring those archives.

Two Measures

The appraiser would value the collection being donat-ed to the library as having two distinct and separate measures: (1) the FMV ascribed to that information made available for the purpose of academic support and investigation, and (2) the effect the collection would have on attracting and retaining research interns and post-doctoral students.
The Australian Library Journal addresses the first measure. It notes that FMV is made up of general assets (physical non-current assets other than land), which are either specialized or non-specialized assets. Archives are specialized general assets that can’t easily be replaced as an entity through purchase on a secondary market (such as a library collection that’s been built up over a number of years in accordance with a collection development plan tailored to a client population with particular needs and purposes in a particular geographic area). Therefore,

Academic libraries can help higher education institutions retain and graduate students, a keystone part of institutional missions.

the appropriate value for an archive is that current cost in the open market to the university library and/or its users for available material that addresses those essentials.(2) University of Colorado librarians Denise Pan, Gabrielle Wiersma and Yem Fong address the second measure.(3) In one of their articles, they discuss a pilot study done by the University of Colorado Denver that analyzed the extent to which use of online library resources contributed to faculty teaching and research outcomes. A byproduct of the study was the discovery of the percentage of usage of print material. They stated:
Academic libraries can help higher education institutions retain and graduate students, a key-stone part of institutional missions.

Based on interviews, Denver’s Chemistry faculty read on average 3 additional articles for every reference citation. The citation analysis revealed that 88% (742 out of 845) of all references were from journals. If the Denver study participants did not have access to the Library’s collections, they would have spent nearly $100,000 over two years. This amount was calculated by multiplying the total number of journal citations and articles read by an estimated cost of $30 to purchase an article. The $30 price was determined by a sample of the 14 most cited journals from 6 different publishers.(4)

One Cornell University librarian states, “We all know that maintaining a research library requires a large investment. The annual expenditure figures of a library quantify the investment, but do not tell the whole story.”5

She continues, “How do we quantify the other side of the story, the contributions the library makes in return to the university? Borrowing some of the methods pub-lic libraries use, RAU has calculated dollar values for some core library transactions. This is only an illustra-tion and is by no means an exhaustive list of the ways the library contributes to the university.”6

In the article, “Library Value Calculations,” Cornell University’s Library Research and Assessment Unit finds, “If CUL did not exist, the university would have had to pay the following amount last year to secure services that are comparable to the use that the Cornell community makes of the library: for the use of physical volumes: $15,135,782.”7

A Cornell Research Library study done in Boulder substantiates this methodology for valuing library mate-rials. The study states:
For in-depth consultations that contribute to Cornell research results: $126,900.

The assumption is that $75/hr. is a fair repre-sentation of the value of a research consultation. This figure is based on the fee-based reference rate charged at the ILR library for requests coming from non-Cornellians.

In 2008/2009, 376 consultations were con-ducted at the handful of unit libraries that record these transactions. We are estimating that three times this number took place at CUL as a whole, and that the average length of a consultation was 90 minutes.8

Setting an Amount

The appraiser of the publishing house’s archive reviewed various academic studies dealing with the issue of valuation of an archive and found, in the case of this donor and this specific recipient, the rare content of the existing copies of original materials donated and the needs of the university are synchronous. (See “Don’t Underestimatethe Value of Copies,” this page.) Understanding that it would be impossible to replace

the publishing house’s archive; considering its use-fulness as a tool for enticing post-doctoral students to the university; setting a $30 value per letter; and appropriating an additional $10,000 for the ancil-lary material as a fair basis for determining the most appropriate value for this collection in the hands of a university, the appraiser securely sets the value for this archive of gateways into the thoughts and cre-ativity of the publishing house at $100,000.

Source: The Breus Group and WealthManagement.com