1.    The governing body of a municipality that has established a public library and reading room, or the board of county commissioners for a county library, shall appoint a board of five directors who must be residents of the municipality or county, as the case may be, to govern the library and reading room. One member of the governing body of the municipality or designated representative must be a member of the board of directors of a municipal library, and must be a resident of the municipality that establishes and maintains the municipal library; and one member of the board of county commissioners or designated representative must be a member of the county board of directors.

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2.    The terms of office of the members of the first board of directors must be established so one member holds office for one year, two members hold office for two years, and two members hold office for three years. The members, at their first meeting, shall determine the length of their respective terms by lot. Thereafter, the number of directors required to fill expired terms must be appointed each year, and each director may hold office for a term of three years from the first day of July in the year of appointment and until a successor has been appointed. No member of the board may serve for more than two consecutive terms, after which an interval of one year must elapse before the same member may be reappointed. All vacancies on the board of directors must be reported by the board to the governing body of the municipality or the board of county commissioners, as the case may be, and must be filled thereby. An appointment to fill an unexpired term may be for the residue of the term only.

3.    The appointing authority shall establish the rate of compensation for directors and actual expenses incurred by directors may be reimbursed at the official reimbursement rates of the appointing authority.

4.    Immediately after the appointment of its members, the board of directors shall meet and organize by electing a president. The governing board of a municipality or county establishing public library service may, in lieu of appointing a library board, contract directly with a library board established by another governing body of a municipality or county for the purpose of extending public library service.