I don't think that Philip is opposed to the idea of a tool lending library, he is merely questioning why the City of Berkeley needs to be running it. Why can't a group of citizens form a cooperative to do this, instead of involving the city government?
It's not really an issue because the guys that work there are highly competent. Informally, you can ask them for advice about hard projects. Maintaining the tools, they do a fine job. Liability to the city, I don't recall whether I had to sign a disclaimer or not when I first went there. I don't think so but I could be mis-remembering. At any rate, they are quite conservative and careful in their tool management.
Also, regarding: "Why can't a group of citizens form a cooperative to do this, instead of involving the city government?"
Well, we certainly could. Actually, we do! You should see our neighborhood-based disaster-prep system. It has miles to go before I feel like I can laugh at the next big earthquake but it is quite impressive. We've sheds and caches all over the place. And in many neighborhoods, there are less formal tool sharing arrangements. The Tool Lending Library fills a nice niche within that arrangement and is, as another commenter pointed out, a "citizen coop" in the sense of being "voter approved".
Honestly, there is plenty to kvetch about about Berkeley and East Bay politics but the tool lending library is just not on that list.