The C symbol that he painted is irrelevant and does not entitle him to any extra privileges. Copyright is automatically applied to any work that is 'communicated to the public' whether there is a symbol present or not. So, yes, he owns the rights to that image. I think it was a bit cheeky of him to include it for a community painting though. After all, he does not own that wall. If Bill was paid for the work, I would actually argue that the library owns the copyright. Copyright just means that other artists cannot replicate the work and that people need to ask permission to use a photo of it in a magazine or something. I don't think there is any issue with people taking photos for personal use. If they started selling postcards with a photo of the mural, then it would be illegal because they are profiting, but taking personal photos is not a breach of copyright. Same as how someone can photocopy a recipe from a library cookbook for home use, but cannot photocopy the whole book or use that recipe to write their own cookbook. If it is deemed "fair use", then it's legal. He would have a very tough time arguing that taking a photo in a community library is not fair use.

The library owns the wall and have the right to repaint it if they wish. I'm not a lawyer, but from a copyright perspective, I can't think of any legal reason as to why you would not be able to repaint it. However, I understand that he is on your library board and you don't want to offend him. I would suggest coming up with a new idea for a mural (something that would make everyone happy) and asking Bill if he would like to assist because he did such a great job last time. Explain that it's because you want something fresh. I think that suggesting the theme for the mural, instead of just leaving him to do what he wants, is a good idea. You could even the public to submit ideas for the new mural.