Item No. 9
AGENDA REPORT
DATE: February 10, 2025
TO: Honorable Mayor and City Council
FROM: Joe Pradetto, Director of Governm Affairs9�
Phillip White, Director of Finance
Fermin Preciado, Director of Deve ent Services/City Engineer SUBJECT: Yucaipa Branch Library Project
RECOMMENDATION:
That the City Council:
1) Not proceed with the Yucaipa Branch Library Project due to the financial risks associated with the total project development costs; and
2) Authorize the City Manager to execute any necessary documents required to terminate the project agreement and return funding for the project.
BACKGROUND:
Project Update
On February 12, 2024, the City Council received a comprehensive update on the Yucaipa Branch Library Project (Project) that outlined the history of the Project and recent funding commitments that helped meet the State matching requirement, making the Project viable.
In that report, staff shared that the $9 million State grant was subject to budget cuts and proposed that the City proceed with the Project in the face of that uncertainty so that we could work towards meeting the grant construction deadline.
Several important developments occurred after the Project update in February of 2024.
State Library Grant: The State Library grant funding was spared from cuts, allowing the City to retain its $9 million grant to fund construction related costs only.
Federal Congressional Designation: At the City's request, Congressman Jay Obemolte submitted a federal appropriation in the amount of $500,000 for the Project. The request is now working through the Senate, but it appears that there is a good probability that the request will be approved.
Change Requests: The City submitted a formal request to the State Library to reduce the size of the proposed library project from 25,000 sq ft to 15,000 to 18,000 sq. ft. to stay within the estimated facility construction budget of $18 million. The State issued a tentative approval pending completion of the Project and Use Agreement.
The City also began discussions with the State about potential time extensions. The State Library grant requires that projects be complete and operational by March 2026. State Library staff indicated that it was not yet accepting extension requests.
With the State Library grants tight timeline to deliver the Project, staff researched the potential construction schedule and found that the design -build construction process allows for a fasterproject delivery schedule.
Design -Build: The design -build process helps deliver projects quicker because the design and construction team work together. This contrasts with the typical design -bid process in which one firm designs the project and another firm constructs the project requiring two separate procurement processes, two separate contracts and two firms going through theprocess to coordinate their efforts.
The design -build process is faster and more seamless. The tradeoff is that you do not get multiple construction bids to ensure the lowest price. Instead, the design -build process aims to deliver a project faster at a maximum guaranteed price with proven partners.
In its research, staff discovered that new legislation went into effect that permits cities to utilize a design -build process and prepared a Request for Qualifications/Proposals (RFQ/RFP) to procure progressive design -build services for the Project. The progressive design -build is a two-step process.
The first step involves selecting qualified engineering design and construction partners. When the engineering design is about 70% complete, the construction cost estimating process begins, which leads to the generation of a maximum guaranteed price for the construction and 100% completion of the engineering design. The second step involves construction of the Project at a cost that does not exceed the predetermined maximum guaranteed price.
This two-step process and the determination of a maximum guaranteed price helps reduce risk by having a clear understanding of expected construction costs before committing to construction.
Library Project and Use Agreement
On November 13, 2024, the City Council approved the Library Project and Use Agreement (Agreement) between the City, the Yucaipa-Calimesa Joint Unified School District (District) and San Bernardino County (County). The District Board approved the Agreement on January 14, 2025, and the County Board of Supervisors approved the Agreement on January 28, 2025. The Agreement outlines each partner's contribution and responsibility for the Project. Although the Agreement moves the Project forward, it does not commit the City to construct the Project if cost estimates come in above budget or if we lose funding.
Construction: The Agreement calls for the construction of a 15,000 to 18,000 sq. ft. library facility on property owned by the District and to be operated by the County. The City will own the facility during the initial term of the Agreement.
City Lead: Per the Agreement, the City is the lead agency under CEQA and is responsible for the construction of the new facility —including site development and any cost over -runs —and ongoing maintenance. The City will lead the process to 1) select a design -build entity, 2) work with project partners to design the new library facility, and 3) construct the new library facility and related site improvements.
Site improvements are anticipated to be an additional $2.5 million, or more, on top of the $18 million grant -funded construction budget. The City is responsible for the cost of site improvements, increasing the likely cash investment for the construction phase of the Project from $3 million to $5.5 million. The City would also be responsible for the administrative costs associated with the design -build, which would make the City's total funding contribution for the overall project well over $5.5 million.
Term of the Agreement: The initial term of the Agreement is for 25 years. The parties may negotiate to extend the Agreement, but the City is not obligated to continue after the initial term. If the City declines to participate in future extensions or subsequent agreements, ownership of the facility will default to the District. If that happens, the District and County would negotiate the continued use of the facility as a library.
Termination: Since the Project still faces some uncertainty, the Agreement outlines several scenarios that would trigger termination. They are as follows:
1. The Division of the State Architect does not approve the facility within one year of the approval of this Agreement.
2. The State of California revokes grant funding.
3. The City is unable to perform according to grant requirements.
4. The City loses substantial funding to render Project infeasible.
5. Construction bids exceed available project funds.
6. District fails to provide the property.
Financial Responsibility and Risk: Under the Agreement, the City is the lead agency and is accepting all financial responsibility beyond the secured financial commitments. The City has secured $15 million towards the construction of the Project, which is estimated to be $18 million.
However, that $18 million does not include site improvements, which is estimated to be another $2.5 million, or more.
This means that the City Council has committed and set aside $3 million towards construction of the new library facility, but that does not include items such as utility connections, parking lot construction, and landscaping. These costs were expected to cost around $2.5 million, or more. The administrative costs associated with the design -build costs are also not included, which means the City's total contribution would be further increased.
DISCUSSION:
RFQ/RFP for Progressive Design -Build Services
In November of 2024, City staff distributed an RFQ/RFP seeking progressive design -build services for the Project with a response due date of January 9, 2025. At the request of potential responders with offices in the Los Angeles area, the due date was pushed back to January 16, 2025, due to the evacuations related to the wildfires in the Los Angeles area at that time. Ten (10) responses were received and an evaluation panel reviewed the submittals based on the City's qualifications based evaluation policy.
The qualifications based evaluation process ranked the submittals based on the following criteria:
0 Experience completing similar projects using the progressive design -build process (50%).
Understanding of the project requirements (20%).
Proposed scope of work (20%).
Key staff's experience delivering progressive design -build projects (10%).
Once the top five (5) most qualified firms were determined, the cost proposals were opened and staff found that the total additional project costs could be approximately $4.3 million on top of the $5.5 million previously mentioned. This was based on the cost proposals received from the most qualified firms, which ranged from $4.25 million to $5.1 million.
To move forward with the Project, the City would have to set aside a total of approximately $9.8 million. This is an additional $6.8 million on top of the $3 million already committed by the City Council for the Project.
Based on the City's current financial situation and the City Council's goals to deliver a balanced budget for FY26 and to establish a strategic plan for the future, staff is recommending not to proceed with this Project.
The City and its project partners recognize the desire and need for a new library and have gone to great lengths to deliver this Project. This includes securing $15 million for construction. However, current economic and market conditions have pushed the Project price from an estimated total of $18 million to approximately $25 million, making this Project financially infeasible. The City explored multiple options, including reducing the project's size and seeking additional funding, but these efforts could not close the funding gap.
FISCAL IMPACT:
A directive to proceed with the Project will direct staff to begin incurring design costs. The City's share of the Project's cost has been updated to an estimated $9.8 million comprised of $1.4 million in design, $2.5 million in site improvements, $3 million towards construction and $2.9 million for project management. The $9.8 million represents approximately 2/3 of the Unassigned Fund Balance in the General Fund ($14.9 million) and which does not include the impacts of current -year activity (budgetary deficit of $4.4 million).
Attachments:
Approved by: