DATE:
TO:
Item No.
AGENDA REPORT
March 10, 2025
Honorable Mayor and City Council
FROM: Joe Pradetto, Director of Governm
Phillip White, Director of Financ
Fermin Preciado, Director of Deve
Affairs Vc �g
ment Services/City Engineer
5 SUBJECT: Yucaipa Branch Library Project Funding Options RECOMMENDATION:
That the City Council:
1) Receive a report on potential project funding options; and 2) Provide direction to staff on how to proceed on the library project. 3) If Council directs staff to proceed with the library project, provide direction on how to prioritize projects in the adopted Fy25 Capital Improvement Program.
BACKGROUND/DISCUSSION:
The City of Yucaipa has been working to build a new library to replace the existing branch. The project was originally estimated at $20.5 million, but recent construction estimates place the cost closer to $25 million, leaving the City with a $10 million funding gap beyond secured grant contributions.
Additionally, the State's $9 million grant requires the project to be completed by March 2026, a deadline that realistic construction timelines suggest is not achievable unless the State grants an extension.
On February 10, 2025, considering the size of the funding grant, the available reserve balance, and the grant construction timeline, staff recommended to Council that it abandon the library project.
Council instead directed staff to make a formal request to the State Librarian to extend the grant and return with more information. Staff made a formal request to extend the grant and is awaiting a response.
On February 21, the San Manuel Band of Mission Indians alerted the City that it would be terminating its grant contribution because the City would not be able to construct the facility by the March 2026 date outlined in the agreement. In conversations, representatives for the Tribe indicated
that they are open to a future partnership when the project becomes more certain. As for now, the Tribe had more urgent uses for the money.
As we wait for the State's response, staff prepared various funding options. While the need for a modern library is clear, the decision to fund this project must be weighed against potential financial risk and other capital improvement projects that address immediate public safety and infrastructure vulnerabilities. Therefore, many of the funding options are presented, but not recommended.
Funding Options
If the City chooses to fund the library now, it must find $10 million in additional funding. There are three ways to close this gap: 1) come up with more cash, 2) borrow, or 3) a combination of the two.
Below are potential funding options, along with their strengths, weaknesses, and risks.
Funding
Option
Strengths
Weaknesses
Risk
Level
Viability Under
Current
Constraints
State
Infrastructure
Bank Loan
Low -interest rates;
structured repayment;
government -backed
Still requires debt
repayment; adds long-
term obligations;
contributes to structural
deficit
Medium
Possible, but
adds debt
General
Obligation
Bond
Voter -approved;
spreads cost over
time; potential
community buy -in
Requires public vote;
lengthy process;
uncertain approval
High
Unlikely due to
timing
Lease -to-
Own
Spreads cost over
time; avoids large
upfront expenditure
Market -dependent
feasibility; may not
attract interest;
contributes to structural
deficit
Medium
Possible, if loan
amount is
attractive
Internal Fund
Borrowing
Immediate access to
funds; avoids external
debt
Strains general fund;
contributes to structural
deficit
High
Risky,
considering past
financial strain
Use City
Reserves
Immediate funding
without borrowing
Drains reserves; weakens
financial stability
Very
High
Not
recommended
due to fiscal
danger
Additional
Grants
(Limited)
Non -repayable
funding; reduces
financial burden
Limited availability;
highly competitive
Medium
Limited impact;
may not close
the gap
Relinquish
Grant &
Reassess
Avoids financial risk;
allows time for
sustainable funding
plan. Consideration
can be included in the
Strategic Plan
Delays project; requires
alternative funding
strategy
Low
Most responsible
choice given
constraints
Using reserves to fund the library would be financially dangerous. It would drain two-thirds of the City's general fund reserves, leaving only $4.5 million available —a level far too low to protect the City from unexpected emergencies, economic downturns, or urgent infrastructure needs. Borrowing funds through loans or lease -to -own agreements spreads the cost over time, but it still adds debt service payments that could further strain the City's already tight budget. General obligation bonds require voter approval and take time to implement, making them an unlikely solution for the current funding gap. Seeking more grants is an ongoing effort, but securing an additional $10 million is highly unlikely. The City has already been awarded one of the largest available state library grants.
If the City funds the library now, it must do so at the expense of other critical infrastructure projects.
The financial risks of prioritizing the library over other capital projects must be carefully weighed.
If no additional funding is secured, the most responsible option is to delay the project and reassess a long-term funding strategy.
Library and Capital Improvement Program
The City maintains a long list of approved but partially unfunded capital projects, including flood control improvements to protect critical infrastructure from storm damage, road repairs and expansions to improve traffic flow and public safety, and other publicly -demanded public park and recreation uses, including pickleball. These projects are not just wish list items; many are essential to prevent costly damage from flooding and improve public safety.
By approving and funding the library project, the City would elevate it above all other pending projects —regardless of urgency or direct impact on public safety.
If the City does not move forward with the library, there are no direct damages or safety risks. If the City delays flood control projects, Yucaipa remains vulnerable to storm flow damage, which could result in costly emergency repairs to public and private properties.
The library project is important, but it does not present an immediate financial or safety risk. The existing library remains functional, even if it is outdated. Flood control projects are among the most urgent needs. If funding is delayed, the City is at risk of incurring costly storm damage that could result in millions of dollars in emergency repairs —costs that would have to come out of reserves.
Road and traffic safety improvements have a direct impact on public safety. Delaying these projects could increase accidents and long-term repair costs.
Below is a list of Council -approved but unfunded capital projects included in the adopted FY25 Capital Improvement Program (CIP).
Project Description
Estimated
Project
Cost
Authorized
Funding
Additional
Funding
Needed
Wilson III Basin
$33,006,425
$17,006,425
$16,000,000
Wildwood Creek Basin # 4
$4,684,000
$3,184,000
$1,500,000
Intersections along Avenue E
$16,090,000
$10,090,000
$6,000,000
Yucaipa Boulevard Improvements - 15th Street
to I-10 Freeway
$24,193,000
$15,693,000
$8,500,000
Oak Glen Road Widening — Colorado Street to
Outer Highway 10 South
$2,238,889
$1,293,889
$945,000
Avenue E Sidewalks — 13th Street to Dunlap
Channel
$1,348,000
$598,000
$750,000
Pendleton Road Low Water Crossing at Oak
Glen Creek
$10,865,000
$2,865,000
$8,000,000
Dunlap Park
$11,855,000
$1,855,000
$10,000,000
7th Street Pickleball Facility
$1,220,000
$500,000
$720,000
Total Additional Funding Needed
$52,415,000
In addition to the above CIP projects, the City has approximately $2.6 million in deferred maintenance projects at various parks and public facilities.
Summary
A new library is a community amenity, but the decision to move forward must be made in the context of broader capital improvement needs. Approving and funding the library project now would require a $10 million commitment, which could come from reserves, loans, or debt. It would move the library ahead of all other unfunded capital projects, including flood control, road repairs, and park improvements. It would leave the City financially vulnerable by draining reserves or taking on risky financing.
Request For Direction
Staff is operating under the assumption that the State's $9 million grant is the funding that makes the library a viable project. To plan a strategy, staff would like to clarify assumptions and ask for Council direction considering two scenarios: 1) State denies our extension request and 2) State approves our extension request.
1. If the State denies the City's request for a grant extension, how would the Council like to proceed with the project?
2. If the State approves the City's extension request, which of the funding options would the Council like staff to investigate further? Are there any options the Council would like to eliminate?
Alternatively, the library project could be studied as part of the Strategic Plan which is one of the five goals the City Council adopted for calendar year 2025.
FISCAL IMPACT:
In anticipation of the $9,000,000 State library grant funding, the adopted FY25 Budget identifies $3,000,000 in the Capital Project Fund to be used for capital projects. While the FY25 budget document does not specifically identify the $3,000,000 to be used for the library, these funds could potentially be used for the City's local match requirement associated with the library grant.
Alternatively, these funds could also be used to fund partially completed projects identified in the table above in need of additional funding or the funds could be used to fund a portion or all of the $2.6 million in deferred maintenance needs at existing City parks and public facilities.
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 at 6/30/24) and which does not include the impacts of current -year activity (budgetary deficit of $4.4 million).