That the City Council:
A. Approve and authorize the City Manager to increase the project budget for the Coyote Creek Imperial and Channel Improvement Project by $282,237.92, funded by accrued interest earned from the grant funds provided by the California Department of Water Resources (DWR) Grant Number 4600015471 that were deposited for this project; and,

B. Authorize the City Manager to apply these accrued interest funding to the existing sub-grantee agreement with the Coyote Village Homeowners Association to cover authorized project costs.

In June 2022, through the advocacy of State Senator Josh Newman, the City of La Habra was awarded $8.5 million in state grant funding for the Coyote Creek Imperial and Channel Improvement Project. This funding was designated to address the critical failure of a private underground storm channel located at 901 W. Imperial Highway, owned by the Coyote Village Homeowners Association (HOA).

On August 21, 2023, the City Council approved Funding Agreement No. 4600015471 with the California Department of Water Resources (DWR) to receive $8.5 million in state funding. These grant funds were received by the City and placed in an interest-bearing fund account, managed in accordance with state guidelines, until needed to pay for project costs. The amount of interest that accrued on the $8.5 million principal grant amount totaled $282,237.92.

Under the terms of the DWR grant management protocol, interest earned on advanced grant funds must be used for eligible project costs or returned to the State. By formalizing the addition of this $282,237.92 as part of the project budget, the City can ensure that these accrued interest funds can be utilized to pay for change orders, costs of construction materials, labor, and technical oversight required for the project, or any other eligible project cost, subject to approval by the DWR.

The addition of $282,237.92 in accrued interest increases the total available State grant funding for this project from $8.5 million to $8,782,237.92. There is no impact on the City’s General Fund, as all eligible project expenditures, including reimbursement to the City for its previous emergency response costs, are fully covered by the grant funding, subject to DWR approval, up to the total amount of grant funding that is available.