The most recent Colorado Municipal League newsletter (CML Newsletter, November 19, 2008; http://www.cml.org/pdf_files/1121_web.pdf) has a blurb on public library grants.  This newsletter goes to many city and town managers.  Libraries could use this newsletter as a way to start a dialog with local officials about grant funding.  Check it out:
Non-traditional use of libraries
Once an institution devoted to book circulation, the public library is evolving. A recent study of the members of ICMA, the premier local government leadership and management organization, found some communities are using their public libraries for projects providing services for teens, immigrant residents, recycling, health and public safety.

During the next two years, with the help of the Bill & Melinda Gates Foundation, ICMA plans to encourage adoption of more such leading practices through the ICMA Public Library Innovation Grant. Local governments can employ these grants to develop new and creative ways of using their public library to deliver services in areas such as public safety, disaster preparedness, sustainability, health, immigration, civic engagement, and economic development.

For more information, contact Molly Donelan mdonelan@icma.org. Applications, guidelines and a budget template are available at icma.org/publiclibrarygrants.