All too often, capital projects are delayed because the community has a tough time finding local resources to satisfy a funding match requirement associated with a grant program, even when the community can leverage 70 percent or more from outside resources.
This month's column focuses on breaking down the barriers of meeting funding match requirements and shares ideas you can apply to satisfy local funding match.
Making a Match
Grants and other forms of financial assistance frequently have funding match requirements. In general, funding match is the commitment of capital and/or in-kind services that originate with the applicant. Funding match is also a way to stretch grant funds and gauge the level of local commitment to the project or program.
Matching funds are generally defined as either hard match or soft match. Hard match is capital or physical assets committed to the project that have value.
For example, land that is part of a project or budgeted financial resources that are pledged to a project are considered hard match because they represent a value that can be quantified.
Soft match is frequently defined as staff time committed to the project or resources that may donate or discount fees for services rendered. While hard and soft match are common terms associated with funding programs, you should always review program guidelines for eligible and ineligible funding match requirements.
While both hard and soft match are allowable, hard match is generally preferred because it is capital or cash committed to the project. Based on this common perception, most of this article will focus on ideas to satisfy hard match, while discussion of soft match will be limited.
Now that we have defined what funding match is and why it is important to a program, let's turn our attention toward approaches to satisfy match requirements.
Before we begin this discussion, I would point out that, in my experience, public officials often times limit the definition of a "project".
For example, if the scope of your project is to purchase new playground equipment that costs $100,000 and you identified a grant that will offset 80 percent of the project, you need to generate $20,000 within the community to leverage $80,000 in grant funds.
On the other hand, if you are actually creating a new neighborhood park that will involve the donation or acquisition of land, extension of utilities, construction of restrooms, installation of park furniture, etc., and, with the exception of the playground equipment, all of the funding is secured, you may have satisfied all of your funding match requirements.
The difference is how you define the "project". Again, be sure to review and follow the program rules regarding match requirements to ensure that your proposed funding strategy is allowable.
One of the government's most common forms of funding match is budgeting general fund or enterprise fund (i.e., fee-based) resources.
This is generally done when a project is programmed during a budget cycle and one or more outside sources have been identified or secured.
And while these sources work well, they are not always politically palatable. This is truer of general fund budgeting because it is linked to the property tax levy.
Invariably, matching funds that are tied to tax increases makes it extremely difficult for elected officials to accept.
While funding a match that is secured through the general property tax levy may not be the most attractive alternative, several others are available. We'll explore three of them -- tax increment financing, local option sales tax revenues and special assessments (while not the same thing as a Special Assessment, revenues derived from Business Improvement District (BID) can be used to meet local funding match in much the same way as a Special Assessment).
• Tax Increment Financing: Frequently known by its acronym TIF, this funding mechanism is derived by incremental increases in property values resulting from new taxable investment occurring within a defined tax increment area or district. TIF is frequently used to satisfy funding match to leverage grants for improvements in underdeveloped neighborhoods. For example, an inner-city neighborhood park trying to secure a grant for splash pads might use tax increment revenues to satisfy match requirement. The key to TIF is that the incremental revenues must be spent in the district where they originate.
• Local Option Sales Tax Revenues: Local option sales taxes are generally subject to a referendum. Consequently, if the referendum is approved, it stipulates that funds be directed to specific purposes as defined in the referendum. For example, if the referendum stipulates that 30 percent of the revenue be used to fund an aquatic center, this is what the funds would have to be used for. Alternatively, if the referendum stipulated that a percentage of funding should be used for economic development –- without defining what economic development meant –- then the elected body overseeing the use of the funds could determine how the percentage of monies could be used. Regardless, one should seek the counsel of a bonding attorney and/or municipal financial advisor to determine eligibility rules concerning the use of these revenues.
• Special Assessments: Special assessments are additional taxes paid by property owners who receive direct benefits from a public improvement project. Common examples include street or sidewalk improvements. For these projects, the city council may decide to make property owners located along the proposed alignment help fund improvements costs. Occasionally, special assessment revenue can be used to leverage external grants to fund trails, streetscapes or other related improvements.
Before we fully close the discussion on hard match, I would encourage you to research potential funding sources and determine how many grants were awarded when only the minimum match requirement was satisfied.
The reason this is important is because many applicants will attempt to bolster support with the grant reviewer by increasing the local funding match beyond the minimum required. Getting a sense of how match served as an influence in funding awards will help you determine if it is necessary or not.
As previously stated, soft match is defined by the commitment of time and resources. Many grant programs will limit the percentage of soft match, giving greater deference to hard match.
Nevertheless, if you know that a significant percentage of your time will be dedicated to implementing and managing the project, consider tracking time spent via time sheets or other forms of time tracking.
While matching funds may not be as exciting as securing a grant, it is frequently the difference between getting the grant or not. Use these tips to help plan for your next grant opportunity or to overcome hurdles you may have encountered in previous pursuits.
Jim Halverson is a senior project manager and grant writer for Howard R. Green Company (HRG). One of HRG's most successful grant writers, Halverson has won funding on every grant he has authored for HRG clients.