Ten Myths Communities Believe About Grants

Ooooh, we do love the grant announcements! Few things generate more excitement than a large amount of money from the rest of the taxpayers that will let us build a new rink, create a tourism attraction, or support economic development! Ribbon cuttings, grip and grins in the local paper...the residents are happy with Councils that bring in new money!

We need to think a little about what happens after the ribbon is cut.

Grant funding is only the beginning of a much larger financial commitment for the entire community, even for those who didn't want the asset built in the first place. And nowhere does failing to assess an asset's life-cycle costs hurt more than in small-population communities. It's worth having a conversation that addresses some of the more common beliefs about grants.

Myth #1: If We Get a Grant, It's Free Money

Nothing about a grant is free.

Most grant-funded projects expect municipalities to contribute their own funds, provide land, dedicate staff time, manage procurement processes, submit reports, and carry ongoing financial obligations. Even when those rare unicorn funds cover 100 percent of the capital cost, municipal staff and elected officials still invest considerable time and resources throughout the project. That means everything else waits.

A grant reduces costs. It does not eliminate costs.

Myth # 2: Getting a Grant Means the Project is a Good Idea

Funding approval is not proof that the project you are planning is one your community needs.

Grant programs meet government priorities, not necessarily local priorities. A project can score highly against program criteria while delivering limited community benefit. Also, a highly needed local project may never qualify for available funding. The question smart communities ask is "should we do this at all?"

Myth #3: If We Don't Apply, We'll Miss Out

Don't allow this belief to push you into a project you never intended to pursue. Some communities see a grant and decide to pursue it even when the project was never part of their strategic plan, capital plan, or asset management plan.

Identify the need first, then find the funding that suits it. Funding availability does not, and should not, determine a municipality's priorities.

Myth #4: The Bigger the Better

Big grants create big obligations.

A $10,000,000.00 facility looks like a great idea when a grant covers 75% of the cost. People focus on the amount they are going to get, rather than the fact that it still leaves them with $2,500,000.00 in debt for the next several councils to figure out. The larger the project, the larger the maintenance budget, staffing requirements, maintenance costs, and future liabilities. Nobody in their right mind should approve multi-million projects without a cost projection and tax implications through the asset's expected lifespan.

Consider this:

For a loan of $2,500,000 at 5% interest amortized over 20 years, the monthly payment would be approximately:

$16,499 per month

Here's the breakdown:

• Loan Amount: $2,500,000

• Interest Rate: 5.0%

• Amortization Period: 20 years (240 monthly payments)

• Monthly Payment: $16,498.92

Over the full 20 years:

• Total Payments: $3,959,741

• Total Interest Paid: $1,459,741

For a municipal council, that's roughly:

• $198,000 per year in debt payments alone

• Before accounting for utilities, staffing, insurance, maintenance, reserves, and future replacement costs

A grant may help build the facility, but the municipality must be able to afford debt service, operations, maintenance, and eventual replacement costs. The real question is now whether you can afford to build it, but whether you can afford to own it.

Myth #5: Other Communities Got One, We Need One Too

Ah, comparison and competition with the neighboring communities is one of the most common drivers.

Even when we see the neighboring facility is struggling, we somehow think we will do it better. We need to consider what our community can provide without comparing to the neighbors, because every municipality is different. Population size, age demographics, volunteer capacity, local income levels, community priorities, operating budgets, and asset management all play an important part in how we determine if a project makes sense.

Neighbors don't matter; councils need to determine whether a project addresses a local need, whether residents will use it, and whether taxpayers can support it over the long term.

The goal isn't to keep up with the neighbors; it's to make decisions that are right for your own community. Sometimes the most responsible decision isn't how to build it; it's whether to build it at all.

Myth #6: Operating Costs Will Take Care of Themselves

This is probably one of the most dangerous beliefs.

New facilities consume electricity, heating systems need maintenance, equipment wears out, insurance premiums go up, we need staff to run our facilities, and we need supplies. Operating costs are often the largest financial burden associated with a project, and even a facility that cost nothing to build can still become financially unsustainable to operate.

Myth #7: Build it, and They Will Come

Bullshit. A new anything doesn't automatically generate economic growth. Build a new rink, and that does not mean all the provincial events are coming your way. The games don't go to the "best" facility. Building a new swimming pool doesn't mean people will rush to buy a house. Sometimes it helps, sometimes it doesn't. Hope is not a business plan. The math has to work.

Myth #8: Someone Else Will Pay for Repair and Replacement

Every asset has a lifecycle. Eventually, the municipality always becomes responsible. The grant that funds the build rarely funds major repairs and replacements 20 years from now. Municipalities need to plan for these costs from the moment the project is approved as part of an asset management plan.

So, if your project costs 10,000,000.00 to build and is expected to last 40 years, a responsible Council starts putting money away every year from the year it is built, which, based on 10,000,000.00, is an additional 20K-ish every month, not including adjustments for inflation. That is, if you plan to have enough to replace it in 40 years without incurring more debt. And that is fine, if your community is good with that expense, and if that is transparent before you build.

Myth #9: If the Community is For It, Therefore The Project is a Good One

During public consultations, strong community support is common. But that doesn't necessarily mean they support the long-term expense, especially when that information wasn't available during the consultation process.

A Council should never confuse public enthusiasm for a project with the community's ability to afford it. The math has to math.

Myth#10: Future Councils Will Figure It Out

Sometimes projects move forward because today's Council secures the funding and leaves future challenges for someone else. Debt payments, staffing requirements, maintenance costs, and major capital replacements become problems for future councils and future taxpayers.

Good governance requires Councilors to look beyond their own term of office, and honestly, if you are a Councilor who thinks, " What the heck, I won't be here when that happens," quit. Right now.

Before a Council decides to apply for a grant for a major facility, instead of asking Can we get funding for this project, the better question is:

"Can we afford to operate this facility successfully for the next 25 years?" Council needs to shift from construction costs to lifecycle costs. Council needs to consider staffing, utilities, maintenance, reserves, debt, opportunity cost, and eventual replacement of the asset as part of the decision-making process.

Grant funding is an excellent option; however, it does not eliminate Council's obligation to consider future costs. A grant can help build things, but it cannot guarantee that the municipality can afford to operate things.

That is the difference between a sound investment and a financial burden that can last decades.