The Match

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.

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