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Application Exhaustion Experience Dictates Guarded Approach to Grant Programs
April, 2009
By Barbara Carss
Applicants awaiting a response to proposals they submitted to the Ontario government’s Municipal Eco Challenge Fund (MECF) in early October finally got news in late March – news that the program had been cancelled. That’s less than 12 months after the $14-million program to support infrastructure projects that reduce energy consumption and greenhouse gas emissions was first announced.
The fund was part of the provincial government’s Action Plan on Climate Change and was to have been dispersed over a three-year period. Municipalities were required to contribute matching funds and could receive up to 25% of project costs to a maximum of $100,000 from the $10-million Retrofit fund for proven energy-saving technologies with a timely payback, or up to $500,000 per project from the $4-million Showcase fund to support the demonstration of emerging, innovative technologies.
There was no formal media release to announce the cancellation of the Municipal Eco Challenge Fund, but a posting on the Ministry of Energy and Infrastructure’s (MEI) web site states: “This decision follows a careful review of all MEI grant programs in the context of ensuring the most efficient use of capital dollars in these challenging times.” A letter to declined applicants from MEI’s Assistant Deputy Minister, Barry Beale, also advised them to consider Infrastructure Ontario’s low-interest loan program.
After waiting nearly six months to be told to look elsewhere for funding, municipal proponents are revising their capital budget plans somewhat. However, seasoned project developers who routinely apply for grants from senior levels of government tend to enter the process with modest expectations.
“When we do our businesses cases, we also do them without the incentives,” says Geoff Lupton, Manager of Energy Initiatives for the City of Hamilton.
“We don’t see grants as driving a program. They are additional gravy that we might get once we have decided to do the program,” concurs Rajan Balchandani, Manager of Energy Management for the City of Mississauga.
In Hamilton, Lupton had hoped to secure $100,000 toward the district cooling system that will initially connect nine prominent facilities and office buildings in the downtown core (see Canadian Property Management, October 2008) and another $100,000 to help install energy-efficient technology including high-performance lighting and building controls as part of a major renovation of Hamilton City Hall.
The provincial grants would have represented a small fraction of both projects’ price tags, but would have helped to justify City Council’s decision to spend more on upfront capital costs, particularly given the ongoing pressure that municipalities face to cut costs and keep property tax increases in check. Notably, construction of the district cooling system will cost approximately $1.5 million more than simply replacing the aging chillers that now serve civic buildings in the city’s core – even though it is expected to deliver far greater long-term operational savings in the future – so $100,000 would represent nearly 7% of that incremental cost and help reduce the payback period.
The City of Mississauga received an $85,000 grant from the MECF’s Retrofit fund in the first (and only) round of funding in the spring of 2008, but was awaiting word on a proposal to the Showcase fund for an innovative demonstration project. “We had an application for $25,000 but now that the project is not getting funding, we will probably not be doing it,” Balchandani says.
Despite its more lucrative grant potential, Balchandani suggests the Showcase fund was the less popular of the two programs. “Many municipalities are hesitant to spend a lot of money for technology that is not proven,” he reasons.
Other possible sources of funding have opened up in the 2009 federal budget, which allocates $4 billion for new infrastructure projects, $1 billion for capital upgrades and energy efficiency improvements in social housing, and $500 million for upgrades and expansion of sports and recreational facilities. Municipal proponents will have to contribute matching funds, which they will have to obtain from the provincial government and/or their own capital budgets and reserves, but the emphasis on so-called shovel-ready infrastructure projects that can be completed within two years could be a boon for energy retrofits since they wouldn’t require the time-consuming planning and environmental approval processes that typically go with new construction.
“We’re doing lighting audits in all of our fire stations and libraries so if money comes available we are able to implement within a two-year timeframe,” Lupton reports. Even so, approval processes for capital spending are invariably longer when public money and City Council review and confirmation are required.
“The fundamental challenge with all the incentive programs that are out there, especially for public sector clients, is we need some kind of confidence that it’s going to be there for two to three years because, the reality is, it’s more than a one-year process,” he says. “And the process of applying for one of these incentive programs is a lot of work.”
Information about the cancellation of the Municipal Eco Challenge Fund can be found on the Ministry of Energy and Infrastructure web site at http://www.mei.gov.on.ca.wsd6.korax.net/english/energy/conservation/?page=MECF
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