Canada: New And Improved Funding Options For Community Hubs

Co-authored by Anna Côté

One year after the Province of Ontario (the "Province") released its report entitled Community Hubs in Ontario: A Strategic Framework and Action Plan, Premier Wynne's Community Hubs Framework Advisory Group released a progress update highlighting, among other things, expanded and improved funding opportunities for Community Hubs. Following the initial Plan's recognition of a need for increased flexibility and better integration of funding for Community Hub initiatives, the progress report, entitled Enabling & Celebrating Community Hubs, unveils new initiatives and larger funding pools aimed at making funding for Community Hubs more accessible.

This bulletin provides an overview of the new and expanded funding initiatives, in addition to existing ones. It also sets out some of the legal risks and responsibilities that accompany many of the financing agreements attached to these programs.

Funding Opportunities

In the latest report, the Community Hubs Framework Advisory Group highlights three revamped funding sources for Community Hubs initiatives.

The first is the redesigned Community Health Capital Program ("CHCP") policy. The CHCP — which provides a unified approach for the funding of community health care infrastructure projects in Ontario — already has a funding stream dedicated to community health projects involving integrated facilities. Now, the new policy expands the eligibility criteria to make funding more accessible for integrated service models. The second funding update is the doubling of funds under the Investment in Affordable Housing ("IAH") initiative, providing a combined $1.28 billion over six years. Among other aspects, the initiative aims to encourage the development of "Supportive Housing" which combines affordable housing with support services for issues such as mental health and addiction. Finally, the report echoes the Ministry of Education's recent announcement of almost $90 million in funding for the development of Community Hubs on school properties (for further details, see Borden Ladner Gervais LLP's ("BLG") bulletin on the Disposition of Surplus Properties by School Boards).

Besides the funding developments outlined in the report, there are additional funding sources which are important to consider when planning a Community Hub project. These include:

  1. The Ontario Trillium Foundation ("OTF"), the largest granting foundation in Canada, which disperses $136 million a year in grants. It funds projects at the seed and growth stages, in addition to offering capital project funding and collective impact grants that encourage the integration of multiple services aimed at resolving complex social issues.
  2. A further source offers not grants but loans. Infrastructure Ontario ("IO") aims to help municipalities, universities and other public sector partners renew Ontario's public infrastructure with loans at affordable rates for either short- or long-term financing. Non-profit organizations aiming to own or operate a community health or social services hub are among those eligible to apply for a loan from IO.

In addition to the increase in funding support for Community Hubs, the Province is in the process of modernizing its Transfer Payment system. When complete, it will simplify the administrative process of accessing these important financial resources.

Legal Risks and Responsibilities

In accepting a grant or loan, lead organizations or anchor tenants for Community Hubs enter into a financing agreement with the funding organization or province. This agreement introduces many of the legal risks and responsibilities for which the Community Hub is accountable. The following is an overview of some of the risks and responsibilities which flow from the grant and loan programs described above.

In our previous bulletin, Community Hubs: Strategies for Lead Agency De-Risking, we discussed various legal strategies and structures that would minimize or shore risk amongst organizations that participate in a Community Hub. These de-risking principles would apply to the issues raised in the remainder of this bulletin.

Financial Soundness and Use of Funds

Legal responsibilities are incurred first of all with respect to financial soundness. Prior to a grant or loan's disbursement, a Community Hub organization will have to demonstrate that it is credit-worthy, that it has no legal impediments (for example, pending litigation) to undertaking the project, and that should the grant or loan amount not cover the entire project, it has access to additional sources of funds. The organization may be made responsible for meeting the demands of cost overruns and sourcing additional funding. It is therefore important that prior to starting a project, the organization has a realistic budget and a contingency plan for additional funding.

Organizations are also bound to use their grants and loans in the manner set out in their financing agreement. Funding cannot always be easily re-allocated, even for related aspects of the same project, without prior authorization. Organizations should therefore budget time to receive the required authorization for a change in funding use in order to avoid losing their right to funds.

Reporting and Audits

Several funding sources come with reporting requirements as a condition of accessing the full amount of funding. Reports may be required quarterly, twice a year, yearly, at the half-way point of a project, and/or at its completion. The OTF further requires an organization to survey its project participants under some of their grants. Community Hub organizations should therefore ensure that they collect the required information and allocate time and human resources to producing the reports by the required deadlines.

Receiving financing from a grant or loan also opens up the Community Hub to audits. Several grant programs reserve the right to audit the recipient organization during the life of the grant as well as after the grant has been closed in order to determine compliance with the financing agreement. An organization should always be prepared for the possibility of an audit by monitoring and enforcing compliance with funding terms.

Viability

In entering a funding or loan agreement, an organization may be required to make efforts to keep the project viable. Several limitations in the grant programs aim to ensure that the organization receiving the funds is accountable for the success or failure of the project. For example, the IAH initiative allocates funding while retaining the authority to revoke the funding if it is not committed by the required timelines. Other initiatives require that the recipient organization make "reasonable commercial efforts" to provide the planned services for a minimum period of time, or to show satisfactory progress in achieving the intended outcome. Finally, the Community Hub organization may be required to indemnify the grantor for repayment in the event the project fails, is closed down, or does not sufficiently meet its objectives.

Given these responsibilities, organizations should only agree to a financing arrangement when they are confident that they have a plan that provides the proposed Community Hub with a sufficient chance of success. Once underway, they should ensure they are meeting their legal obligations to support the success of the Community Hub.

Legal Compliance

Compliance with the law is of course required at all times, but in the context of a funding agreement, failure to comply with the law can additionally trigger contractual default when legal compliance is made a term of the financing agreement. Laws which require particular attention in the case of Community Hub projects include the Privacy Act, the Planning Act, and the related regulations and by-laws. Additionally, Community Hub organizations must ensure that they comply with the policies of the funding organization.

Seeking legal advice from knowledgeable lawyers in relevant fields such as real estate, planning and finance is the best way to ensure that compliance is maintained.

Repayment

While grants are given with the intent that repayment is not required, there are instances where the rescission of a grant and the recovery of funds will be activated against the grantee. The default of the grantee on a term of the financing agreement has the potential to trigger these events. Where this occurs, the Community Hub organization may be liable to repay some or all of the grant, and it can be pursued to the full extent of the law where it fails to do so.

Loans can create a similar situation. While repayment is always required, default on repayment can trigger a restructuring of the financial agreement, the interception of payments, and the legal pursuit of the borrower for the amount owing.

Given the legal risks and responsibilities incurred from entering into a funding agreement with the Province or a lending organization, it is strongly recommended that any organization looking to do so get legal advice beforehand. BLG has considerable experience in government financing as well as in working with the "MUSH" (Municipalities, Universities (Colleges), Schools and Hospitals) Sector on a wide variety of issues. We look forward to working with our clients to create vibrant Community Hubs.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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