What is the defining characteristic of grants in municipal finance?

The defining characteristic of grants in municipal finance is that they are funds provided by organizations or governments that do not require repayment. This means that municipalities can use these funds for various purposes, including funding projects, programs, or services, without the burden of having to pay back the money received. Grants can come from various sources, such as federal, state, or local governments, as well as private foundations or organizations, and they are typically awarded to support specific projects or initiatives that align with the priorities of the funding organization.

While other options might present specific scenarios related to funding or grants, they do not capture the essence of what grants fundamentally are. Repayment requirements, restrictions to federal projects only, or limitations to specific uses, like infrastructure improvements, do not encompass the broader nature and flexibility of grants as financial assistance available to municipalities for a wide range of purposes.