Couple of details I picked up while doing some google stalk:

According to the MI SHPO website [[i.e. the people responsible for awarding the grant), the $40,000 grant was, in fact, declined.

There was also a Freep article stating that the repairs to the roof would amount to $195,000 total.

As a historical architect, I have seen these grants in action. They are distributed on a yearly basis, with funds coming from the National Park Service. They must be used for their intended purpose, and there is a timeline to use them once allocated. The grant is a 60-40 matching grant, with the recipient having to pay the entire project cost up front. The recipient then asks the state for reimbursement of 60% of the total project costs not to exceed the limit of the grant.

All of this means that the city would have to foot the $195,000 bill for the roof renovation [[not sure how much money the FOBIA has to contribute) sometime over the course of the next fiscal year. My guess is, the city took one look at that contract, and said, "Not this year, not with a $300 million deficit", and declined the grant.

Not sure if the FOBIA could re-submit their application. SHPO is usually pretty understanding of the economics of any development project, but they might need some pretty definitive commitment from the city to do the restoration if a future grant is to be allocated.