It depends. Unless it falls under the general welfare exclusion, disaster relief or has otherwise been specifically excluded from taxable income, most grants are considered taxable income. So if this was just an incentive rebate and you did not have to prove need, it would be considered taxable income. However, the repair of a foundation wall would NOT be considered rental income, so you may want to contact the issuer of the 1099-Misc to get it corrected.
Although this is discussing state payments, local grants would be treated the same.
Federal Income Tax Consequences of Certain State Payments
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