Have you spoken to other authors who've worked with them? Are they earning money on their books? I'm still not sure how the publisher earns it's money here. And what are they providing you that you couldn't use the grant and fund for yourself? It feels like hybrid publishing rather than traditional publishing to me. (Self publishing is often better than hybrid models, but not always.)
Also, have you considered a California or Southwest publisher who might be fine with a book that is locally focused? (Maybe you could do a series on different regions of the state for them.)