Experience gifts are awesome. A few years back father in law gave stepMIL a hot air balloon ride. She was over the moon. Think about what he likes, then go to university calendars, museum websites, various city and group websites. Also check out Groupon for his area. they have some neat things sometimes. There is a cafe here that only does chocolate and they had a groupon for a class and another for products and it was cool and a great deal.
Also think about magazines for things he enjoys doing. A while back my dad was really into photography so we gave him a year of 2 different photography magazines. He loved them. If you go to the various magazine websites (like bestdealmagazines.com or whatever, NOT the site for the magazine itself), you can often find them for FAR less than the price in the flyers in the magazines. One year I gave six different families each a year of family fun for $30 when the best deal that family fun had would have been $60.
After you order the magazine online, go to the bookstore and buy a current copy of the magazine. Wrap it up with a note about a full year coming with the issue.
A really cool idea would be to set up an experience that he could enjoy with you or with his grandkids. It is a gift of both the experience and your time.
I had a great aunt who was the tightest tightwad you could ever know (she would dry paper towels if she used them to dry her hands or a piece of fruit she had ashed etc... for reuse, and cut her depends into five or six pieces that she put masking tape on so she got more out of them. And those were not the most extreme things!). She did not like to talk on the phone. She liked to write letters but when postage went over a quarter she thought it was too expensive. My mom would buy 100 stamps and put them on envelopes. Mom addressed some envelopes to each of the relatives so that GreatAunt would not have to worry that her handwriting was too bad for the postman to read, and she left some blank also. Those would get used because otherwise it is just throwing money down the drain, lol.