Issue municipal bonds? No thanks, we’ll crowdfund instead

Central Falls, Rhode Island

Central Falls, Rhode Island

CNBC – 26 Sep 2013 – When most towns need trash cans, they use money raised from taxes or municipal bonds. But when a city that emerged from bankruptcy less than a year ago needs trash cans, a touch of creativity is required. That’s why Central Falls, R.I., is trying to use a method more commonly associated with Internet start-ups and low-budget movies: Crowdfunding.

In 2011, Central Falls became the only Rhode Island city to ever file for bankruptcy. And while the impoverished 1.2-square-mile city of about 20,000 residents never missed a bond payment, pensions were slashed, and the city budget became very tight. So tight, in fact, that the city couldn’t afford to buy trash cans for its public park.

“We have these plastic blue bins that we literally got for free from the state,” explained Stephen Larrick, the city’s director of planning and economic development. “They’re not mounted to the ground at all. So if they’re empty, they will just blow over. Or kids will push them over. And the trash gets everywhere.”

In addition to being unsightly, the spilled trash increases the city’s maintenance costs. And since the cans don’t provide a recycling option, Central Falls is also paying more than necessary to landfills, and missing out on a Rhode Island recycling-based rebate.

But due to the city’s precarious financial situation, simply buying trash cans proved a daunting task for Central Falls.

“The outlook is bleak to get additional things funded,” said Larrick (who is a college acquaintance of the author). “I don’t have a line item that would cover that.”

That point was emphasized by Len Morganis, the city’s administration and finance officer, who is responsible for ensuring that the city abides by its bankruptcy plan. “There’s very little discretionary spending,” Morganis said. “There is not a lot of room for, ‘Hey, this just came up, let’s put ten grand towards it.’ That doesn’t happen.”

And the city won’t turn to the bond market for additional funding anytime soon. The city hasn’t issued debt since the bankruptcy, and according to Morganis, “that’s a long way off. We haven’t even talked about it.”

After all, even though Moody’s recently upgraded the city’s credit rating from B1 to B2, Morganis said bond issuance “would still be too cost-prohibitive.”

So Larrick turned to crowdfunding, and specifically to a new company called Citizinvestor. Its concept is simple: Municipal employees post projects that they are trying to get funding for on to the site. Citizinvestor, which is a for-profit company, increases the total project costs by 8 percent—3 percent for transaction fees, and 5 percent for the company. Individuals then donate online, and their credit cards aren’t charged until the project is fully funded.

“We’re giving citizens an alternative way to fund projects,” explains Citizinvestor co-founder Jordan Raynor. “Government has never had enough resources to provide every good and service that citizens want. This was exacerbated by the recession, but it’s always been true.”

But while the need was simply for mounted trash cans with a recycling capability, Larrick wanted something more. He wanted the project to “reflect a sense of place or purpose.”

He also needed the somewhat-staid municipal project to stoke interest online. So he proposed artistic garbage bins constructed by The Steel Yard, a Providence, R.I.-based nonprofit industrial art firm.

All in all, the project, which would see five creative garbage units installed (each with a bin for trash and a bin for recycling) has a price tag of $9,300. With Citizvestor’s 8 percent added on, the city is trying to raise $10,044. The project quietly went live on Friday (“Clean up CF: New bins in Jenks Park”) and as of Wednesday evening, $246 has been raised from eight people.

When asked about the effort, the city’s bondholders were supportive.

“It’s interesting that they’re exploiting opportunities and being creative,” commented John Miller, co-head of global fixed income at Nuveen Asset Management, which holds some Central Falls debt in its $92 billion municipal bond portfolio. Miller praised Central Falls’ emergence from bankruptcy as “a success.”

The Central Falls garbage can project certainly presents a unique case. But in the future, could crowdfunding be an increasingly important part of the municipal funding picture?

“Right now we’re focused on these mini-projects, but as we build a community of citizen investors across the country, we expect to scale up to bigger projects,” Raynor said. He gives the example of the Luchtsingel pedestrian bridge in Rotterdam, the Netherlands, which was paid for with crowdfunding.

But to the Central Falls city planner, this project is about more than building something the city couldn’t fund by itself.

“Since the bankruptcy, things have kind of been cut down to the bare essentials, so projects that are about a sense of place or reflecting a sense of community pride go unfunded,” Larrick said. “And not only do we have a big problem with trash and litter, but we have a big need for public pride.”

Crowdfunding may not make municipal bonds obsolete anytime soon. But it certainly confers certain advantages.

When you issue bonds, “you have a lot of criteria built in there. But something like this gives the municipality much more freedom,” Morganis said, adding: “If you can get residents involved in turning things around, that’s a big thing.”

Source: —By CNBC’s Alex Rosenberg. Follow him on Twitter: @CNBCAlex.




This RSS feed URL is deprecated, please update. New URLs can be found in the footers at [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise ...NPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it woul [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

CoinDeskKickstarter ICO? Don't Count On It Says Crowdfunding Leader ...CoinDeskThe company most widely associated with crowdfunding, Brooklyn-based Kickstarter, has no plans to get into the initial coin offering (ICO) business. Coming in response to the news yesterday that compet [...]

CryptoCoinsNewsCrowdfunding Giant Indiegogo Looks to Make ICOs Mainstream ...CryptoCoinsNewsOne of the world's most popular crowdfunding platforms is getting in on the ICO game. Josiah Wilmoth on 14/12/2017. ------------------Advertisement------------------. Advertisement · Reddi [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

Crowdfunding via Customers: Is This The New Startup Capital?Customer ThinkWith more and more companies in a variety of sectors developing new crowdfunding campaigns, it makes sense to ask whether crowdfunding is likely to replace startup capital in the near future. Crowdfunding is qui [...]

VentureBeatAtaribox hits the pause button on its crowdfunding campaignVentureBeatAtari was supposed to start taking preorders along with launching its crowdfunding campaign on Indiegogo today for its new Ataribox console. However, it seems to have hit an unspecified snag and in an ema [...]

Coindesk (press release) (blog)Crowdfunding Giant Indiegogo Opens to ICOs - CoinDeskCoindesk (press release) (blog)The startup revealed today that, through an existing partnership with MicroVentures, it will begin offering services to projects seek to use the blockchain funding model. [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

CFB Finance


  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Follow Us!

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |