Municipals: ripe for disruption?

Helen Avery
Published on:

Want to see improvements to your town or city? Don’t just rely on municipal budgets. New crowdfunding sources are springing up. The disruptors even have municipal bond markets in their sights.

The City of Central Falls, Rhode Island, filed for bankruptcy in 2011. With budgets fully allocated until 2017 under the terms of its debt adjustment plan, the city has no room for manoeuvre when it comes to making improvements within the community.

"We have limited resources and a limited set of financial parameters, but we still have needs in the city," says Stephen Larrick, director of the Office of Planning and Economic Development.

Andrew Teacher-large
 There was money floating around before the financial crisis in local communities, but there’s never been this kind of mechanism to access ideas

James Stewart

One such need was to replace the refuse bins in the city’s Jenks Park that were regularly being knocked or blown over, resulting in strewn litter. Bins were already emptied less frequently due to cutbacks and the amount of rubbish was becoming a problem that the community was finding increasingly frustrating. It would cost $10,044 to replace the bins, but even that small amount was not going to be possible within the budget.

So Larrick decided instead to turn to crowdfunding using civic funding platform Citizinvestor. Within 73 days the full $10,044 had been raised. The majority of the donors were from Rhode Island. "The effect was that citizens felt empowered. We promoted the campaign as a way of saying: 'Things can still happen, even if the budget isn’t there from us’," says Larrick.

Citizinvestor is one of several civic crowdfunding platforms that are springing up around the world, enabling residents to donate and invest in their local communities. CEO Tony de Sisto set up the platform after experiencing first hand how inefficient it was to get small projects funded by donations done in local government. It has funded over 50 projects such as bike racks in Oregon, an animal care centre in Texas and sculptures in Illinois.

A quick assertion would be that as municipals find themselves cash-strapped from the economic downturn, citizens are taking it upon themselves to fund the difference. But this isn’t the only reason, says Andrew Teacher, director of policy for Spacehive, another civic crowdfunding website. It was set up in the UK by Chris Gourlay, a former Sunday Times architecture correspondent.

Unlike Citizinvestor, Spacehive allows anyone – from individuals, businesses or government bodies – to post a project idea that it then verifies as viable.

Projects are similar to that of Citizinvestor and range in cost from several hundred pounds for local Christmas lights or murals to £140,000 projects to create a sculpture walk along the River Thames or turn a flyover in Liverpool into an urban park.

Teacher says that a lack of public money isn’t the only reason people are taking part in civic crowdfunding. "There was money floating around before the financial crisis in local communities, but there’s simply never been this kind of mechanism to access ideas."

It makes no sense that trader fees in the muni market
are twice the fees of the corporate market

Jase Wilson

He says there has been a shift in mindset over civic funding that has coincided with the popularity of crowdfunding platforms like Kickstarter. For one, he says, people are becoming more interested in their local communities.

"Technology has resulted in a greater focus on the individual and on convenience. Many more people work from home and have a greater awareness of their local community. They’re more aware of what could be improved and they have ideas they want to share because technology enables them to. Tech has transformed the way we connect with everyone, and this is a manifestation of that," says Teacher.

Civic funding platforms allow for those ideas to be voiced, and that’s positive for both civic funding and urban planning. Teacher says that urban planning has been a barrier more than an enabler in many aspects of development, and while successive governments have promoted a localist approach, the reality is that this results in "getting people to come to a boring local meeting when they want to stop something being built."

Platforms like Spacehive are opening up urban planning to local residents in an empowering way. "There is a mindset slowly shifting from: 'I pay my taxes so that local governments will do their work for me’," says Teacher, "to the mindset of: 'Where can I fit in with regards to shaping and improving the place where I live?’ – be that through ideas, supporting ideas, or donating money. It’s a more rational way of looking at society."

Support system

If Teacher's comments are correct – that people are becoming more interested and inspired to help their local communities invest – then the current wave of technology disruption within finance could provide the perfect support system to lift that sentiment to the next level – municipal funding.

In August the City of Denver launched $12 million of mini bonds. The mini bonds were offered only to Colorado residents, are tax-free and available in $500 increments that pay back $750 in nine years or $1,000 in 14 years. Proceeds would finance the final part of the $550 million Better Denver Bond Program to improve roads and civic buildings.