Posted on 09/30/2013 7:49:37 AM PDT by whitedog57
Crowdfunding has worked for films, political candidates, disaster relief and now real estate. Crowdfunding, the act of soliciting funds from the public, most recently on the Internet, is already a powerful tool. Now it is being used by cities to raise funds bypassing the traditional muni bond market.
Central Falls, the Rhode Island city that filed for bankruptcy two years ago, is seeking to finance a park project through a crowdfunding website rather than the municipal-bond market.
The city of about 19,000 wants $10,044 to put five trash cans in Jenks Park, which is currently “\”littered with garbage and debris,” according to the campaign on the website Citizinvestor, a site where residents can fund municipal projects. The initiative so far has $295 through 11 donations.
The decision to circumvent capital markets may foreshadow similar steps by other cities when they exit court protection, such as San Bernardino and Stockton in California and Detroit, which filed a record municipal bankruptcy in July.
“Even with attractive yields, there aren’t a lot of people lining up to get involved with places that have gone through bankruptcy,” said Gene Gard, who helps oversee $1.3 billion of munis at Dupree & Co. in Lexington, Kentucky. “The people there are probably doing the right thing — they’re not trying to take more aggressive or higher-yielding financing.”
During its 13 months under court protection, Central Falls moved from “pain to a sincere hope,” U.S. Bankruptcy Judge Frank Bailey said at a September 2012 court hearing in Providence, the state capital. The Chapter 9 case was the quickest municipal-debt adjustment for a city in U.S. history, he said.
Central Falls maintained debt-service payments even as it became the first city in Rhode Island history to enter bankruptcy in 2011. The court-approved exit plan called for full repayment to bondholders while employee pensions are cut.
Moody’s rates Central Falls B1, four steps below investment grade. The city has about $12.4 million of bonds outstanding. Central Falls’ proposal would finance “high quality steel bins” that wouldn’t spill trash in the park.
The Citizinvestor campaign site said the city would work with the Steel Yard, a local nonprofit that makes functional public sculptures.
Crowdfunding websites have been used to raise pools of cash for startups and small businesses. They include Kickstarter, which in 2011 successfully funded a project that would build in Detroit a life-size monument of RoboCop, a fictional cyborg from the 1987 film with the same name.
With the fiscal problems facing Detroit, I would think that a statue of Robocop would be near the bottom.
RoboCopDetroitStatueprotobig-01
Cities face growing funding pressures given staggering pension obligations and runaway costs. So crowdfunding will likely grow for smaller projects. And slow employment recovery isn’t helping.
The Chicago PMI employment sub index fell for the 3rd month in a row to 5 month lows.
chiplmiemp
With declining labor force participation, real median household income and slow employment recovery,
uslfp
this may devolve into “mobfunding.”
pitchforks torches mob
What a joke.
bump
The mountain of govt debt continues to grow.
But it’s obvious some of the lower rated underpinnings (some cities and states) are starting to crumble.
It won’t be a pretty thing when the avalanche hits.
$2,000 PER TRASH CAN! What are they made of gold.
This is why Government should be involved in almost no aspect of life. What they do is done poorly and at an incredibly high fee.
$10,000 for five trash cans???
No wonder cities are going bankrupt.
Wonder what city counsel member owns that trash can company.
With the fiscal problems facing Detroit, I would think that a statue of Robocop would be near the bottom.
The OLD Robobcop or the new Politically Correct Robocop from the sucky new movie....
Because a statue of the old robocop would be awesome!
But $10,044 for five trash cans? I can do it for half that.
I think we should allow volunteers to pay for almost everything government does now. And no other funding source.
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