Bankrupt Cities Seek Crowdfunding For Garbage
Want to fund your "grilled cheesus" project? Need money to continue your "edible cup" business? Kickstarter is the platform of choice. But now, with the muni bond market suffering from outflows in retail funds and bankruptcies mounting across the nation, cities are increasingly turning to 'crowd-funding'. As Bloomberg reports, Central Falls (which filed for bankruptcy 2 years ago) is using Citizinvestor to seek $10,044 in funds for 5 new trash cans. "Even with attractive yields, there aren't a lot of people lining up to get involved with places that have gone through bankruptcy," as the initiative has raised $295 so far...
Via Bloomberg Brief,
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.
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