What Happened?
Traverse City, Michigan, is placing development strategies on a crowd sourcing website to generate funding from interested investors looking to support new construction. Alternative funding solutions will help the local government sustain necessary development projects despite the persistent financial struggles lingering from the economic downturn.
The Goal
The crowdsourcing tactic helps developers get projects off the ground even when banks fail to offer full funding. The process of acquiring a property and having new development plans approved is riddled with extra costs and fees that will not all be covered even when bank loans are obtained. Funding gaps can be quickly filled to ensure projects are not stalled and communities can continue to recover economically.
In addition, crowdsourcing websites empower the individual to participate in development investments that are usually funded by banks, large organizations or grants. The money required for any community, residential, industrial or commercial building to be constructed is significant. Regular citizens typically have little to no impact on these developments. With crowdsourcing, however, individuals can have a say in how community land is used and share ideas with the government or developers.
Michigan, after experiencing several financial setbacks, has passed legislation to optimize crowdsourcing tools. The law allows Michigan companies raise money from as many individual investors as possible to keep the projects rolling to help rebuild struggling communities.
Cities of all sizes could benefit from crowdsourcing tools, especially if the community is interested in making drastic changes to the makeup and use of land. Many municipalities are interested in increasing the efficiency of buildings and streets, looking to optimize green space and enable more vehicle-free mobility. Creating a channel of communication between the decision makers and residents impacted by the construction ensures goals are aligned and ideas are nurtured.
Break Down The Perks
According to crowdsourcing site Fundrise, many development projects are stalled or abandoned after outdated regulations or unnecessary fees create too many roadblocks to completion. For example, securities regulations make it difficult for wealthy individuals from investing in real estate projects, while the construction processes include several layers of middlemen that increase fees. Crowdsourcing empowers citizens with the ability to choose what developments they wish to support and be informed of the progress from start to finish.
Rhode Island Taps the Crowd
CNBC reported crowdsourcing was recently leveraged in Central Falls, Rhode Island, to help the city pay for new trash cans. Central Falls was the first city in Rhode Island to file for bankruptcy, leaving the local government unable to pay for trash cans in public parks. While it may seem like a minor expense, spilled trash increases maintenance costs for the city and is counterproductive to the Central Falls rebirth.
Rather than seek out more funding from the bond market, Central Falls decided to avoid more debt and tap into pockets of individual residents. Central Falls recently had its credit rating improved from B1 to B2, and would prefer to stay on track for a full recovery. Allowing many small contributors to pool their funds and support the project will keep the city’s financials on track.
Power in Numbers
Gov1 has kept an eye on smart growth strategies and has noted a rise in crowdfunding efforts to sustain local projects.