The City of Cambridge, Massachusetts was this week honored with a 2017 Deal of the Year Award by The Bond Buyer for doing something truly revolutionary – offering tradable bonds directly to its residents.
The bonds were sold directly to residents using the Neighborly platform and funded city-wide capital projects including school building renovations, municipal facility upgrades, and implementation of Cambridge’s “Complete Streets” plan. Demand for the bonds was so strong that the City is planning another offering in 2018.
“I am absolutely thrilled to receive national recognition for the City and our staff members who worked so hard to get this program established, ” said City Manager Louis DePasquale. “For many years, the City of Cambridge received calls from City residents asking how they could buy the City’s Bonds. Our Minibonds are a great way to provide Cambridge residents a way to invest directly in City projects that will benefit our entire community.”
The City was recognized in Bond Buyer’s non-traditional financing category for the General Obligation Series 2017 A Minibonds that were issued in February 2017, at a ceremony in New York. The offering was considered non-traditional as the bonds were made directly accessible to residents at $1,000 denominations, and because it succeeded in significantly widening participation in the market while delivering competitive interest rates for the City.
Over 230 individuals residing in the five zip codes that encompass the City of Cambridge purchased a cumulative total of $2 million bonds. More than 30% of investors were younger than 40 years old and 37% were first time bond buyers. The order period ran over five days, including a weekend, and the interest rates the City achieved were equal to the prevailing AAA-rated benchmark bond rates at the time.
Below is a summary of investor participation.
“We believe that buying municipal bonds should be as easy as buying a plane ticket. Simple, clear instructions and complete price transparency,” said Pitichoke Chulapamornsri, Director of Business Development who led the Cambridge deal. “Technology makes this possible, and reducing the denomination from $5,000 to $1,000 means a wider range of investors can participate.”
The offering also demonstrated that individuals are motivated to invest in their communities, suggesting that there is significant untapped demand for municipal bonds. 90% of investors responding to a survey said their primary motivation for investing was to support their community.
Cambridge and its residents are not alone. Neighborly has worked with Burlington, Vermont, Lawrence, Kansas to issued small denominations bonds in 2017. In addition, Neighborly worked with issuers across sectors in California, Oregon, Maryland, Massachusetts, New York, and Pennsylvania.
Neighborly’s mission is to help issuers to finance projects more efficiently and reduce borrowing costs by unlocking demand from investors who have traditionally lacked access to the market, from individuals to mission-driven professional investors.