Perhaps now more than ever, folks across the country are looking for ways to invest in their communities and collaborate to build a better future. Cambridge, Massachusetts is blazing a trail in that direction by using a new way to fund critical local projects like parks, streets and municipal facilities.
In February 2017, the City pioneered the beginning of something truly revolutionary – offering online tradable bonds directly to its constituents.
Bonds have been publicly available for folks to invest in for 200 years, but over the past few decades the number of households directly investing in municipal bonds has declined due to minimum investment requirements that make them less financially accessible and a lack of awareness of municipal bonds.
Cambridge decided to take a fresh approach by opening up access and using a new platform to engage local residents.
Cambridge used Neighborly’s technology platform to sell bonds exclusively to Cambridge residents in denominations of $1,000, a fraction of the usual $5,000 denomination. Neighborly’s platform made this innovative issuance possible by giving the city direct access to the investing power of its constituents.
Cambridge is using the $2 million as part of their larger capital plan to renovate school buildings, upgrade the energy efficiency of municipal facilities, update city parks and implement the City’s Complete Streets plan, which will reduce congestion, improve public health and build paths toward more inclusive and vibrant communities.
Neighborly’s mission is to democratize access to the 200 year-old municipal bond market by utilizing modern technology to better connect municipal bond issuers to investors. And residents of Cambridge were the first ones to prove the possible. By lowering the minimum investment amount required and building a platform that provides a frictionless investment process, Cambridge, working with with Neighborly, unlocked access to a broad range of potential investors.
In the first two weeks of the account opening process, more than 500 Cambridge residents applied for Neighborly brokerage accounts and over 80 Cambridge residents attended town halls hosted by Neighborly and the Mayor’s office to learn more about the process. The issuance sold out in less than three business days to more than 230 Cambridge residents. Over a third of these individuals were investing in municipal bonds for the first time.
More than half of the bond orders were less than $5,000 each. In the traditional bond market, these investors would have been locked out, unable to meet the minimum denomination threshold.
Finance and civic engagement should go hand-in-hand…so this really gives us an opportunity to allow the residents of this city to participate in the way Cambridge invests its money and to be a small part of it.*
– Louis A. DePasquale, City Manager for Cambridge
From East Cambridge to Porter Square, Neighbors invested their money back into their community. Citizen engagement spanned generations, from graduate students to retirees.
Take one citizen investor, who is a long-time resident of Cambridge. On a chilly Tuesday evening in late February, this man walked an hour and half to City Hall to sign up for an account with Neighborly representatives. He placed two bond orders, one for himself and another for his wife. When prompted to list his reason for investing, visibly upset, he proclaimed,“It’s ‘other!’” Pitichoke Chulapamornsri, a Neighborly representative, who was helping with the sign-up process, looked a bit perplexed. Pitichoke asked, “Okay, sure, why are you investing?” The Cambridge resident quickly shot back, “Because I’m an owner of this city!”
The man walked away from City Hall that night immensely grateful to everyone for making this possible.
We believe that there are citizen investors in every corner of this country, waiting for the opportunity to support projects happening in their city. The five winners of the Neighborly Bonds Challenge are helping to prove that – beginning with Burlington, Vermont and Lawrence, Kansas. Neighborly is ready to work with all cities and communities that want to help their constituents engage civically and financially in building a better future.
Cambridge showed the world how to put the public back into public finance. We’re proud to work alongside the dedicated citizens and civic leaders of Cambridge, and look forward to bringing the platform to your community in the near future.
If you’re an issuer interested in helping your citizens become more invested in their own communities, consider issuing with Neighborly.
This testimonial is no guarantee of future performance or success and may not be representative of the experience of other customers. This is not a paid testimonial.
This material is provided solely as a matter of possible interest. The information provided is not intended to be and should not be construed as “advice” under Section 15B of the Securities Exchange Act of 1934 or the municipal advisory rules of the SEC and MSRB. Neighborly Corporation, a Delaware corporation and its wholly owned broker-dealer Neighborly Securities(“Neighborly”), is acting for its own account. Neighborly is not a municipal advisor, financial advisor or agent and has no advisory, agency or fiduciary duty to any person pursuant to Section 15B of the Securities Exchange Act of 1934 or Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Securities are offered through Neighborly Securities, member FINRA, SIPC and registered with the MSRB. Learn more at https://neighborly.com/learn/terms.
This article was updated on 10/10/17.