Firefighters are part of the backbone of our communities. They’re the ones running into a burning building when everyone else is running out, they’re first on the scene to provide medical care, and they’ll even help rescue your family cat from that sugar maple. Firefighters save lives, protect property and help educate the public about fire safety. Ensuring that they have the equipment they need to do their jobs is crucial.
But raising funds for fire equipment isn’t always easy. The traditional transacting costs associated with issuing bonds are high, so cities often bundle projects into larger bond issuances – the average bond issuance in the year to date was $35.7 million, according to the MSRB. This “bundling effect” can sometimes delay the acquisition of important equipment, such as the purchasing of fire trucks.
So what if a city fire department could borrow on an as needed basis – say, for instance, financing a single fire truck at the moment it’s required? At Neighborly we believe that’s the future of regenerative public finance and we’re working with public agencies across the country to put it into action.
Take the City of Lawrence, Kansas. The City wanted to fund a single fire truck for Lawrence-Douglas County Fire Medical Department at a cost $654,000. The City turned to Neighborly to help raise the funds through a public bond offering.
By using Neighborly’s technology platform, issuers can benefit from lower financing costs, making smaller issuance sizes more viable. Our technology delivers document standardization, prices bonds at market rates and markets the bonds to a wider group of investors than usually reached by the municipal market.
This starts with community members who are closest to the project being financed.
In the older model of large, bundled issuances, and without a technology platform that offers scalable community outreach, marketing to the residents who would benefit from a new fire truck might be considered expensive and hard to execute. As a result, local investors have struggled to invest in municipal bond projects – even if they might be some of the most enthusiastic supporters of them.
Brian Kidney, the Finance Director of Lawrence says he often gets asked by Lawrence residents how they can invest in their city. “They see us issuing literally millions of dollars each year in tax-exempt debt in bonds, and so I get that question a lot: ‘How can I also invest in these bonds?’”
Lawrence Fire Division Chief Justin Temple and Captain Pat Talkington get involved in promoting the bond sale.
Previously, the answer wasn’t too simple. “You just can’t call up a bank and say give me a $5,000 City of Lawrence bond,” Kidney said. “It’s not as easy to purchase as an individual retail investor; you just have to do some work to get there.”
So the City of Lawrence used the Neighborly investment platform to market the bond issuance and empower local residents to invest directly into their community.
Over 150 individuals signed up, expressing interest in being a part of this unique offer. Ultimately, forty-three orders were placed, with over 99% of the order amount being placed by residents with a Lawrence, Kansas ZIP code. Bonds were sold in $1,000 denominations, and 82% of investors were first-time bond buyers.
By democratizing access to the municipal bonds and engaging in multi-channel community marketing to market bonds directly to local residents, Neighborly increased access to capital for the City of Lawrence. And by disaggregating the bond issuance for a single fire truck, investors also knew exactly how their investment was being used to benefit the community.
The City of Lawrence will be a little bit safer when that new fire truck shows up at the fire station; and some of the city’s own residents can proudly say they are one of the reasons why.
If you're a community looking to use regenerative public finance, learn more here.
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.