Crowdfunding for municipal projects

Motivation:

In Germany, investment expenditures at the municipal level have not matched rising investment needs for years. Figures from the Kreditanstalt für Wiederaufbau (“Credit Institute for Reconstruction,” or KfW) show a significant investment backlog. Although extensive funds for investment support are available at the federal level, they are rarely requested for a number of reasons. In addition to structural obstacles in applying for subsidies, construction service providers' capacity limits and municipal budgetary requirements also play a role. Furthermore, municipalities often lack sufficient funding for the contribution required in applying for subsidies.

Meanwhile, crowdfunding has evolved from a funding option for creative entrepreneurs to an established financing and communication instrument for a wide variety of projects. This instrument is becoming increasingly important in the public perception. In addition to financing smaller municipal projects (e.g. events, green spaces, maintenance of popular leisure facilities), the funds from a successful crowdfunding campaign can also serve as an option to cover municipal subsidy contributions.

In a time of increasing disenchantment with politics, municipal crowdfunding also creates incentives for citizens to deal with the challenges of their municipality and to become actively involved in their region. In turn, municipalities can use crowdfunding to prioritize certain projects and transparently communicate their use of funds.

Project:

In view of the situation described above, the aim of this project is to evaluate the feasibility and framework conditions for the use of crowdfunding at the municipal level in the Free State of Saxony. At the same time, this project identifies municipal needs and examines to what extent the frequently required communal contribution can be covered by funds from a successful crowdfunding campaign. Overall, the project contributes to raising awareness on alternative financing instruments and formulates new ideas for strengthening civic commitment and the active participation of local stakeholders.

Our services:

This project is divided into three phases. During the first project phase, a comprehensive needs analysis was carried out to evaluate the feasibility of municipal crowdfunding campaigns. The results were summarized in a short study and discussed together with the client, the Development Bank of Saxony (SAB), along with interested municipalities at the Saxon Expert Forum in January 2019.

During the second project phase, two concrete application cases will be piloted at the municipal level via a crowdfunding campaign. With the help of several workshops, the Innovation Financing Unit will enable the respective campaign teams to carry out successful municipal crowdfunding. Moreover, the usage behavior of the municipal "crowd" will be surveyed and evaluated via online and offline surveys throughout the campaign. Finally, recommendations for the positioning of the client within the crowdfunding ecosystem will be developed.

The scientific monitoring of this application case will be carried out with the help of the model process developed in the first project phase, which will be further developed on the basis of practical experience and scientific findings.

In the third phase of the project, suitable combinations of crowdfunding with existing subsidies in the client's assisted area will be analyzed for their feasibility. Furthermore, possible cooperation agreements between respective implementation partners will be evaluated with a view to consolidate crowdfunding services. Finally, the project will examine how future municipal crowdfunding marketing campaigns can be designed by the client and consistently communicated to the outside world.

Client:

Sächsische Aufbaubank - Development Bank - SAB

Project duration:

Project Phase I: 1.11.2018 - 31.1.2019; Project Phase II: 1.8.2019 - 30.11.2020; Project Phase III: probably beginning in 2021.