Civic crowdfunding at #SXSWi 2013
This week I spoke on a panel at SXSW Interactive on civic crowdfunding, titled "Can crowdfunding save local government budgets (SXSW 2013)?" Here's a liveblog of the talk, by Helena Puig Larrauri and Leah Jones.
Panelists: Eric Engelman - advisor for Mayor of San Diego Story Bellows - co-director of Mayor’s office of new urban mechanics in Philadelphia Rodrigo Davies - researcher at MIT and advisor for Spacehive Jordan Raynor - Co-founder of @citizinvestor
Jordan Raynor Raynor introduces the panel and opens by saying he intentionally made the title over-dramatic. Won’t be taking questions via twitter during the panel, will answer questions after. Each presenter will be talking for about 10 mins. Local government budgets might not need to be saved but they do need to be helped. Pawnee Indiana, most cash strapped local government! Video from Citizinvestor using Parks & Recreation’s Pawnee Indiana. Launched in Sept 2012 with City of Philadelphia, then Austin now in more than 40 cities.
Not the typical crowdfunding platform, a few differences:
No rewards, you don’t get anything for investing in these projects (unlike Kickstarters).
Focused on building a community of micro-philanthropists, to build together something large and tangible.
Every donation is tax-deductible because all projects are either Government or institutions linked to Government.
Here is how Citizenvestor projects are identified. First identify local government projects by approaching municipalities. Then citizens can donate, and projects only go ahed if the projects are fully funded. THis is great for local government since they don’t have to commit unless they get all the money.
Only municipalities and official partners can post projects, but any citizen can post a petition to the platform. Before posting, citizens have to think through what the idea is and provide some details. Once they get enough signatures, Citizenvestor will do their best to introduce them to municipality and if the Government approves the project, then they can be posted for funding.
Municipalities don’t pay to use the service and Citizinvestor don’t hold the money, but Citizenvestor keeps 5% of all funded projects. Links
Rodrigo Davies There are a number of different models and none of them are perfect. I want to address four points:
Spacehive's model and how it differs
Two case studies
Towards a partnership model
But first - crowdfunding is not a new thing. There is a rich history of communities raising money to improve their communities. One very notable example is the Statue of Liberty: built and funded in France, but the platform it stands on was crowdfunded. Pulitzer was outraged that government had vetoed spending on the platform, so he launched a campaign on the New York Post in March 1885 saying that the rich people were not interested in funding. Over 6 months they got 160,000 donations to raise 100,000 USD
Civic crowdfunding can put communities into the centre of the planning process. The expertise and the resource is already available in the community already, this process allows it to come out more easily. Spacehive is basically a project management site that allows you to upload a project, and then pledge funding on the project. The platform also allows people to volunteer to make the project happen or to later maintain it. The site has secured partnerships in the past 2 years with JustGiving and with MumsNet. (MumsNet is a very influential parents network in the UK).
Example: Glyncoch Community Centre. The community centre that was there looked a bit like a shed. However the community was very vibrant with lots of activities going on. Nobody cared enough (3000 person town) to raise enough money to complete the community centre. Spacehive ran a campaign to raise awareness of this project. In a period of 2 months raised 40,000 GBP thanks to support from Welsh Rugby team and others. Majority of remaining funds for the centre came from Tesco and other large companies.
Example: Wifi for Mansfield. The district already had attention from the government, but raising the money for wifi was proving difficult. Was also a succesful fundraising campaign.
Kickstarter is one large platform with lots of individual small projects. Public projects are slightly different, so Spacehive uses a partnership model. First partnership with ATCM to give weight to projects, but still allow individual citizens to propose them. Helps achieve scale whilst still retaining the individual contributions.
Story Bellows Bellows works at the Philadelphia new urban mechanics centre: a safe space to take risk in a number of areas, including crowdfunding.
Want money to try new things, so thought crowdfunding was a good to get this. This falls within general interest to explore new funding models to work with local investors and businesses. Mayor of Philadelphia has a special interest in crowdfunding and wanted Philadelphia to test this out as a model for other cities.
Started talking to Mayor’s office people in law, finance, procurement, risk management. Example of the types of questions that were coming up: what if citizenvestor stole the idea of crowdfunding from Kickstarter? Solution was to hack the system by going to The Fund of Philadelphia (their 501(c)3) because their procurement and risk offices said they could not sign off on using crowdfunding. This shows that we need a standard operating procedure for crowdfunding to be used by city governments.
Once they worked out the hack, they had to think about what projects should be selected to be considered for crowdfunding. Ethan Zuckerman’s ideas on this helped them, three criteria: 1. Equity and fairness; 2. Not just because they are broke
One project: Philadelphia Fall Tree Planting. This was not the best project to put on crowdfunding platform. They didn’t get all funds, but did learn a lot. Some lessons: need to give people a compelling reason to give; collateral is crucial; one failed project doesn’t constitute the type of failure they’re looking for.
What’s next: Still considering what it means to support projects on crowdfunding platforms. This morning they launched a new project that they think is the right kind of project: Rivera Rec Center Community Garden (via Citizenvestor).
Eric Engelman What does crowdfunding look like in the future - for government and citizens? What does a mature crowdfunding world look like? It’s about tapping the generosity of citizens. It’s about empowering citizens to prioritize improvements and take action on a new idea by getting feedback and use a transparent process to make that idea a reality and get it funded.
Traditional model of government: taxation and voting for representation. With crowdfunding, citizens can share their project ideas on a more regular basis (not just voting) and provide funds on a regular / targeted basis (not just via taxation).
If we can get to this model, it will mean a big change for government. Civic crowdfunding short-circuits the debate between big government + big taxes v. small government + few taxes. However, government will continue to retain its core function of arbitrating and providing public services.
What does successful civic crowdfunding mean for government? Is it an argument for lower taxes since people can decide and fund target projects? Will government re-allocate tax dollars to projects that could be crowdfunded? Will it become harder for government to fund projects that can’t be crowdfunded? What will be the effects on equality?
Government should be doing three types of projects. First, the low hanging fruit that Ctizenvestor works on: projects already in the pipeline with a funding gap. Second, projects suggested by citizens and this is really when crowdfunding reaches its full potential. Third, extending existing services via crowdfunding (e.g. keep libraries open for longer). Diving deeper into this second one: governments will need to find ways to validate the project design and coting structure, as well as help navigate the approvals hurdles and invest in design where necessary. In order for this to happen, city processes need to change, and there has to be a way to decide which citizen proposed projects should be supported through these processes.
Audience Q&A What happens when a crowd-funded project goes over budget or over deadline? “It’s pretty clear from Spacehive and Citizenvestor that funded projects are owned by Government. Governments are notorious for bad budgeting, so what happens when project is funded but then goes over budget during implementation.”
Remains to be seen what will happen, hasn’t happened yet. When Government projects go over-budget it’s not possible for citizens to see how much of their money was over-budgeted. In a way, crowdfunding allows more accountability because citizens know how much it’s gone over-budget. One solution is to go out to vendors and tell them this project was crowdfunded, so you have to stay on budget because we’re not going back to citizens. Spacehive model this is in the contractual model: there is a project delivery manager that is responsible and they have a contractual relationship with vendor to deliver project on time and to budget. On a normal government project, there is not that type of contractual accountability.
Does crowdfunding model for public projects change “government as vending machine” model of public funding? “Vending machine style of funding (circa Tim OReilly). Do you think that the way you are doing crowdfunding in partnership with government changes this?”
Raynor: It’s not such a bad thing for Government to work a bit more like a vending machine. At the moment government bureacrats chose what projects get funded isn’t exactly democratic. As crowdfunding matures priorities will be more determined by citizens. Davies: Not entirely comfortable with this model of government as vending machine. The Spacehive model is more around disruption of the planning process, putting communities at the centre and give them a voice, not about individuals funding projects but about individuals having a voice.
(i) Every kindergarten and elementary school in US raises money from parents via bake sales and events - can crowdfunding adopt or work with that model? (ii) Have groups looked at plaques or other acknowledgement for donations?
Davies: Great idea to work with existing fundraising infrastructure. Spacehive works with the Big Lunch - community lunch on the street - during UK jubilee, had millions of people doing this. Example of working with the existing relationship. Acknowledgement / rewards key part of existing philanthropic and commercial relationships - spacehive doesn’t do this, sees rewards stemming from individuals enjoying community benefit.
Raynor: Working with one of the largest public school groups in the US to post projects on Citizenvestor, and have seen lots of legal hurdles to offering rewards. Potentially illegal to give rewards for donations that are 100% tax deductible.
Donations 100% tax deductible, but across the country there are different tax structures. Have crowdfunders considered working with local governments to alter tax codes to be crowdfunding friendly?
Raynor + Davies: Not really doing this now, but interesting point.
(i) Any examples of crowdfunding / participation model that was contingent on external factors - ballot / proposition passing, company involvement? (ii) How does in house R&D around goverment crowdfunding work - city of Austin is preparing to launch an innovation office.
Bellows: Lots of different models. In Europe have outsourced it to institutions linked to Government. In Philadelphia they are in the Mayor’s office, and this works well. They are not trying to own innovation but rather to support and nurture innovation by working with others and e.g. being ok with failure.
Engelman: To get to citizen-suggested crowdfunding, then need to make sure that donations are also contingent on approvals being granted (which speaks to the importance of partnerships).
Can mature crowdfunding market potentially change government spending decisions and priorities?
Engelman: someone in crowdfunding industry needs to step up and write a set of principles re. how government works with crowdfunding, e.g. only projects that are highly unlikely to be funded by other means.
Davies: very important question, at this stage we’re still building literacy and proving the model. That makes it hard to create recommendations or a master plan. Not likely to see mass disruption of existing government projects and priorities. Really about community empowerment - communities have great ideas about how to improve their own environments.
Bellows: Exploring what participatory budgeting means. Can have that discussion as part of proving the crowdfunding model.
(i) Once a project’s funded, how is it maintained, e.g. who keeps a new park looking good? (ii) How does crowdfunding work outside big cities, in smaller towns of 1 or 2 thousand?
Raynor: First, more interested in one-off cost projects that don’t have big maintenance costs. Second, we’ve had lots of rural towns and counties approach us, but not so much the very small towns.
Davies: One of the projects described was at a 3000 person town. Worked to a certain extent because crowdfunding was new but also because it put the town on the map by using Welsh celebrities.