Cambridge offers sale of municipal minibonds to residents

Mass Innovations, From The Beacon, March 2017

Cambridge is expanding its efforts to get residents more engaged on finance and budget issues by selling “minibonds” for the first time to finance several forthcoming capital projects.

The city has partnered with website Neighborly Securities to sell five-year bonds starting at $1,000, with residents able to purchase up to 20 bonds for a total investment of $20,000. Bonds were available for sale from Feb. 17 through Feb. 23.

The bond yield rate set on Feb. 17 was 1.6 percent, so buyers will receive a semiannual interest return based on that rate, according to Cambridge Budget Director Jeana Franconi, with the full value of the bond paid back in 2022.

Previously, the city only sold municipal bonds in denominations of $5,000 or more, with a commercial sale every year that required residents to go through their own brokers to purchase municipal bonds.

The city’s partnership with Neighborly Securities negates the need for an outside broker. Neighborly representatives held two drop-in sessions at Cambridge City Hall to provide assistance and discuss the process with interested residents.

City Manager Louis DePasquale said the idea to sell minibonds to residents came up about 12 years ago, when he was the assistant city manager for fiscal affairs and Brian Murphy, then a councillor and Finance Committee chair, raised the idea.

A couple of years ago, DePasquale said, Cambridge officials met with Neighborly Securities about the idea, before undertaking their due diligence before launching the program.

“We’ve always said that when people think of finance and budgets, they don’t think of civic engagement,” DePasquale said. “I’ve always felt it is important to have civic engagement. The budget office did a phenomenal job getting residents excited about the budget process.

“This is the next step,” he continued, “getting people aware of how residents can invest in a AAA-rated city …  and also have a pretty good investment. This is a win-win for everybody.”

Capital projects included in this bond sale are the construction of the King Open and Cambridge Street Upper School and Community Complex, work toward the city’s “complete streets” plan, and other municipal and school  building renovations, according to Franconi.

While noting that she is not a financial broker and thus cannot give investment advice, Franconi said that a rate of 1.6 percent is a better return than what some people can earn through checking accounts, money markets or certificates of deposit.

“It’s been a long time since a Massachusetts community has done this,” she said. “The state used to do it as well, so it’s not new, but we haven’t seen this in quite some time.”

For more information, contact Cambridge Budget Director Jeana Franconi at (617) 349-4270 or jfranconi@cambridgema.gov.