Should Governments Use Crowdfunding?
City officials in Bloomfield, New Mexico, loved their Ten Commandments monument.
They loved it so much, in fact, that they ran up a hefty legal bill in three separate court proceedings over six years trying to convince judges that its existence on city property was not a violation of federal laws requiring separation of church and state. In the end, after the U.S. Supreme Court failed to take the case last year and ordered that the structure be removed from city property, all the city had to show for its efforts was a $700,000 legal bill that they were hard-pressed to pay.
Contemplating the strain their failed legal venture was inflicting on the city budget after paying one-third of the amount, the city council recently identified a possible solution: A crowdfunding campaign. On Aug. 13, the city launched a GoFundMe fundraiser, asking private citizens to chip in to cover the legal bill.
Cities Turn to Crowdfunding
As most people know, crowdfunding means funding a venture by raising small amounts of money from many individuals. Perhaps the most well-known crowdfunding operator is Kickstarter, which has focused its efforts over the last 10 years on financing creative projects by various types of artists.
The notion that a government entity would turn to crowdfunding, however, is something that has been gaining traction – and is perhaps a bit more controversial than raising money for starving artists.
In recent years, local governments and public offices have begun turning to crowdfunding to finance projects and needs.
One of the biggest and most well-known was its use in Louisiana in 2015 by the Orleans Public Defenders office, which faced a nearly $1 million budget shortfall. Aided by a boost from comedian and TV host John Oliver, the campaign raised nearly $100,000, helping the office to avoid furloughs.
In 2017, Texas state representative Eddie Rodriguez launched a GoFundMe campaign, Travis County #Stronger Together, to help County Sheriff Sally Rodriguez in her effort to cover a funding gap after Gov. Greg Abbot cancelled $1.5 million in criminal justice grants due to Hernandez’ refusal to cooperate with federal immigration investigators.
Small-Scale Ventures Are Typical
More commonly, however, local governments use crowdfunding to pay for smaller projects. The city of Fort Lauderdale, for instance, agreed to an $80,000 crowdfunding venture by 51 people for development of an upscale dog park. Tiny Central Falls, Rhode Island, raised money for park trash bins via crowdfunding. City of St. Louis treasurer Tishaura Jones launched a successful crowdfunding campaign to remove a Confederate statue from a city park.
Some cities, meanwhile, have taken a bigger step by establishing crowdfunding as an ongoing money-raising tool for multiple purposes. The City of Las Vegas, for instance, last year created the Mayor’s Fund for Las Vegas LIFE to provide a vehicle for “corporate and philanthropic partners to support innovative initiatives that improve the quality of life for all Las Vegas residents.”
Crowdfunding and the Border Wall
But should a city rely on crowdfunding to cover a budget shortfall, like Bloomfield is trying to do? Or rely on it to provide services normally funded by taxes?
Public-sector crowdfunding is apparently gaining support. But it’s also drawing some critical reaction. Amanda Mull, a writer for The Atlantic, pointed to President Trump’s failure to secure funding for a U.S.-Mexico border wall (despite Republican control of both the executive and legislative branches) as an example: Supporters of the wall are circumventing congressional gridlock and turning to crowdfunding ventures to build the wall.
The GoFundMe campaign of the biggest of them, We Build the Wall, has raised more than $25 million of its $1 billion goal. It’s unlikely that crowdfunding can provide anything close to the billions (estimates have ranged from $8 billion to $70 billion) that would needed to build the wall, but Mull says it’s the principal of the thing: The ability for advocates to turn to nongovernment funding alternatives like GoFundMe “gives them potential access to a privilege previously accessible only to the very wealthy: treating large-scale government projects that will affect millions of people like personal hobbies.”
Then again, crowdfunding also provides a means to fight back against “the very wealthy.” A GoFundMe campaign called Ladders to Get Over Trump’s Wall, launched last December, has raised $162,000 of its $1 million goal.
Meanwhile, the City of Bloomfield has a long way to go in covering its remaining $467,000 legal tab. The city’s three-week-old GoFundMe page reports that the total donations to date are $1,675.
Related Resources
- What Is Municipal Law? (FindLaw’s Learn About the Law)
- Fun with Crowdfunding, Legally Speaking (FindLaw’s Free Enterprise)
- Is Crowdfunding Legal? (FindLaw’s Free Enterprise)
- What Is Equity Crowdfunding? (FindLaw’s Learn About the Law)