Basically, this error indicates that your user instance do not have permissions to alter/create database in SQL. You can find more information in this forum thread:
If the problem still persist would it be possible for you to:
1. Verify that the Application Pool Identity is NetworkService.
2. Check the Authentication section of your website in IIS. Verify that only Anonymous authentication is enabled and the anonymous user identity is the application pool identity.
3. Assign proper permissions over the App_Data folder for the NetworkService account
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