27 New Year Resolutions for Community Renewal
Updated: Jun 15, 2021
If you are unsure how to fix your community after a year of COVID shutdowns, bankruptcies, deaths, and despair, I’d like to offer 27 resolutions. The focus of all 27 is how to jump-start your economy by mobilizing local capital for local businesses, projects, and people, in relatively easy and inexpensive ways.
Let’s begin by considering the opportunity: American households have $56 trillion invested in stocks, bonds, mutual funds, pension funds, and insurance funds—nearly all of it in global companies they barely know or trust. That works out to $169,000 per capita or $439,000 per household. If you live in a 10,000-person town, you’ve got $1.69 billion to play with. If you reside in a small city with 100,000, you’ve got $16.9 billion. Even moving a small fraction of those savings can provide your economy with a huge stimulus.
As they sing in The Rocky Horror Picture Show, don’t dream it, be it!
A vibrant local investment ecosystem in your community needs four cornerstones:
A pipeline of local businesses, some existing and some startups, that fill currently unmet local needs;
A diversity of local finance options for these businesses;
A mobilized network of grassroots investors prepared to support local businesses, projects, and people; and
An amalgam of intermediaries bringing local businesses and local investors together.
My first 18 resolutions provide a checklist for how you and your neighbors can lay these cornerstones:
Resolutions for building a pipeline of investment-worthy local businesses:
(1) Technical Assistance – Strengthen technical assistance available to such businesses from your Small Business Development Centers, universities, community colleges, and banks.
(2) Mentors – Organize an army of local mentors for these firms drawn from existing businesses and retirees.
(3) Incubators – Create as much space as possible for startups in incubators, accelerators, impact hubs, fab labs, and maker paces.
(4) Peer Groups – Weave together sector-specific businesses (in food, energy, manufacturing, etc.) to facilitate peer support and cost-effective joint action.
(5) Leakage Analysis – Perform leakage studies that identify local purchasing being unmet by local businesses or being neglected altogether.
Resolutions for making local finance options available to local businesses:
(6) Inventory Existing Options – Create a comprehensive list of currently available financial options from the usual players, such as banks, angels, and venture capitalists.
(7) New Ownership Options – Develop support systems for creating new cooperatives and employee-owned companies, which expand opportunities for building local wealth.
(8) Crowdfunding – Deploy a support system for moving local businesses into crowdfunding campaigns, whether from donations (e.g., Kickstarter), interest free loans (e.g., Kiva), peer lending (e.g., Prosper), or Title III investments (e.g., WeFunder).
(9) Evaluation Network – Put in place a collaborative network among banks, foundations, and other investors that, among other things, collectively evaluates businesses to bring down the transaction costs for getting them finance.
Resolution for organizing local investors:
(10) Pre-purchasing – Set up a simple pre-purchasing web site (like that offered by www.local-futures.org) to improve the cash flow of your businesses struggling in the pandemic. Most pre-selling does not trigger securities law requirements but can help you identify promising local investors.
(11) Grassroots Investment Champions – Publicly identify residents who are willing to organize investment groups of any kind, ranging from informal gatherings to formal investment clubs.
(12) Investor Resources – Make available educational tools around local investing, including how to find, evaluate, and manage local investments, and how to use pension savings for local investments (my latest book, Put Your Money Where Your Life Is, can help).
(13) RIA Networks – Create a network of local-investment-minded registered investment advisors, as Angela Barbash of Revalue Investing has done in Michigan, to help identify, evaluate, and improve local investment offerings and connect them with their clients.
Resolutions for establishing intermediaries that can bring local businesses and investors together:
(14) Business-Investor Gatherings – Form LIONS that bring together businesses and investors informally (LION stands for Local Investment Opportunity Networks, which started in Port Townsend, Washington, in 2008).
(15) Business-Invest Online Groups – Put together a local online platform facilitating discussions between local investors and businesses (in a “testing the waters” framework, recently legalized by the SEC).
(16) Local Listings – Create an online platform listing all available securities offerings from local businesses (transactions would occur only on federally licensed portals). An example is the Maryland Neighborhood Exchange.
(17) Community Investment Funds – Create one or more local investment funds organized around particular portfolios, such as local food or local retail. (This how-to-guide published by NC3, the National Coalition for Community Capital, can help.)
(18) Evaluations – Set up an evaluation company (like a mini Moody’s) that could provide local investors with objective, third-party information about business investment opportunities.
A few final points about these 18 resolutions. Nearly all can be done by committed grassroots groups with very little money. And even just a couple can have profound results. LION, for example, is moving $800,000 per year into local businesses in Port Townsend—in a town of 10,000. Imagine what’s possible in your community.
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Resolutions #19 to #27 focus on what your local government can and should do. Of course, your city, town, or county can support the first 18 ideas rhetorically or financially. For example, your city could help organize local investment networks (LINS), to introduce local investors to local businesses, as Washington State has been doing. Or it could provide educational and other informational resources on its websites. But let’s get more ambitious with the following:
(19) Municipal Funds – Create one or more funds run by your local government, but privately funded, around localization priorities, such as affordable housing or renewable energy. Particularly urgent is creating a fund to buy up fledgling residential and commercial real estate before nonlocal hedge funds do and wreck your local housing market.
(20) Municipal Bonds – Issue municipal bonds focused on localization priorities purchasable by residents in reasonable denominations of, say, $500 per bond. (Former Mayor Bernie Sanders launched what is now the country’s biggest community land trust in Burlington, Vermont, with $200,000 in municipal bonds.)
(21) Public Banking – Create a public bank like North Dakota’s. It’s less important that your city provide banking services per se than that it place surplus funds (that is, taxes collected or federal transfer payments received that won’t be spent for a while) on deposit in local banks and credit unions. The probability of a dollar put on deposit in a local financial institution touching a local business is three times greater than if that dollar goes into a megabank like PNC. That’s what motivated the cities of Phoenix and Tucson to localize their banking deposits.
(22) Public Employee Option – Develop a local investment option for your public employees’ retirement account, such as a pool of your city’s municipal bonds.
(23) Tax Credit – Enact a tax credit—in income or property taxes—rewarding those who invest locally. The Canadian Province of New Brunswick has a 50% income tax credit for its local investors, and several Republican state legislators in Michigan have introduced a similar bill there.
Everything above could be done within existing law. But don’t stop there. Many of us are committed to change U.S. law to empower your local government to act more boldly. Press your politicians to embrace the following reforms:
(24) Investment Fund Reform – Let’s allow communities to create more varieties of local funds supporting community development. For example, the Canadian provinces of Alberta and British Columbia make it easy to create investment cooperatives. And the province of Nova Scotia permits the creation of neighborhood pension funds. This kind of reform probably will require an amendment to the Investment Company Act of 1940.
(25) Local Stock Exchanges – Let’s give communities the option of creating a local stock exchange that can facilitate the resale of local securities. This will probably require an amendment to the Exchanges Act of 1934.
(26) Portable Retirement Savings – Let’s amend the Employee Retirement Income Security Act (ERISA) of 1974 to allow any employee with a 401k to move those funds into a self-directed IRA or solo 401k, which would facilitate local investing. (Currently, employees must wait until they retire, resign, or are fired before they can move their funds.)
(27) Banking Reform – Let’s give local banks and credit unions clear permission to offer their customers a wide range of local investment options. Big banks give their customers lots of investment options, and smaller banks should not operate at a competitive disadvantage.
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Three final points about all 27 New Year Resolutions.
First, nearly all of them cost little or nothing in the short-term and will generate huge dividends in the long-term. There is no conceivable reason why any local leaders—whatever their party or politics—should not prioritize them.
Second, l can guarantee you that your community hasn’t even conceived of most of these options. If you’re lucky, people in your community are doing a handful of my suggested activities (and probably not very well). That’s why its important for your community to end foolish economic development practices that waste time and money (like corporate attraction) and focus on what’s easy, inexpensive, and powerful.
Finally, if you need help with any or all these points, I’m ready, willing, and able to help. So…I’d like to propose a toast to working together to make 2021 your—and our—most prosperous year ever!
Reprinted from michaelhshuman.com