Community Way Proposal
Kitsilano Community Centre
2690 Larch Street Vancouver, B.C.
February 11, 1997The program will raise $2 million in donations of a new community money, with the Kitsilano Community Centre as the initial core beneficiary, and as it expands include other community organizations throughout the region.
The project is designed to recover all costs with $200,000 of the new community money (10% of donations raised), and will last between 6 and 18 months.
Up to $10,000 borrowing is anticipated, underwritten jointly by several core beneficiaries, possibly matched by the primary sponsor (perhaps a bank &/or foundation).
A LETShare co-operative contracting structure assures maximum flexibility and fairness, and the ability to easily introduce more participant-contractors as required.
The community way program is the first stage of a longer term strategy to introduce and develop community currencies in the south-west region of British Columbia
This project will test the design model under local conditions, and report results. For more information on this agenda, and on community currencies, please see the appendices and reference materials attached to this proposal.
The core of this design, the community way program, both initiates community currencies and provides all participants, particularly the business sector, with a safe and limited test of this money under controlled conditions.
A community way program is a form of LETSystem, with the added condition that the money in the network is brought into circulation by business by the act of donating community money to service organizations and projects (see appendix - "community way to community money").
LETSystems are a particular form of community currency. For details of the overall structure, purpose and practice, see the Landsman / Soutar LETSystem Design Manual <http://www.gmlets.u-net.com/design/>
Community way applies off-the-shelf components from the developing field of community currencies and from familiar marketing and banking practices, but this particular arrangement of the parts is entirely unprecedented, and we are anticipating very strong results. A successful demonstration of a community way program will quickly lead to more demand for it.
The design is intended to easily accommodate expansion and replication, both locally and elsewhere. It also anticipates the need for a smooth transition between the short term community way initiative and a longer term 4-5 year program of LETSystems development.
LETSystem Development Initiatives (LDI) are the organizational designs recommended for the management of these longer term programs, and are described in some detail in Section 5 of the Design Manual.
"planning refers to the attempt to produce the outcome by actively managing the process, whereas design refers to the attempt to produce the outcome by establishing criteria to govern the process so that the desired result will occur more or less automatically without further human intervention."
William Ophuls, Ecology and the Politics of Scarcity, W.H. Freeman & Co., 1977
This is not a normal business plan, but rather an economic design, modelling programs to introduce and develop community currencies, and stimulate local economic activity - by creating and moving money.
The core of the proposal is written for general application, and can be adjusted to meet a wide range of conditions.
The dual purpose of creating a money system, while raising funds for charity, requires clear distinctions between those purposes, and meeting the standards of both.
It is unethical for the operators or developers of a money system to directly profit from charitable exchange between parties using that system. Just as banks don't take any % of the donations processed through their systems, neither can community currency systems. However, in order to initiate the development of such systems, money has to be raised.
This design is based on the premise that it is ethical for the system operators to levy charges on donations in community currency if and only if the promotion and development of this charitable circulation is the core of a development strategy, and essential to it. Furthermore, for any such proposition to have substance, the levy must be strictly limited, and any charge against donations by system operators must be completely discontinued at some predetermined point.
A 10% solution
The LDI for this region, the south-west of B.C., in order to set standards and pre-empt scams, declares a levy of 10% on the first $2 million of donations in community money, the equivalent of $1 per member of the regional population.
This is adequate for a test launch of the community way model, as per projections 1 and 2 of the design. If it happens that this program cannot cover all costs from a 10% levy (as shown in projection 3), then the design can still be justified as a direct fund-raising program at an internal cost of 15-25%.
It is likely that some groups will start community way programs with that expectation alone, and without any purpose beyond that of raising money for good causes.
We fully expect that:
business will like the combination of contributing to community and attracting customers,
and people will appreciate being able to help without hurting.
The actual accounting and operational costs of community currencies are minimal and hardly significant in this project. The cost of "sales" is the major consideration - how much time, energy, materials are needed to engage participants in each sector? We will be testing the following predictions:
We expect many beneficiary organizations will respond readily to an offer to raise money for them, at low cost in terms of money and time.
Registration of business accounts is expected to take more time and resources. In commercial "barter" organizations, charges are usually around 10% of trading turnover, and most of that is applied to sales costs. However we anticipate considerably lower sales and promotion costs as the community way / community currency options offered are far superior.
The program works to attract customers in much the same way as superficially similar marketing discount systems - 2 for 1 offers, seniors discounts, loyalty cards, air miles - but community way is much less expensive, and much more controllable. Moreover, the business isn't discounting, as the $cw income can be used with other participating businesses.
The costs of signing people up can probably be kept down to $5 per person at the outset. It will in any case be prudent to do minimal promotion in this area until office systems are well established.
In Canada, people make 90% of all charitable donations and that commitment to giving is very much limited to what the donors can afford to spare. Community way enables people to help by exchanging money, conventional for community, with considerably less limit, since the $cw they get are accepted by participating businesses.LETShare co-operative can begin with 3 fte (perhaps 3-5 contractors) if several sponsors undertake jointly to underwrite a potential loss of $10,000.
Office and operating costs are initially low as participants are recruited, briefed and trained.
Per fte/month, full cost recovery (including debt) is estimated to need $50,000 each month in business donations of the new community money. Thus, for 3 fte, donations of $150,000 per month are needed. This can come from a mix of as few as 30 - 40 participating small to medium businesses.
After this level is reached, the LETShare will grow as justified by income - to a total of 40 - 45 fte months, over a time period between 6 and 18 months.
introduce more core beneficiaries to share underwriting
enrol additional beneficiary organizations as appropriate
qualify, approach and propose
register accounts and process donations
install point of sale and accounting procedures
mailshots - telemarketing
press / radio / tv information and circulation
point of sale display systems
introduce multiple LETSystems
Phases begin in order, and proceed simultaneously.
These general task areas are :
Initial LDI personnel
The following 3 projections are examples of possible outcomes, points on a continuum of levels of business / beneficiary acceptance - termed "sales" below - ranging from high to low.
Sales need to be "pushed" up, as in powered flight, where effort is required to reach and maintain a sustainable level.
For 3 fte, break-even with full salaries, and debt recovery requires about $15,000 monthly income. With partial salaries, and no debt repayments, income of $8,000 per month is enough to offset spending.
This scenario shows how a gradual fund-raiser can be maintained on its own merits without necessarily establishing a full LDI program.
Sales "rush", driven by demand, as a balloon rises by inherent buoyancy, or a fire starts and spreads, without continuing inputs of energy.
The progressively faster and easier induction of all parties allows the first phase of the project to be completed in only 6 months, with the major limitation being the logistics of staff induction and training. As donations accelerate, debt is retired and cash retained, and equity increased to best bridge the transition to a full-scale LDI.
The worst case scenario: low sales, little or no lift-off, maybe even need to apply brakes before the end of the runway.
Business is reluctant to donate and/or other unforeseen factors are prohibitive. If this is quickly and clearly evident the project scales down. Borrowing is reviewed and revised limits negotiated with the guarantors. Contracting staff reduce their contributions, and focus mainly on conversion of the donations already made.
The contractors and beneficiaries / guarantors jointly negotiate a soft landing.
The practice of deferring payments and accruing equity releases cash for additional staffing, and establishes the commitment of the participants to the longer term objectives of the program rather than to a weekly pay cheque.
LETShare allows for better risk sharing between the financial backers and the contracting participants, and will reduce the borrowing requirements considerably. Pay scales within projects of this nature are often severely depressed to accommodate tight budgets, which can result in staff poorer, one way or the other, than the task deserves. This model assures proper levels of remuneration, if the program meets its objectives.
This organizational approach is essential for a smooth transition to an ongoing ldi program, when the termination of revenues from community way and the shift to other sources of revenue for the funding of the second phase requires bridging finance. LETShare provides a method to reserve both cash and equity for this transition.
LETShare is described in detail in the LETSystem design manual at <http://www.gmlets.u-net.com/design/>
The account will be supported by a line of credit, guaranteed by the sponsor beneficiaries, who set limits on their liability, and may review those limits at any time.
All drawings on the account are cleared by a "trustee" - a signing authority, appointed by the program client.
The trustee will issue cheques on the directions of the LDI as long as the guarantors are still willing to underwrite the borrowing.
This can be arranged by opening a bank account for the LDI with a conventional line of credit, guaranteed by core beneficiaries. The guarantors will set limits to their liability, open to regular review based on reports and projections provided by program administration.
If risks undertaken by core beneficiaries are matched $ for $ by the core sponsor (foundation, bank, or government), a $10,000 line of credit is covered by a reserve of 5% from $100,000 in donations raised, or 1% on $500,000.
Particularly in the first two months of this revenue, when the exchange between the beneficiaries and the public will just be opening, the conversion of the LDI $cw should be assured by other means.
Core sponsors and others can usefully undertake to buy $cw from the LDI, for federal, while the general conversion process is becoming established.
This role can also be taken by local government, with the direct benefit that they use scarce dollars twice, once when they convert on behalf of a community project, and then again when they use the community money elsewhere in their grants or other expenditures - a.k.a. "taxpayer helper".
When local government is willing to support conversion of community $ to federal, this will further encourage participation by all sectors. Other sponsors of community programs in general, such as major foundations and organizations like the United Way, can likewise support the effectiveness of a community way program.
The terms of reference of the commision included requirements that there be a focus on the local neighbourhood, on developing the possibility for participation by the local branches of the credit union, and that the financing of the design should be shares risks amongst all particpants - the lenders, the beneficiaries and the protagonists.
Landsman Community Services Ltd.
1 250 338 0213 / firstname.lastname@example.org