I. INTRODUCTION TO THE COMMUNITY SUPPORT DOLLARS (C$D) PROJECT

I.1. Why a Sonoma County Community Currency?

I.2. What are Community Support Dollars (C$Ds)?

I.3. What are the advantages of local currency systems in the current economic crisis?

II. OPERATIONS

II.1 What Is the Community Support Dollar C$D System?

II.2 How Does C$D Work in Detail?

II.3 How Will the C$D System Be Governed?

II.4 How Will C$D Be Evaluated?

II.5 When Will C$D Be Implemented?

II.6 How Will C$D Benefit Me or My Organization?

II.6 .1. Individuals/Families

II.6 .2. Businesses

II.6 .3. Non-profit organizations

APPENDICES

I.1 Why a Sonoma County Community Currency?

All conventional national currencies, including the U.S. dollar, are controlled by central banks. These banks and their subsidiaries create our money by issuing it as loans. The loans must be repaid to the issuing bank, and repayment must be accompanied by interest. (The money to pay that interest with is never itself created; it must be siphoned from the extant, circulating stock of lent money.)

This means that communities have practically no control over the amount of money available to meet local needs. If banks choose not to lend money to Sonoma County entities (government, businesses, organizations, individuals), the money is simply not here. Furthermore, given the repayment-plus-interest feature of conventional money, the money that IS here doesn't stay for long. It returns to the bank that lent it, often in New York or some other distant financial center.

Especially in recessionary times like the present, this set of factors causes unpleasant social and economic consequences. Businesses cannot sell at projected levels, because less money is available for people to buy their products. As sales drop, layoffs inevitably follow. As unemployment rises, sales drop further, and so the process continues in a distressing downward spiral. Monies available to local government likewise decline, as tax income is reduced. Local agencies' ability to handle their work declines while the workload itself increases.

A self-help solution to this familiar "bust" cycle exists. It has been employed successfully thousands of times in recent history, in the U.S. and abroad. In many cases it outlasts the immediate recession-spurred need, and takes its place alongside conventional money as a useful complementary economic tool. It is called by various names: community currency, local currency, complementary currency.

Community currency, unlike federal dollars, stays at home, circulating infinitely to facilitate local trade. In the process, it supplements the income of local businesses, provides employment to local citizens, nurtures the growth of a healthy sense of community, and brings with it all the beneficial side-effects implied by those developments: less crime, less poverty, less suffering, less violence; greater prosperity, greater collaboration on public tasks, greater well-being.

Community currencies also sustain our natural environment. U.S. dollars and all other debt-based national currencies, given their built-in competition for scarce money, promote an overwhelming temptation to exploit natural resources for immediate gain, and to ignore negative environmental impacts. Community currencies, which are designed to be available rather than scarce, provide no such incentive to exploit.

An immediate boost to the global environment is provided in the C$D system by its unique tree-planting feature (see sec. III. below).

I.2. What are Community Support Dollars (C$Ds)? C$Ds are a local currencies designed as a public utility to create liquidity medium of exchange) in a community or region that is an alternative to bank-debt created fiat currency. U.S. dollars and all other contemporary national currencies are bank-debt created fiat currency. C$Ds are not intended to provide other functions of national currencies, to serve as a store of value or a tradable commodity. The principal differences between local and national currencies are:

• The creation of liquidity is supported by a service charge based on the volume of transactions, rather than by interest based on the volume of debt.
• The system is designed primarily to facilitate current transactions, and not savings and investment (which require the continued use of conventional currencies).
• Inflation is controlled by the transparency of the system, rather than by public policy as is required by fiat currencies.
• The system is designed as a public utility, rather than as an investment- and marketing-driven, product-based enterprise.
• The C$D Project uses the "mutual credit" model in which inflation is controlled by a debit-credit balance mechanism and the currency is backed by goods and services pledged as debits within the system (rather than by the "fractional reserves " of conventional banking, which are based on accounting conventions involving capital investments and retained earnings).

I.3. What are the advantages of local currency systems in the current economic crisis?

• To the extent that recession is a consequence of an insufficient medium of exchange, local currency systems permit a local community to mobilize its underutilized productive capacity for the purpose of increasing trade. ("Underutilized productive capacity" includes unemployed and underemployed labor and excess or underutilized productive capacity of physical capital.)
• Local currency systems permit a local community to mobilize its underutilized productive capacity to support the public services it wants. This can happen in two ways:
  • --Voluntary contributions can be made in the local currency, thus in effect encouraging the equivalent of in-kind contributions without the need to match specific contributions with the specific needs of participating agencies.

    --Local taxes and fees that reflect community decisions about the services it needs and wants could be collected with the option of payment in local currency; the local currency payment option permits the community to collect taxes based on the additional productivity that is generated in the community because of the additional liquidity provided by the local currency system.

• Increasing liquidity through the local currency mechanism is a way of increasing trade and the level of public services desired by the community without resorting to borrowing.
• Local currencies permit more efficient "workfare" type arrangements, as low income clients can be asked to make at least a token payment for services in local currencies that can be earned by working on community projects, rather than in scarce U.S. dollars.
• Local currencies can encourage democratic debate in local jurisdictions about the level of public services that is desired in areas including education, health, social services, public safety, environmental protection, etc.; experiments with the trauma tax in Los Angeles and hospital district parcel taxes and the open space sales tax in Sonoma County indicate that local jurisdictions are willing to tax themselves for services they deem essential.
• Local currencies would avoid the risks associated with massive borrowing by the State of California; state government should consider the possibility that we may be facing an extended period of recession comparable to that which Japan has endured for the past decade, particularly in the view of the fact that the Bush administration has shown no signs of offering a credible economic stimulus package.
• Combined with initiatives including single payer health care, professionally and progressively managed public charter schools, effective diversion programs, and programs to increase stakeholder ownership in the economy, local currencies could be one element of a comprehensive Democratic Party platform that would emphasize family ad community values and address the areas that most concern voters and which have proven most resistant to effective political action in recent decades.

II. 1. What is the Community Support Dollar (C$D) System?

C$D is a new, non-interest-bearing, locally created currency for Sonoma County. It is REAL money.

C$D will buy many locally-produced goods and services that we customarily have to pay dollars for.

C$D money results from transactions, rather than being issued (like U.S. dollars) as the precondition for transactions. C$D's are a record of value created or traded -- nothing more, nothing less. As such, they function perfectly as a medium of exchange.

C$D's exist in two forms: first, as credits and debits ebbing and flowing in members' accounts (called "mutual credit"); and, when account holders so desire, as paper bills issued in exchange for credits earned (and thus "backed" by the value those credits represent). Paper C$D's may also be issued in exchange for U.S. dollars, at par.

C$D's exist harmoniously alongside dollars. Indeed, most purchases will entail both C$D's and dollars, with the seller deciding the percentage of each that makes up the price.

For ease of pricing and shopping, one Community Support Dollar equals one U.S. dollar. C$D 1 = $1.

Sellers decide which of the goods and services they offer will be subject to C$D pricing. (E.g., a store could price some merchandise in a mix of U.S. dollars and C$D, while continuing to price other merchandise only in U.S. dollars; a theater could offer seats only at certain times for C$D purchase; etc.) To guarantee the long-term health of the system, however, all prices quoted partially in C$D must include a minimum of 10% C$D.

C$Ds' use is facilitated by a published list (online, and periodically in newsprint form) of all participants in the system, the goods/services they offer for sale, the percentage of their price payable in C$D, and their requests for items they would like to buy with C$D.

II. 2. How Does the C$D System Work in Detail?

The seller sets the price.

Once the prescribed participant thresholds have been reached (see ¶ VI. below), people, businesses, and organizations start trading, using C$D to the extent specified by the seller in each transaction. All C$D sales will, however, be subject to the 10% C$D minimum described above.

Mutual Credit C$D.

Sellers using the mutual credit mechanism report each transaction to the system bookkeeper online (or by phone or mail if necessary), giving the date, item purchased, price, and buyer's and seller's names.

For added security, both participants in each transaction may keep a written record of it, using "proof of purchase" chits provided by the system. (Cp. conventional check stubs.)

Paper C$D.

Participants using C$D paper bills use them just as paper dollars are used. The only difference is that C$D users record the date of the transaction in the first empty space on the back of the bill. When the spaces are filled, the holder must turn in the bill for a new one of equal value. This mechanism allows the system managers to keep track of the speed of circulation of the bills -- useful information as we evaluate the system's efficiency.

C$D bills are printed on recycled U.S. currency paper.

Credit limits.

To avoid potential abuse, members' initial debit limit is set at C$D500. This means that members are obligated not only to buy, but also to sell. Once the C$D500 limit is reached, members must reduce their debit by sellilng -- perhaps through lowering their price, modifying their offer of goods/services to make it more attractive, or offering something else entirely -- before they can make more C$D purchases.

After demonstrating responsible, productive participation in the system for six months by establishing a record of frequent C$D sales and purchases, a member's credit limit will be raised to C$D1,000, and by a further C$D500 for every subsequent six-month period showing a similar level of participation. Conversely, the credit limit of participants who gain from the system by buying, but do not contribute to it by selling, may be reduced. Decisions regarding increases or reductions in a given member's credit limit will be made by the Steering Committee (see below).

Transparency.

The main system account book is open online for perusal by all members at any time. This allows them to check their own "proof of transaction" records against the master account book, and to correct any discrepancies. Individual accounts, recording the details of each transaction, will NOT be open to public scrutiny, but accessible only via the individual member's password.

Self-Support: Dues Payments in U.S. Dollars and in C$D.

To cover necessary U.S. dollar expenses (office costs, printing, etc.), members pay annual U.S. dollar dues: initially, $15/individual or family, $25/non-profit organization, $50/business. The first payment must be made when enrolling. New members' accounts will immediately be credited with the equivalent amount in C$D to reflect this first dues payment.

In subsequent years, depending on unforeseeable financial eventualities, membership renewal fees may be assessed progressively in C$D rather than U.S. dollars. Thus, in a member's second year, dues might be modified as follows:

• individual or family, U.S.$10, C$D5;
• non-profit organization, US.$20, C$D5;
• business, US.$45, C$D5.

Payments could be similarly adjusted in later years.

Office administration.

Record-keeping, website maintenance, and other administrative tasks will be provided by the Glen Ellen-based Skaggs Island Foundation. (See Section III.)

"Plant a tree with C$D."

When participants enroll, they are given a certificate with which they can buy a tree seedling from the local "Planting Earth Activation" group. They may plant the tree themselves, or may use C$D to hire another system member to plant it for them. (A list of willing "planters" is published on the system website.) Thus our currency helps solve global warming, instead of building exploitative debt as U.S. dollars do.

II. 3. How Is the C$D System Governed?

Community Service Dollars (C$D) is a project of the nonprofit Skaggs Island Foundation, which will provide record-keeping, website maintenance, and other administrative services. For more information on the Skaggs Island Foundation, consult its web site at www.skaggs-island.org.

Policy and strategy regarding all aspects of running the system are the responsibility of the Sonoma County C$D Steering Committee, subject to review by the Skaggs Island Foundation Board of Directors.

Project Director: Philip Beard, Ph.D., Professor of German and Coordinator of Global Studies, Sonoma State University

Steering Committee:

Philip Beard, Professor of German, SSU

Art Warmoth, Ph.D., Professor & Chair Psychology Department, SSU;

Kirk Templeton

Takahiro Omuro

Shann Bunyard

Jason Spencer

Sonoma County C$D shall also solicit the counsel of a five-member Advisory Board, to be chosen by the Steering Committee. Members are currently being recruited.

II. 4. How Is C$D's Performance Evaluated?

After the C$D system's first, second, and fifth year of existence, and every five years thereafter, an independent audit will be performed by a CPA, summarizing the system's general performance and specifying the following particulars:

• number of members

• dues collected

• total value of C$D transactions

• breakdown of mutual-credit vs. paper-money transactions

• system expenses (office expenses, PR outreach, printing, bookkeeper, salary, etc.)

• efficiency of administration.

This evaluation shall be paid for from member dues and, to the extent possible, with C$D.

II. 5. When Will C$D Be Implemented?

The C$D currency will be officially launched as soon as 500 individuals/families, 30 businesses, and 10 non-profit organizations have signed on as members, and the project has sufficient financial reserves to cover first year operating expenses..

II. 6. How Will C$D Benefit Me/My Organization?

II. 6.1. Individuals/Families:

As a C$D participant, you will benefit from greater prosperity than you could possibly enjoy when using U.S. dollars alone. Your scarce dollars will become more useful than before for purchases from outside the system, because you won't need to use as many of them for local purchases. Even more importantly, you will learn to see your money as a community-building tool: one that brings you into mutual support relationships with your neighbors and local businesses. You will become less vulnerable to boom-and-bust business cycles. Your ability to supply your needs and to help others supply theirs will rise significantly, regardless of what happens to the U.S. dollar or other currencies you may use. You will likely conceive of many more goods and services that you might offer for sale (or that you would like to buy) than occur to you when considering sales/purchases that demand full payment in U.S. dollars.

II. 6.2. Businesses:

As a C$D participant, you will attract many clients/customers to your establishment who would otherwise pass you by. C$D's will work similarly to coupons, discounts, "loss leaders", and other devices you currently use to attract a broader customer base -- with the difference that you can use the C$D's you receive to pay some of your own bills. You will strengthen your relations with other local firms that have also joined the C$D system, even to the extent of using C$D to facilitate your large-scale transactions with them (similarly to the barter systems that are becoming ever more popular in business worldwide). If you operate a service whose patronage ebbs and flows with the time of day, or days of the week, or seasons (e.g. restaurants, movie theaters, golf ranges, etc.), C$D's will help you maximize your productive capacity: You can attract more customers at "off" times by allowing them to pay a larger percentage of their bill in C$D during those times. You can use C$D to reward interns and volunteers who would otherwise be unavailable for your use. C$D can also probably be used for tax-deductible donations to charitable organizations (like the deductible "in-kind" donations currently honored by the IRS.)

In general, use of C$D will weave your business ever more firmly into the fabric of local community life.

II. 6.3. Non-Profit Organizations

Non-profit organizations benefit from C$D by using the currency to reimburse volunteers who otherwise couldn't afford to contribute their time. Volunteers of course should never be pressured to accept any form of remuneration for their work if "not getting paid" is an important motivator of their involvement. But making C$D available to them at a living-wage level will certainly attract a large number of volunteers who otherwise would have to leave their volunteer work prematurely, or who would never come forward in the first place.

Those who object to the notion of "stipends" as a stimulus for volunteering because of allegedly corrosive, competitive, non-communitarian aspects of dollar-paid work should consider that C$D, a currency designed to be abundant and available, promotes healthy social involvement in ways that conventional, interest-burdened money cannot.

C$D also facilitates healthy quid-pro-quo arrangements with clients of nonprofit organizations, many of whom would like to be able to reciprocate for the services they receive from the agency but lack the time to do so. Reimbursing them in C$D for their own volunteership (subsequent to receiving services) provides a practical avenue for encouraging mutual service exchange.

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APPENDICES

Appendix A. THREE IMPLEMENTATION SCENARIOS

Appendix B. OUTLINE OFPOTENTIAL MAJOR C$D STAKEHOLDERS

Appendix C. DRAFT: A DEVELOPMENT PLAN FOR COMPLEMENTARY CURRENCIES IN CALIFORNIA

Appendix D. DRAFT PUBLIC INFORMATION FLYERS

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