27 Resolutions for Community Renewal (Part II)

Last week, I offered 18 of 27 New Year’s Resolutions on how you can create a vibrant local investment ecosystem. You and your neighbors can use your savings to boost your community’s economy and speed its recovery from COVID-19. I suggested ways to get your local businesses “investment ready,” to create more investment options for local business, to mobilize grassroots investors, and to marry businesses and investors through dynamic intermediaries. 

This week, 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!