Categories
politics

To Keep My Money Local

One of the buildings here on Main Street in Poultney has been for sale for a least a few years. It’s an old gas station with a two-bay garage attached. It sits on the corner of Rt. 30 and Main Street, right at the entrance to the village. A year or two ago, one of the organizations in town hoped to purchase it using taxpayer money to create a welcome center for the village. It was also going serve as the main location in town for weather-protected access to our regional bus route (i.e., a bus stop). Unfortunately (in my view), the taxpayers voted it down at town meeting that year.

This morning, in the shower, I had another idea for that building.

One of the biggest issues with Vermont is the lack of meaningful employment opportunities. In the list of the occupations with the largest employment in Vermont, you’ll find at or near the top of the list not-so-rewarding jobs such as cashier, retail sales, food prep (including fast food), and waitstaff. According to the Burlington Free Press, “almost all of the new jobs [created last year] were concentrated in four sectors of the economy:  health care, hotels and restaurants, business and professional services, and construction.”

In other words, outside of some version of nursing, there’s not a lot of jobs in Vermont that provide secure, long-term employment with health benefits, retirement accounts, and the ability to feel as if you’re making a meaningful contribution to the wider community.

Forbes’ profile of Vermont explains some of the reasons behind this.  We have the smallest economy in the nation, the second highest business costs, and an economic outlook that is supposed to be the fifth worst in the country over the next five years, all of which affects our residents’ income growth. Add on an aging population (second oldest in the country) and a brain drain of young college graduates (as with all young college graduates, ours are more attracted to urban areas than to rural), and it’s easy to see why more large-scale employers don’t choose to make Vermont their home.

On the other hand, the state of our small businesses is strong. According to a Business News Daily survey of Vermont’s small business owners, “entrepreneurs in Vermont may have to contend with a tight labor market and an elevated cost of living, but they also have access to strong, entrepreneurial communities and operate within a stable economy.”

One of the entrepreneurs said, “There are events every month in and around Burlington to facilitate networking with [investors, mentors, incubators, and entrepreneurs]” — but if you don’t live in or around Burlington (as I do not), then your access to this network is greatly diminished.

That’s where my idea for the building on the corner of Main Street comes in.

It has to do with a thing called locavesting:

In the wake of the financial crisis, people [looked] for ways to rebuild their communities, dotted with foreclosed homes and shuttered storefronts. And they knew they had to look beyond Wall Street. In some cases, that [meant] rediscovering tried and true solutions, such as community banks, cooperatives and CDFIs, or resurrecting centuries-old concepts, like local stock exchanges. In other cases, it meant inventing brand new models, like crowdfunding. All of these alternatives harken back to a time before our global financial age, when finance was something that happened largely within a community, among trusted participants, for mutual benefit.

The word locavesting is analogous to the successful locavore movement; where locavores eat food grown or raised in their local community, “locavestors seek to invest that way.”

In Vermont (as in many other states), we have rules designed to help Vermont businesses seek investments from Vermont residents. Our Small Business Offering Exemption, for example, “allows Vermont businesses and start-up companies to raise up to $2 million in capital by selling shares in their company to in-state investors.”

But I’m wondering how your everyday small business and your everyday Vermont resident gets access to this kind of financial market. If more people were able to invest in the growth and success of local businesses, wouldn’t Vermont be more attractive to entrepreneurs, and not just entrepreneurs who are coming from out of state, but entrepreneurs and potential entrepreneurs who already live here?

Imagine this:

Let’s say I receive a $1,200 tax return on my Federal taxes. I’ve got several options on what to do with this windfall: I can pay down my debt (always a good idea); I can spend it on goods and services; or I can invest it in either a traditional savings account or in something a little fancier (of course, I can also do some combination of the three).

Let’s say I choose to invest it.

Wouldn’t it be great if I could walk down the street to a beautiful new building where I could sit down with a professional financial consultant who could help me invest my $1,200 in a local business of some kind?

Because the building is located in Poultney, various brochures and video-playing kiosks would direct my attention to businesses located within or around Poultney, with each business making some sort of pitch as to what they would like to do with my money and what kind of return I can hope to generate from it.

Maybe there’s a video from a man I know who is looking to hire a second construction worker to help him grow his business. He’s hoping to raise roughly $40,000 to afford the second worker’s salary, and in return for the investment, he is willing to split a portion of his company’s profits with his investors.

Maybe there’s a pitch from a local entrepreneur who’d like to start a locavore restaurant, or another from a woman who would like to expand the location of her daycare, or another from a college student who is seeking investors to help him build a company around his recently acquired patent, or another from an elderly man who’d like to take his cottage industry online, or another from a local farmer who wants to buy a new piece of heavy equipment, etc.

It’s not just people looking to do something specific, however. There are also shares available in already thriving companies: a local plumber, a local hardware store, a local private school, a local baker. My investment in these small businesses signal my willingness to trust these entrepreneurs to make the most of my money, to use it to generate a return greater than I might find with a traditional savings account.

Of course, I would also have access to the larger Vermont market, but the priority of this particular building in Poultney would focus on entrepreneurs who live and work within 35 miles of my home — people I know, businesses I recognize and patronize, families who send their children to school with my daughter.

The upshot is that the exchange would act as a kind of hybrid between crowdfunding services such as Kickstarter and GoFundMe, micro-loan services such as Kiva, and a traditional stock exchange.

Okay. So, that’s what it looks like if I’m an investor. But what if I’m a small business owner? As an entrepreneur (in this scenario), I’m already pulled in every direction and don’t have the time or the finances to do all of the legwork necessary to get my business listed on such an exchange, or once I’m there, to figure out how to conform with all the transparency requirements that are only fair in a public market.

That’s where the person working behind the desk in our imaginary building comes in. He or she is not just a resource for individual investors; he or she is also a resource for the businesses that are looking for those investors. This professional consultant can help walk the business owner through all of the required steps to getting listed on the market, and can put the business owner in touch with other consultants who can help maximize the offering (i.e., local professionals who can produce brochures, create videos, develop websites, assist with financial audits, etc.).

Because he or she is walking all of the local businesses through the process of getting onto the exchange, he or she will know the local market better than almost anyone else, and will therefore be able to assist the individual investors when they come looking for guidance.

Now imagine this particular building (and this particular kind of financial consultant) in all of Vermont’s 255 municipalities, each dedicated to driving investments in their local economies.

This isn’t a crazy idea. The financial rules are already in place. The only thing that is missing is the local access point.

What if the legislature set aside some kind of funding for this? The funding would go towards the creation of the Internet-enabled backbone that allows an investor in Brattleboro to send her money to a cupcake maker in the Northeast Kingdom, and to track the rise and fall of the various shares listed on the exchange.

The next step would be for the legislature to create an unfunded mandate that basically says, “Okay municipalities, if you want to give your local business owners access to an entire state’s worth of local investors, you have to create a physical location in your municipality where residents can receive professional advice related to the local market. The wages of the person providing the advice must (at least) meet your county’s designated living wage, and the physical location must have access to the Internet. Until you are able to meet these requirements, your businesses will not be allowed to list themselves on the exchange.”

This would not only create (at least) 255 well-paying jobs in the state (Burlington, for example, might choose to open a few of these access points), it would also equalize the opportunity to participate in the market: you wouldn’t need the Internet at your house because it would be available at your local access point; you wouldn’t need to hire a financial manager because the consultant would be available to everyone in your town for free (his or her services would already be covered by the taxpayers); and small businesses wouldn’t have to deal with a ton of up-front costs to prepare their businesses to be listed (again, because the consultant is already working for free).

The benefits of such a marketplace would greatly outweigh the costs. It would not only ensure that more Vermont dollars stay in Vermont, but it would also increase the rate of entrepreneurship throughout the state. With more local money flowing to more local entrepreneurs, more residents would have the opportunity to follow their passions to meaningful employment, whether that means starting their own businesses or hiring more of their neighbors, funneling my investment dollars into my neighbors’ lives.

Anyway, that was the idea I had in the shower this morning. It might not be wholly original, but I thought it was good enough to share.