How two local businesses show the possible future for a local currency
In Ithaca, New York, citizens and businesses are circulating $100,000 worth of colorful paper bills called Ithaca Hours. The scheme, which has been going since the 1991 recession, is that each Hour is equivalent to $10, and can be spent at any participating business in Ithaca, of which there are 900. In addition to being able to buy dollars outright at the local bookstore, Hours are given out when participants join the program or renew their membership (two Hours at a time), or when businesses and nonprofits apply to the Hours Circulation Committee for a loan or grant. The Hours Committee issues its currency for loans at a zero percent interest rate. All the money stays local.
The Hours aren’t just used at participating businesses. The program has been so successful, that residents are trading Hours at yard sales, giving them to their children as allowance, and using Hours to pay the babysitter. It’s not just a coupon—the Hours are a real currency. They are taxable. They are illegal to counterfeit. They are administered by an independent and elected board of directors. And they sound like exactly the sort of thing Santa Cruz would do.
Not that there hasn’t ever been a push. Joe Ferrara, the owner of Atlantis Fantasyworld and the finance chair of the Downtown Association, has been peddling his own miniature version of a local currency for 15 years. Called Atlantis Bucks, the green slips of paper are handed out to any customer at his comic book store, one buck for every $10 spent, and accepted in return as partial payment for designated items in the store. “Every Monday they’re worth double,” he says. “Three-day weekends they’re worth triple. We’ll do special things on Magic or other collectible card games, where you can use one on a starter pack. It’s main focus is on classic books, but other items get included so customers always have a way to spend them.”
While they seem like simple coupons, Ferrara says the idea took an entire year to work out before he could implement it, because he wanted to make sure he didn’t start something that would end up costing him too much profit, and need to be pulled back. Atlantis Bucks have lasted long enough and been successful enough that they are now accepted at other comic book stores around the world. “My friend who owns Kings Comics in Sydney, Australia, asks me if we just hand them out at the airport, he sees so many,” Ferrara says.
The success has also led Ferrara to think bigger with the concept. “I have been pushing for a downtown dollar for many years, because I recognize the value in my store,” he says. “It’s difficult to get people to participate, to figure out how to create and implement the program. If it sounds good on paper but if you can’t implement it, it’s no good. That’s why it took me a year. When you’re an indoor mall, you can issue an edict to the stores and provide a centralized location for the gift card. It’s not that simple with downtown.”
He says there might be the seeds of something during the Amgen Tour stop next February 16. “There’s going to be 30,000 people here. How do we get people to become customers at places besides the restaurants? We’re trying to be creative with a treasure hunt or something along those lines.”
Chip, the executive director of the Downtown Association, thinks it’s possible that a local currency might develop, but it wouldn’t be easy. “Capitola Mall has the credit card thing, but it’s a lot harder with a couple hundred independent stores each with their own accounting system,” he says. “The logistics have been prohibitive for us to take on. I’d be more interested in doing a credit card type thing than a coupon.”
Ferrara agrees that anything like this must be carefully considered. “There are no pitfalls in our program, but make sure you think it through ahead of time. I do know of other businesses that had to pull back a punch card because it was costing them too much. You need to walk yourself through an application to see how it works, make sure you can explain it clearly enough, so from conception to implementation you understand it.”
Sharing the Wealth
The other aspect of the Ithaca Hours program is its interest-free loans to local businesses. Heidi Schlecht, the owner of River Café and Cheese Shop, has taken an individual plunge into the realm of community microloans. Last February, she posted flyers asking customers to give her $1,000 cash in exchange for $1,200 worth of credit to be used on food or wine at her shop. She originally capped the number of investors at 20, but now has nearly 30 and is considering going up to 50.
“Justin, who’s the butcher at the farmer’s market, told me that Café Gratitude in San Francisco did something like this, and that’s where I got the idea,” she says. “I needed it because I basically started the café with hardly any working capital, just a loan from my parents and my former business partner’s parents, but no cash flow. I could go to the bank and get some money, but I wanted to put my feelers out to the community and see if people were interested in having us stay around, and if they really wanted to support us. I was in a transition with my businesses, with not much money, some needed improvements—three refrigeration units for $7,000—and I wanted to give the reward of the investment back to the people who were supporting me.”
The loan scheme did allow Schlecht to buy the refrigerators, as well as a barbecue, and she says the $1,000 investors saved her business. “It’s definitely helped us survive. The remodel changed the whole dynamic of what happened at the cafe,” she says, “and paid for my beer and wine license and allowed me to buy a bunch of wine. We’re talking small money, but it makes a huge difference.” Right now, she’s trying to keep the ball rolling, and has already had a few investors return for another round. “I’m just now putting together my winter share. I have wine, tomatoes, jam, a huge store of stuff that I really want to promote, because I want people to be able to eat locally and in style during winter.”
Not that it wasn’t an easy step for her to take in the first place. “It was terrifying in the sense that it’s scary to put yourself out there, and I would keep thinking it was so hare-brained, who would ever give me $1,000? My crew was certainly nervous when I put those letters out there and they had to talk about it, because I’m not a hard sell person at all. I wanted the product to sell itself, and thank goodness it did.”
While Schlecht says her profit margins are far smaller than the 20 percent she’s giving to her investors, and she has to keep some cap on the number of investors to avoid losing money, she’s been surprised at how much the scheme has increased business, with investors bringing in friends and family to eat on their credits, thus creating new regulars. When she adds in the 9 percent it would have cost her to take out a traditional bank loan or use her line of credit, she believes that working directly with her customers for investment has made a great deal of sense. “It was a calculated bet,” she says. “But it gives back to those people who are supporting us, because doing an all-organic product is pretty expensive on my end and their end.”
She adds, “Having no capital keeps you thinking small because you can’t afford to do anything. And besides, this is the kind of stuff I’m trying to promote, reaching out to the community to get them involved. The more community involvement the better.”
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