An age-old issue for human societies is distributing a surplus within a community. In today’s society, Capital or profits is a surplus available for consumption or investment. Traditionally community groups work for the common good and distribute a surplus as part of their work. Community Capital Markets give those without a surplus the means to acquire some for zero cost, participate in deciding the distribution, and build social capital.
This article gives examples starting with a way for a community group to increase well-being by encouraging walking.
Well-being and Walking
We know that regular walking increases well-being, and we know that it reduces costs in a community. The cost reductions from walking come from fewer demands on the health system and savings in alternative ways to get from A to B, such as cars. The Australian Transport Assessment and Planning estimates the benefits of walking at $2.77 per km and cycling at $1.35 per km. We also know that money is an incentive to do something and that giving money to benefit others increases our well-being more than receiving money ourselves.
Imagine a government has decided to invest some money to improve the walking environment in a City. One way would be to hire a consultant to devise a plan for walking infrastructure improvements and for the local government to implement and pay for the plan. Another way would be for a government department to develop a strategy and program to increase walking and for the government department to seek a share of taxes to implement and pay for the program.
Another way is to use a Community Capital Market to decide how much to spend to improve the walking environment further and encourage more walking. This market-driven approach starts small and builds evidence-based expenditure. The approach has an in-built feedback mechanism to control expenditure, direct it to worthwhile investments, and automatically adjust itself when or if no longer needed.
ACT Living Streets
ACT Living Streets is a local shareholder cooperative. It asks for funding from the ACT government and members of the public through a Community Capital Market. Any person or organisation, including the government, can put funds into the Cooperative and be entitled to a share of the profits. Shareholders earn a dividend of 5% on funds.
The ACT government agrees to pay each member of ACT Living Streets $2 for each km they walk the streets of Canberra. The $2 is less than the savings to the community from walking. The cooperative invests this earned income from walking to encourage other Canberreans to walk.
The government receives a share in any profits the cooperative might generate. The government shares give it a voice in how the Cooperative spends the funds, and each time the government pays for walking, it receives more shares in the Cooperative. If the Cooperative pays for walking infrastructure or provides a walking service, the government pays for it with shares in the Cooperative.
The advantage of the approach is that costs and income are transparent and that walking members of the public participate in the division of a surplus. Members and the government are fully aware of the finances and the services and benefits obtained. The project is an ongoing one and will evolve naturally with experience. The expenditures that work the best in increasing walking will become known, and the approach will share its experience with initiatives in other cities. The estimated value of walking is checked and adjusted over the years to ensure the project delivers a surplus to the community.
Community Batteries for All
Most of the government's subsidies and support for household solar panels and batteries have been distributed to individual households as feed-in tariffs, direct subsidies, or zero-interest loans. The subsidies help those who have access to Capital but are of little assistance to those who cannot access it. Community Batteries financed Community Capital Markets allow governments to provide equitable support for all households and businesses and give the community the greatest financial benefit.
Let the only source of income for a Battery be arbitrage. The battery owner buys electricity when it costs little and sells it when it is expensive. The battery owner pays the operating costs, but the major cost is the cost of Capital, including the Cost of installation.
The community can supply Capital to a Community Organisation through a Community Capital Market and require a superannuation-level return on investment. Let us assume the Battery is located on a low-voltage line that services 50 dwellings. The electricity to charge the batteries is supplied directly to the battery from community-owned solar panels, and the Battery buys and sells into the five-minute electricity market.
The community-owned battery operation's profit comes from payments made by the community on the low-voltage line. The profit is invested in other community-owned solar panels and other ways to reduce GHG emissions. The Community that owns the battery decides how the Capital is distributed in the Community. It could be on a household, head-count basis, consumption, the inverse of consumption basis or some other way decided by the Community.
The benefit of the subsidy to the Battery goes to all community members rather than a service supplier, and all the profits go to investing in GHG reductions.
Other Examples
The approach provides a way for Community driven services to obtain funding and ongoing income to continue investing in the Community.
Water catchment groups could obtain income from water abstraction charges included in water bills. The Catchment group members could direct that their abstraction charges go to the group, and the members have a say in how the funds are spent on the water catchment in which they live.
Land Care groups could obtain a share of the land tax they paid on their properties to support the care of public land.
Community alcohol addiction groups could obtain a share of the GST tax on alcohol consumption.
The Difference
In regular Capital Markets, money is invested to make more money for the owner of the money. In a Community Capital Market, money is invested to make a profit from reducing costs. In Regular Markets, the investor takes all the profits. In a Community Capital Market, the profits are shared across the community.
