Cash on Hand (Davis Enterprise story)

By Crystal O’Hara | Enterprise correspondent | September 27, 2009 00:08

Buy-local boosterism and eat-local challenges have proved popular in Davis, but a small group of visionaries hopes to take things to the next level with the introduction of a community currency.

Davis Dollars is a fledgling organization working to create an alternative currency that could only be used for local goods and services.

Nicholas Barry, a 2007 UC Davis graduate who now works for state Sen. Darrell Steinberg, D-Sacramento, said he read about community currency a few years ago and thought it was a great fit for Davis.

The city’s strong sense of identity, its size and clear borders, the fact that Davis is a community willing to try new things – all point to success for a local currency program, Barry said.

‘I guess I just feel this is something that is eminently doable,’ he said.

The currency would be legal under IRS rules, Barry said, so long as it is not similar in appearance to U.S. dollars, is made in paper only, not coins, and is treated as taxable income.

‘It’s exactly as real as U.S. currency,’ he said.

The program would work like this: Davis Dollars would be set up as a nonprofit organization. It would sell Davis Dollars to businesses and individuals. The currency would be sold at a discount – for example, the exchange rate might be 10 Davis Dollars for 9 U.S. dollars – to reward users for keeping the money local.

The businesses and individuals would then use that currency to buy and sell local goods and services. Those businesses and individuals would be circulating the money locally, but could go to a participating bank at any time and exchange their Davis Dollars for U.S. currency.

Similar programs in other communities have had varying degrees of success. But there is no doubt that interest in local currency has increased dramatically in the past year or two, said Susan Witt, the founder of Berkshares.

Based in the small, rural area of southern Berkshire County in Massachusetts, the Berkshares program is now in its third year. Already, 400 businesses – from lawyers and dentists, from yoga instructors to car repair shops – have signed on. Witt said that at any given time about 150,000 Berkshares are in circulation.

It wasn’t always that way, Witt said. Often the last thing a small business owner wants to do is take on more work, in this case the large task of accounting for a separate currency. In the early days of the program, she and her board members spent a lot of time ‘knocking on doors and convincing businesses’ to participate in the Berkshares program.

‘But after December, when it was clear that the economy was in a downturn, businesses started signing up on their own,’ Witt said. ‘At the same time, because of the economy, the volume of use has gone down.’

Witt, who visited Davis about 10 years ago, said she believes the city is a perfect place for community currency because of its emphasis on local shopping and local agriculture, its vibrant downtown and environmental innovations like Village Homes and the network of bike lanes and bike paths.

But she cautioned it is too early to deem Berkshares a complete success. The program is still in the research and development phase, she said.

‘All we have at the moment is a very sophisticated and beautiful buy-local program, but the intent is to go far beyond that,’ she said.

Many community currency supporters say the real value of such programs is their ability to stimulate the economy by encouraging the start-up of small businesses, particularly among those providing services. They in turn then use the currency to pay for the services their growing business needs.

‘What’s most exciting to me is that it can function as a business incubator,’ Barry said.

At this point, the proponents of Davis Dollars are still in the early stages of development. Barry said the group is pursuing obtaining nonprofit status; beginning to talk to banks, other businesses and community members to drum up support for the program; and is hoping to get some kind of sponsorship or funding for actually printing the currency.

But the program is already generating interest. Joy Cohan, administrator of the Davis Downtown Business Association, said the DDBA has not yet been approached by Davis Dollars, but the idea is appealing because of its emphasis on supporting local businesses.

She added that 60 cents of every $1 spent with most downtown businesses stays in Davis, versus 6 cents of every $1 spent at big-box retailers.

‘We are interested to know more and possibly be involved with any effort that would help retain and recirculate more dollars in Davis, especially in downtown Davis,’ she said.

To learn more about Davis Dollars, visit http://www.davisdollars.org or contact Nicholas Barry at nikobarry+dd@gmail.com.