Community Currencies Aim to Aid Merchants

By GEOFFREY A. FOWLER
Annie Tritt for The Wall Street Journal
October 7, 2011

Darcy Lee owns Heartfelt in Bernal Heights.

Hoping to keep their money close to home, three Bay Area communities have begun operating their own currencies.

In June, a group of businesses in San Francisco's Bernal Heights neighborhood started signing up residents for a debit card that offers 5% of purchases back in a local currency called Bernal Bucks when residents shop in the community. The move follows that of two nonprofits in Marin County—Coastal Marin Fund and FairBucks—which began minting their own $3 coins last year.

The idea is to raise resident awareness about supporting small businesses in an era of big-box national chains, and to find a new way to raise funds for local causes.

"Neighborhoods are taking their economic destiny into their own hands by looking at the money that is circulating in them," said Arno Hesse, one of the creators of Bernal Bucks.

Community currencies exist world-wide and are legal in the U.S. so long as they don't pose as official American greenbacks. Communities offering them include the Berkshires region in western Massachusetts, while a group in Oakland is working on a currency known as Alternative Currency for Oakland Residents and Neighbors, or ACORN.

But they all face the challenge of persuading merchants and residents to commit to adopting them for daily use. Some past local currencies, such as one called Berkeley BREAD that started in the late 1990s, ended in 2003 after its coordinator left and wasn't replaced. There also was a program called Sonoma County Community Cash that died after about two years around 2000.

The Bernal Bucks debit card grew out of past attempts by Bernal Heights merchants to reward residents for shopping locally, including stickers placed on real $5 and $10 bills that could be redeemed for incentives. Last year, Bernal Heights resident Mr. Hesse set out to find a way to use technology to improve on that idea.

Ms. Lee's shop accepts Bernal Bucks, the neighborhood's own currency, promoted by a sign.

In June, Mr. Hesse's software company, Clearbon Inc., and local merchants teamed up with the Community Trust credit union to issue a Visa debit card with the Bernal Bucks loyalty program integrated into it, one of the first such programs in the nation. For every $200 that users spend at participating local businesses, they receive 10 Bernal Bucks. Users can spend their Bernal Bucks on goods and services sold by participating businesses at the rate of one per U.S. dollar, or can choose to donate them to community nonprofits.

Darcy Lee, owner of a Bernal Heights gift shop called Heartfelt, said she signed up her business for the program in the hopes of attracting "a repeat local, loyal customer that is making a conscious effort to shop in the neighborhood."

Merchants such as Ms. Lee agree to give up 5% of the value of goods and services paid for with Bernal Bucks cards. This goes into a fund that users can tap when they spend their Bernal Bucks at participating merchants. Ms. Lee said the effort is worthwhile for marketing purposes because many of the products she sells, such as wrapping paper, "you could easily go to get at Target."

Last Sunday, Samuel Fajner, a five-year resident of Bernal Heights, used his Bernal Bucks card to buy groceries at Good Life food store on the neighborhood's Cortland Avenue. "I make an effort to not go to the big chain stores," said Mr. Fajner, 36, who signed up for the program in June and has accumulated about $120 in Bernal Bucks.

So far, more than 20 of the businesses along the Cortland shopping corridor have joined the program. The hard part is persuading more residents to sign up, say organizers and local businesses. Mr. Hesse declined to say how many people have joined, or how many Bernal Bucks have been spent so far, but said the transaction volume of card users has doubled every month.

In Marin County, the two currency programs require less initial effort for residents to participate in because they use a physical currency.

Last year, the Coastal Marin Fund began minting $3 brass coins that are about the size of a silver dollar. The coins cost less than a dollar to produce, but are sold for $3 to businesses in western Marin county to hand out as change. The profit on the sale from each coin is kept by the nonprofit Coastal Marin Fund, which has distributed more than $3,000 of it to local charities such as the Bolinas Museum.

One major goal, said founder Richard Kirschman, is to tap the 2.5 million tourists who come through the region's 10 towns each year as a source of revenue for local charities. The hope is that tourists will get the unusual $3 coins in change, and then hold on to them as souvenirs —leaving the value of the currency back in Marin. Mr. Kirschman estimates that about 7,000 coins have left the area with tourists.

So far, about 55 Marin businesses have agreed to accept and hand out the coins, according to Mr. Kirschman. The fund minted 10,000 coins and has about 2,000 left, so it is preparing to mint another batch.

After hearing about the Coastal Marin effort, a group of residents in eastern Marin's Fairfax decided to emulate it, minting up about 5,000 $3 tokens of their own, which they began distributing this summer. The goal is both to boost local merchants and aid area nonprofits.

One difference between the two programs is that the Fairfax currency, called the FairBuck, will be backed for a while by real cash held in a local bank. Fairfax attracts fewer tourists than west Marin, so the FairBuck is more likely to stick around town.

"There was some reluctance with some of the merchants. They wondered, 'How do I pay my rent?'" said David Bernard, a member of the FairBucks steering committee. "We assured them that for the first year we would have 100% of the money, so that if they wanted to cash in their tokens they could do so."

Write to Geoffrey A. Fowler at geoffrey.fowler@wsj.com