How Would the CIC Work?

Control over capital credit largely determines who will own and control productive assets and share in future profits. The CIC—by using a special type of real estate investment trust ("REIT"), a credit democratization vehicle that works similar to that of an employee stock ownership plan ("ESOP")—would create new owners of undeveloped land and newly created assets, without taking existing property away from present owners. With the power to borrow funds from any private or public sector source, the CIC could purchase land for development from present owners. Publicly-owned land could be donated for development by the CIC, keeping local land in the hands of local voters. Public condemnation powers could also be used to enable local voters to acquire land for CIC development projects.

CICs and companies adopting ESOPs would be financed primarily through state and local industrial revenue bonds, supplemented with conventional market-rate loans from local banks and other traditional sources of productive credit. Such funds could then be used both for acquiring shares in the CIC and for meeting the financing needs of companies operating in the development area. In turn, the CIC could use the funds for acquiring and developing land. ESOP companies would be another conduit for financing on credit new machinery and buildings, working capital, acquisition of shares from retiring owners, etc.

CIC shares could be acquired for the accounts of residents and other eligible persons generally with little or no down payment, based on funds borrowed by the CIC and secured by the general credit of the CIC plus land and assets held by the CIC. The CIC itself would guaranty repayment of stock acquisition loans, pledging CIC assets (i.e., land, structures, equipment and receivables) as collateral. Credit for purchasing CIC shares would be repaid wholly with future CIC profits earned primarily from sales and leasing of developed land. Residents would not be personally obligated in the event of default on the share acquisition loans. As the CIC loans are repaid with CIC profits, CIC shares would be allocated among the individual CIC accounts of community households according to the points they earn under the Community Shareholders Participation Plan. The CIC would also serve as a community-based "stock exchange" for repurchasing CIC shares from outside investors or residents who move outside the community.

The CIC could also provide attractive discounts in the sale or leasing of land for commercial or industrial purposes to corporations adopting ESOP financing techniques for their employees or residents of the community. Separate profit centers and maintenance subsidiaries of the CIC would be financed generally by loans which, when retired, would earn additional property incomes for their employees and community residents.

The end result of channeling credit through CICs and ESOPs is to keep as much as possible of future equity accumulations (i.e., "capital gains") and development profits in the hands of community citizens, rather than being drained out by speculators, wealthy outside investors, outside consultants or local exploiters of the community.