The Citizens Land Development Cooperative (CLDC), also referred to as the for-profit Citizens Land Bank (CLB), Citizens Land Development Corporation (CLDC) and Community Investment Corporation (CIC), has been designed to serve as a for-profit land planner and private-sector developer geared to sustainable development and growth at the community level. The CLDC would plan land use and develop the land within designated urban and rural enterprise zones for industrial, commercial, agricultural, residential and public purposes. It would sell and lease the land and structures for public and private uses and impose charges for improvement and maintenance. To avoid restraints on competition, the CLDC would normally not own other businesses that choose to locate on CLDC-developed land.
The CLDC would function just as the Rouse Corporation did in building the planned community of Columbia, Maryland or as the Reston Corporation did in building Reston, Virginia—but with a difference. It would turn community residents into its principal shareholders.
As explained below, every man, woman and child would automatically receive as a fundamental right of citizenship (like the political ballot, at no cost), a single lifetime, non-transferable voting share in the CLDC. (Children’s shares would be voted by their parents or guardians until the child reached the age of majority.) This share would be cancelled upon death or if the citizen changed his or her permanent residence to another community. As shareholders and through their representatives on the CLDC’s board of directors, local citizens could hold land planners and CLDC managers accountable for local land use decisions.
Through the CLDC, each citizen would also share equally as an equity owner in the community’s appreciated land values, rentals and other fees when the CLDC’s plan for market-based development becomes operational. Such widespread participation in profits (normally flowing to outside investors) would supplement local incomes from wages, welfare and other sources. All citizens could then better afford to contribute to the costs of government, health, education and other services under the community’s own growth model of comprehensive development.
Where the CLDC Can be Applied
The CLDC strategy and its institutional structure for mobilizing citizen action are easily adaptable to areas of virtually any size, such as land surrounding nodes of a mass transit system, a downtown renewal area, or an inner-city neighborhood. The CLDC can even be adopted for rebuilding an entire city or metropolitan area suffering from a radical reduction of its population due to outsourcing of manufacturing jobs to countries with lower labor costs (such as Detroit, Buffalo and other Rust Belt cities, for example).
A CLDC could also be designed for redeveloping a multi-state region that has suffered from a natural disaster (such as the region hit by Hurricane Katrina in 2005). Enterprise zones are ideal test sites for CLDC demonstrations. High technology industrial and research parks also make attractive CLDC candidates.
Promoting Ownership Participation
by All Citizens and Workers
While the CLDC would aim at creating an environment within demonstration development areas for stimulating private-sector growth and new private-sector jobs and entrepreneurial opportunities, its unique emphasis is on widespread participation, particularly in the ownership and control of land and infrastructure that must be fabricated upon the community’s land for expanding the local economy.
Companies attracted to the area would be encouraged to adopt leveraged employee stock ownership plans (ESOPs) so that area workers could also earn shares and share profits from the companies for which they work.
Without the CLDC’s broad-based ownership approach, low-wage workers within a development area can easily be exploited by outside investors and companies seeking to compete with low-wage companies in the developing world. This weakness, however, can be converted into a strength and magnet for companies willing to allow their employees to link growth of their future earnings to the increased productiveness of capital assets, reflected in growing equity accumulations, dividends, and individual and team bonuses tied to profits.
Lower fixed labor costs in broadly-owned local companies, particularly those applying Justice-Based ManagementSM to encourage an ownership culture, can reduce capital flight and increase job security and employee incomes, without increasing product costs. Such companies can then become America’s models for global competition.
One word of caution. The Citizens Land Development Cooperative (CLDC) is radically different from not-for-profit Land Banks, Community Development Corporations (CDCs), Community Foundations, and Community Land Trusts, which do not provide direct ownership power and dividends to the citizens in the area. These tools of development launched in the “War on Poverty” of the 1960s too often produced poorly-managed enterprises whose ownership and control frequently fell into the hands of the few who politicized control over the organizations and local jobs. By centralizing ownership control and profits, such non-profit vehicles empowered local leaders, not the people. The CLDC, on the other hand, is designed to empower every citizen directly.
How Would the CLDC Work?
Control over capital credit largely determines who will own and control productive assets and share in future profits. The CLDC would operate like a special type of real estate investment trust (“REIT”). With similar tax treatment now available to workers in corporations and cooperatives, the CLDC would work like a leveraged employee stock ownership plan (“ESOP”). Given credit democratization powers, the CLDC would turn citizens into 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 CLDC could purchase surface and sub-surface rights in land for development at fair market value from present owners. The CLDC could then offer long-term leases to users of the land.
Publicly owned land could also be donated to the CLDC for development, keeping local land in the hands of local voters. (This is based on the principle that anything owned by government can and should whenever possible be owned by the citizens that government is supposed to serve.) Public condemnation powers could also be delegated by government to the CLDC to enable local voters to acquire land for CLDC development projects.
Under the proposed Economic Democracy Act, the long-term development costs of land acquisition and essential infrastructural assets would be financed through local banks. These bank loans would be made discountable at a regional Federal Reserve Bank (under Section 13 of the Federal Reserve Act). The Fed would then monetize these loans with new interest-free, asset-backed money that would be cancelled as the loans are repaid with the full stream of future pre-tax profits from land rentals and other development revenues of the CLDC. The loans would be collateralized and secured by the land and other assets held by the CLDC, reinforced by private-sector capital credit insurance.
To the extent the CLDC requires Fed-backed capital credit from local banks, that portion of bank-supplied loans to the CLDC would be subject to transaction fees and loan default risk premiums. All CLDC debt would then be repaid wholly with future CLDC profits earned primarily from long-term land rentals, extraction fees, and user fees from developed land owned by the CLDC. Residents would not be personally obligated in the event of default on the share acquisition loans. Any CLDC profits above the cost of servicing bank loans would then be distributed to each of the citizen-shareholders.
The CLDC could also provide attractive discounts in the sale or leasing of land for commercial or industrial purposes to corporations that adopt ESOP financing techniques for their workers and residents of the community. Separate profit centers and maintenance subsidiaries of the CLDC would be financed generally by loans which, when retired, would earn additional property incomes for their workers and community residents.
The end result of channeling credit through CLDCs 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.