The Wall Street Journal Interactive Edition -- June 27, 1996 Community Groups Print Local, and Legal, Currencies By ELLEN GRAHAM Staff Reporter of THE WALL STREET JOURNAL At the Fine Line Printing shop in Ithaca, N.Y., crisp new 1996 bills are coming off the presses. Valued at about $6,000 and bearing an engraving of a steamboat, they will be stashed under lock and key at the local credit union until someone stamps them with serial numbers. Then they will begin circulating through the local economy as perfectly legal -- and taxable -- wages, rent payments, mortgage fees and pocket change. Residents of Ithaca, a city of 30,000, have had their own paper money -- in addition to U.S. dollars -- since 1991. "We printed our own money to level the playing field," says Paul Glover, a writer who dreamed up the currency and helps oversee the system as a self-styled "community economist." The money is denominated in Ithaca Hours, with each Hour valued at the equivalent of $10, the area's average hourly wage. So far, Hours valued at a total of $57,000 have been put into circulation. Instead of winding up in the coffers of distant corporations, Mr. Glover explains, Hours must be spent locally. "They stay in our region to help us hire each other." At a time when giant banks and credit-card companies are working to perfect electronic cash that leaps national boundaries instantly and invisibly, groups in about 30 U.S. cities and towns are going in the opposite direction and trying to keep money on Main Street by printing their own. Local-currency now circulates in Madison, Wis.; Takoma Park, Md.; Detroit; and Waldo County, Maine. Ithaca has been the trailblazer, and Mr. Glover says he has distributed his $25 "Hometown Money Starter Kit" to over 600 communities in 47 states. Local currency is legal, but the government stipulates that the notes must be smaller in size than dollar bills, issued in denominations valued at a minimum of $1 and reported as taxable income to the Internal Revenue Service. Prior to the Civil War, virtually the only currency in the U.S. was local, issued by banks. National currency came into being in 1863, yet when banks closed during the Depression, private scrip was issued in hundreds of communities -- by municipalities, school districts, manufacturers and even individuals. The U.S. banking system and Federal Reserve notes in use since 1914 were expressly designed to end the currency confusion and to link one community to another in a prosperous national marketplace, says Jesse Stiller, a historian in the Office of the Comptroller of the Currency. He adds: "I shudder to imagine the chaos that would ensue if dozens of communities followed Ithaca's example." The local currency of Austin, Texas -- bearing a likeness of an armadillo and called Dillo Hours -- started up in late 1994; bills valued at the equivalent of about $5,000 are now circulating, mostly among small businesses and the self-employed. In remote Harvey, N.D., (pop. 2,300), three local banks have for several years granted no-interest loans in the form of Harvey Bucks, which can be spent for holiday purchases at participating local stores and are to be repaid over nine months. The retailers get 95 U.S. cents for each Harvey Buck, amounting to a 5% fee for the lender banks. In Massachusetts' rural Pioneer Valley, a 425-member barter network known as the Valley Trade Connection has issued about 55,000 Valley Dollars -- the equivalent of $1 each -- in the past year or so; users include everyone from Rotarians and grocers to belly dancers and clowns-for-hire. "One thing you notice about printing money is that everyone is interested," says Tim Mitchell, a project manager at the Franklin County Community Development Corp., a nonprofit agency that sponsors the Valley trading network and currency. But he concedes that curiosity is often tempered by fears of being stuck with worthless scrip. When a restaurant in Amherst, Mass., began accepting Valley Dollars for 50% of patrons' bills it was quickly swamped; it now requires customers to pay a larger portion of their bills in federal dollars. But nowhere is a local currency so entrenched as in Ithaca. Its notes, in five denominations ranging from one-eighth of an Hour to two Hours, have been earned and spent by some 1,500 people, including 300 businesses, says Mr. Glover. He estimates that they have changed hands in local transactions valued at $1.5 million. Banks and chain stores don't accept Hours, and local businesses usually take them only as partial payment for a purchase (after adding sales tax). Linda Daybell, president of Ithaca's Chamber of Commerce, says a merchant's decision to accept Hours or not depends on whether he or she needs dollars to pay out-of-town vendors. If not, she recommends Hours as a way "to increase foot traffic." Mr. Glover began by knocking on doors, clipboard in hand. Initially, 90 tradespeople agreed to accept Ithaca Hours and to list their goods and services in a barter directory, thereby receiving two Hours, valued at $20. The free, bimonthly directory now lists hundreds of service providers. The new money got a big boost at the outset, when two movie theaters agreed to accept Hours for the full price of tickets. "That snapped people to attention," Mr. Glover says. One theater spent some of its Hours to buy cider at a food cooperative supplied by Littletree Orchards, which accepts Hours for 100% of a sale. James Cummins, the owner of the 100-acre orchard, says several of his employees now take their full salaries in Hours. He says he is comfortable amassing up to 500 Hours to spend on payroll and major farm improvements, such as a recent addition to his barn. "At first people were leery about sitting on more than 10 or 12 Hours," he recalls. "They worried that the system was going to crash." No longer. "It's grown to a way of life in Ithaca," he says. "The chain has enough people in it and it's unbroken. Virtually all professional services can be purchased with Hours, including physicians and dentists." Mr. Cummins's only complaint is that demand for Hours is now greater than the supply. The money supply -- or Hours supply -- is overseen by an advisory board that meets regularly. Ithaca's Autumn Leaves Book Store replaces damaged Hours and occasionally sells usable ones to newcomers or others for $10 cash. An employee at the food co-op pays part of his rent in Hours to his landlady, Debby Thompson, who also accepts Hours in payment for the kayaking and weaving lessons she offers through the exchange directory. Ms. Thompson, who earns a salary in dollars as a home health-care aide, spends her Hours on home repairs, haircuts, restaurant meals and movies. "We wouldn't eat out if it weren't for Ithaca Hours," the divorced mother of two teenagers says. She has also donated Hours to a local displaced-homemakers agency. "It feels terribly good," she says. "You see the money's value coming around again and again." To Mr. Glover and others in the local-currency movement, that's the point. Interest-free Hour loans and grants seed start-up businesses and local charities. Another benefit is that like-minded people in the chain get to know one another, strengthening community ties. What's more, says Carol Chernikoff, the mortgage loan officer at the federally chartered Alternatives Federal Credit Union, the hometown money "is backed by people you know, whose farms you've driven by, whose faces are familiar -- rather than trillions of dollars of debt." [Image] Copyright © 1996 Dow Jones & Company, Inc. All Rights Reserved.