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Berkeley’s Landmark Micro-Bond Program Offers New Quick Funding

Berkeley City Hall, November 6, 2020. Photo: Pete Rosos

Ericka Xanthe W., a freelance pastry chef with a booming business in Berkeley, wants to expand her house to physical space, but can’t afford a $ 3,000 rent for the roughly 600 square feet she needs. She could use $ 50,000 to $ 60,000 to start.

She found that other small businesses, especially cafes and restaurants, left their spaces along San Pablo, Shattuck and Telegraph avenues in the first year of the pandemic – which has hampered dining establishments in nationwide – to find that landlords wanted to raise rents to recoup losses from months of vacancy.

Xanthe W., 40, who has lived in Berkeley for 15 years, hopes that she and other traders can get money from a new town and all of a sudden Internationally renowned blockchain micro bond financing program, unanimously approved by city council in December to hire a company to start the process, according to a town hall press release.

“I think a lot of them want to come back to the same spaces because they were part of the community, but just can’t afford it,” she said.

The micro-bond program offers an efficient way to provide loans – including small loans – with little input from the wider financial sector, city officials say. This prevents Berkeley from financing projects through the national public finance investment banks, which resell the debt to private clients, the statement said. He adds that projects financed by micro-bonds will also avoid the commonly used municipal bond market. This market is “opaque” with “high barriers to entry,” the statement said.

Berkeley’s micro-bonds will run on blockchain technology, which means investments are transparent and can be quickly backed by supporters inside or outside the city, according to city officials. Blockchain technology refers to a distributed digital ledger that uncovers the details of bond issues, a type of long-term loan preferred by local governments over decades to finance major construction work, and cuts out administrative middlemen.

This benefit will allow project managers to borrow the full costs of projects on demand rather than “when a project is cleared and permits issued,” said Kiran Jain, lawyer and urban technology strategist based in Berkeley who has followed the development of the program.

The idea arose out of a weekly meeting between City Councilor Ben Bartlett and Mayor Jesse Arreguin in 2017, shortly after Bartlett took office and coinciding with the start of their term as President Donald Trump. The Trump administration had lowered the corporate income tax from 39% to a flat 21%, eliminating part of Berkeley’s normal funds for affordable housing and renewable energy projects. Two homeless were frozen to death around the same time, the council member recalls.

Ben Bartlett, Berkeley Board Member. September 2018 (Old Town Hall). Photo: Emilie Raguso (file photo)

“The mayor and I were discussing what to do,” Bartlett said, recalling a meeting at the Eureka! restaurant and finally come across locals who knew the blockchain.

“We are currently in crisis mode. The inequality of wealth in the country, in California and in Berkeley is unlike anything we have ever seen. It’s extreme, ”he said. At the city level, he added, “that’s kind of what we do: we innovate around problems and sometimes it’s money problems. It’s a really interesting labor of love that we’ve been working on for about five years now.

Residents excited about the micro-bond program are already coming to it with ideas for projects that can be funded, the board member said. They suggested creating parks, burying power lines, opening a Berkeley shuttle, launching a city-run self-service bike, starting public Wi-Fi in the city, and offering rides. food vouchers for the homeless – to name a few of the ideas – he said.

John Moore, a resident of Berkeley for 16 years, is considering $ 10 million to $ 20 million from the micro-bond program to open a cannabis institute that would educate students on a West Berkeley campus. The funding would last 20 years, he said. Most cannabis-related projects don’t have the scale to qualify for conventional funding, Moore said.

“Right now we are almost categorized and microfinance gives us more opportunities to build and develop,” he said.

Affordable housing projects feature prominently among the potential beneficiaries as the city seeks ways to shelter the homeless, the elderly and those with low incomes. Chris Schildt, a member of the Friends of Adeline advocacy group, said the micro-bonds could fund around $ 300 million for housing on 5 acres near the Ashby BART station, for example.

The micro-bond money could also help promote the regular train station parking lot flea market and encourage African Americans to return to the Adeline Hallway if they leave due to a redevelopment, Schildt said, a former town planning commissioner. “We are talking about how to right the wrong done to the African American community. “

The launch of micro-bonds shows the first signs of pioneering Berkeley, Bartlett said. After the city announced its intention to launch the program, he said, private banks, two European countries, the United Nations and the environmental group tried their own micro-bond program or expressed interest in try one.


Ralph Jennings is a UC Berkeley alumnus and career journalist who returned to the Bay Area from Asia last year.


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