When the Rockefeller Foundation announced its $500,000 grant to B-Lab this winter, it described the start-up as “one of the newest social capital market infrastructure innovations.” (Rockefeller is now pursuing this idea further by exploring the viability of a “social stock exchange.”) The ultimate intent of launching an entire sector of B Corps, according to Kassoy, is to create transparent standards for good business and a changed legal environment which will allow investors, entrepreneurs and consumers to find each other, thus improving the scale and efficiency of the social capital markets. Among other things, this will require a strong B Corporation brand.

This from an article about B-lab (B for Beneficial) .A non-profit organization that will grant businesses a B rating for companies  that meet extensive standards for their environmental and social performance, scoring at least 80 out of 200 on the B-ratings scale. The article goes on to explain that this is not just greenwashing and that  B-rated companies must also expand their legal and fiduciary responsibilities beyond the interests of traditional shareholders to include a broader universe of “stakeholders” – employees, suppliers, consumers, community and environment.Social capital market infrastructure reads like a good fit with the new hot out of the oven L3C’s .  

B-Lab, a nonprofit organization based in Berwyn, Pa. that certifies individual B Corps and advances their collective potential as a meta-brand for socially minded consumers and investors. To become a B Corp – the “b” is for beneficial – companies must meet extensive standards for their environmental and social performance, scoring at least 80 out of 200 on the B-ratings scale.

http://www.citylimits.org/cont…

UPDATE:  Bill to be Signed Tomorrow, April 30th at the State House, 10:30am. 

Hat tip to BP who started the conversation on Low-Income Limited Liability Companies in his diary, “In the Business Section.” 

Once the governor signs the bill, Vermont will be the first state to allow this unique business entity, aptly referred to as “The For Profit With a Non-Profit Soul.”  Frankly, I think this is a great opportunity for Vermont and reassures me that maybe we haven't lost our sense of national leadership on progressive issues.  Vermont now has an expansive opportunity to lead the nation in the creation of L3Cs which can operate here or anywhere in the world.

There's a great PDF presentation on the subject, from which I draw some thoughts below the fold.  Also, you can get information about the driving force behind L3Cs at www.americansforcommunitydevelopment.org

What is an L3C?  Why is it useful? Answers and examples of a couple creative applications below the fold.

Business as usual just got a lot more interesting….

The L3C is legal solution that allows a philanthropic orgranization to invest, create, or purchase for-profit companies in an effort to fulfill its mission.  Apparently, this is similar to the original purpose of the Program Related Investments (PRI).  The reasons PRIs aren't commonly used are two-fold. 

1. First, non-profit leaders are cautious about tax law, and rightfully ask, “Would the proposed PRI concept fit the IRS definition?”  That question, it turns out, requires an IRS Private Letter Ruling, a process that costs tens of thousands of dollars and about a year and a half processing time.  So a PRI presents an immediate financial and bureacratic hurdle.  This can make a PRI more bother than it might be worth, especially since the investment presents a risk unlike other prudent investments the non-profit might ordinarily make.
2. Second, a PRI's primary objective is shareholder interest, otherwise known as Return On Investment.  The bottom line is that the non-profit's mission is really nothing more than a nice marketing message, making a PRI more like a standard Socially Responsible for-profit company.  Since the PRI is required to put shareholder interest ahead of the non-profit's mission, the investment can inadvertantly run counter to the foundation's mission and goals.

So why is an L3C important and how does it work? 

It doesn't take an expert on non-profit organizations and private foundations to discover an entrerprenurial solution to a foundation's missions and goals.  In fact, if foundations and non-profits begin to put for-profit entrepreneurs to work, they can expect to see some really creative solutions brought to the table.  The timing for the birth of L3Cs is very intriguing, too.  As we being to experience significant changes in our food, fuel, and consumer economy, L3Cs can offer the new , for-profit solutions without being tied to short-term, quarterly gains expectations.  Also, as we begin to enter a recession, L3Cs can help sustain economic activity as it allows venture capital from a completely unlikely source:  private foundations.

So what kind of business would a private foundation purchase, invest in, or form from the ground up?  The answer would depend on the foundation's mission and goals.  There are as many opportunities as there are private foundations and non-profit orgs.

Let's offer a hypothetical.

Farm Foundation, which has worked in the area of economic and policy issues affecting agriculture for 75 years, wants to fulfill one of their High Priority Topics, in the area of Environment and Natural Resources.  At the root of this non-profit initiative is a clear desire to help reduce the environmental impact from farms.  The traditional non-profit method is to facilitate the work already being done by others.  But the root of the problem can also be approached with a for-profit business solution.  

For example, dairy farms impact waterways with excess phosphorous runoff.  It happens that there is a for-profit feed solution which reduces phosphorous, improves milk output, and improves the health of the farm's herd.  But the average farmer won't see an immediate financial benefit significant enough to justify the investment.  Farm Foundation might consider creating an L3C named Phosphorous Solutions to purchase the technology and get the product out to market on at a lower profit margin, making the product more accessible.  At the same time Farm Foundation fulfills it's High Priority initiative via Phosphorous Solutions it generates revenue for continued reinvestment instead of just giving the money away.  It also fills in an economic gap which would have been left void by virtue of market failure.  Farmers wouldn't have bought the product because it was too expensive and the traditional for-profit couldn't offer an affordable discount because it would not make a reasonable profit for its shareholders.

The real opportunity for L3Cs is in these areas where there is an opportunity for gain that has not been captured for one reason or another.  In that sense, maybe we can call the L3C the solution for market failure.  Using the vehicle of the L3C, foundations can:

1. Promote creative efforts to offset negative externalities in the marketplace, such as pollution.  In that regard, L3Cs could become the primary tool in the environmental economy.  L3Cs can also:
2. Support positive externalities, such as health and wellness clinics.  Imagine a low-income healthcare model supported with a captive insurance company.  The combination of controlling health care costs on both the risk management side (the captive insurance company) as well as the provider side (low-income health care clinic) would be a truly American solution to the problem of health and wellness.   

The possibilities are endless.  Why not create an alternative energy utility L3C?  How about solving the problem of Internet and cell phone connections in rural areas?  Transportation?  Etc. Etc.  At at time when rational people have reason to be concerned about our economy, national debt, global competition, climate change, fuel costs, food and hunger, the L3C model offers new hope in it's unique position in providing potential safety nets where ever there is market failure in alignment with non-profit missions and goals.

To understand a little more about where this proposal is coming from, here's an example from the PDF linked above.

Take a hypothetical foundation with a $100 million endowment. If it conducts business as usual,
it distributes $5 million per year in the form of grants. At the end of ten years, assuming the
foundation’s endowment does not grow, it will have spent $50 million on social causes in the form of
grants.

Contrast that with a $100 million foundation that spends 100% of its grant money in the form of
PRIs. Let’s say it earns an annual return of as little as 2% on PRIs, which it substitutes for grants.
Again, for the sake of simplicity, assume that the endowment does not grow. In the first year, it
spends $5 million; the second year, $5,100,000—and so forth. At the end of ten years, that means the
foundation will have spent $54,748,605 on social causes—an increase of about 9.5 %. On top of that,
the money will still be there—ready to be spent on yet more social issues.

But, when it comes to extending the impact of foundation dollars that is not the end. The final
key is a concept known as layering. In fact, various foundations in partnership with New York City
used such an approach to build 40,000 new affordable housing units. The foundations provided $14
million ($1 million to $5 million each) in PRIs, and the city appropriated $8 million. As a result, the
project includes $200 million in bank debt which otherwise would not have been available. That’s a
leverage ratio of 9:1.

But that’s just the beginning. After all, is there any reason that such deals, properly structured,
can’t also include partners like pension funds and other fiduciaries? Or smaller foundations, for that
matter—especially if we institutionalize the more user-friendly L3C? If leverage of the foundation
dollar in terms of social impact is what we want, in fact, the ideal PRI or L3C could even be equity
rather than debt.

Take our project in North Carolina, where 60,000 manufacturing jobs have been lost in the last
five years due to competition from China in the form of low labor costs, looser environmental and
labor laws, subsidized buildings and equipment etc. For many of these workers, these jobs are 3rd or
4th generation. It’s not just jobs that are disappearing, but an entire culture. And as this culture
disappears, entire communities are being destroyed.

As a small foundation, we want to level the playing field so these manufacturers can survive.
After the North Carolina legislature adopts the L3C, our first order of business is to form an L3C with
which to buy a factory where we will house a furniture manufacturing plant and furnish it with the
greenest and most efficient cutting edge equipment possible. As a foundation making a “social
investment” in a “low profit” company that replaces a grant, our goal is not to maximize profit.
Therefore we can make long-term investments like green equipment.

The cheapest way to own the building, of course, is to buy it outright. Without a mortgage to
pay, the L3C can charge a furniture manufacturing company lower rent and equipment lease rate.
This, in turn, reduces costs for the manufacturer, which puts it in a stronger position to compete
—and thrive. The social benefit is saving jobs and a culture and promoting community economic
development.

We estimate that it will be possible to lease the building and its equipment to the manufacturer
at a low rate: about 2%, plus a 1% management fee. But there’s no reason the return from the lease
can’t be split among different tranches of investors: 1%, or less, say, for foundations who treat this
PRI in an L3C as a grant by putting up, say, 20% of the total $10 million cost. And 5% for fiduciaries
who must match market returns when making such investments. (The endowment side of a
particular foundation could co-invest as a fiduciary.)

Is it really appropriate to use foundation dollars to make such high risk investments? The
answer is: Does it really matter if the foundation loses money on an L3C or PRI? Remember, these
investments are intended as substitutes for grants, which foundations are required by law to
distribute anyway. Think about it this way. When a foundation makes a grant, it loses the money
forever.

Now that I've done my homework on the subject, I'd like to thank Bob Lang and the Manweiller Foundation for this kind of creative thinking.  The L3C is an ingenious idea that comes at an appropriate time.

Nate Freeman

Northfield

NateFreeman@gmail.com 

This is a good video…. albeit from April 3. Did any of you catch this? Here’s an unedited exchange between FOX News producer flunkie Porter Berry and Father Pfleger, friend of Rev. Jeremiah Wright.

Enjoy.

(Fair? Unfair? Oh don’t worry… have a lot of diaries planned regarding the Vermont Telecommunications Authority… might as well get started with this. – promoted by odum)

How did that song go? “VTA … what is it good for? Absolutely nuttin'” Something like that anyway; maybe I’m paraphrasin’.

Anyway, I guess I shouldn’t say the VTA is good for absolutely nothing, and in all fairness the VTA’s reaction to the ECFiberNet project could just as easily be about growing pains as anything else.

None the less here’s an oped from the Valley News:

One of the many attractive things about the proposed East Central Vermont Community Fiber Network is how neatly it seems to fit in with Gov. Jim Douglas’ celebrated “E-state” initiative, announced with much fanfare in January 2007.

In his inaugural address that year, the governor said that he wanted to guarantee all residents access to broadband Internet and cell phone service, which he called “a fundamental part of modern life for all Vermonters, as essential as electricity and good roads.”

To help achieve this cutting-edge vision, Douglas proposed creating the Vermont Telecommunications Authority (VTA). The Legislature concurred, and the new 11-member board was born last August with $40 million in bonding authority to provide seed money. So far, so good.

Along comes ECFiber, a fledgling joint enterprise comprising 25 towns (including 16 in the Upper Valley) that proposes to bring high-speed Internet, telephone and television service to every household and business in its service area via fiber-optic cable. The $80 million network would be built through a private financing mechanism called a capital lease.

On the face of it, this would seem to be just the sort of effort the VTA was created to promote. Apparently not, or at least not yet. The authority recently turned down ECFiber’s request for $4 million in state revenue bonds, with a like amount to be held in escrow as a contingency fund. The reason cited by the VTA was that ECFiber’s business plan needed to be more fully documented; for its part, ECFiber says that no start-up could meet the standard set by the VTA, which demanded “a high degree of certainty” that the venture was financially sound.

(Creating The ‘E-State’, What Role for Telecom Authority?, Valley News, 04/29/08)

For the record the VTA wasn’t looking for “a high degree of certainty”, they were looking for AAA bond rating for a start up venture … but that’s a different story.

Anyway ECFiberNet continues to move ahead. It’s currently operating with 20 confirmed towns and 3 more looking at a May 8th do or die deadline to sign on. The managing team consists of some high powered entrepreneurs with long track records of success (for some info on the Nultys see here).

Best part is ECFiberNet isn’t looking to the state for any amounts of money beyond a token “we like this project” number.

(I have not been as consistently thrilled with the TA’s editorial’s of late as Nate is, but there’s no question this one merits special recognition. – promoted by odum)

Kudos to Sue Allen in today's Times Argus in her editorial, Loose Lips. So far, I haven't seen any MSM accountability call for Clinton's Cold War posturing and language, but at least our leading editorialist in Central Vermont is calling out Clinton on unacceptable, escalatory messages to our allies and friends overseas.  Here's Allen's lead in: 

Our leaders must be accountable for their words, and the words “totally obliterate” mean nothing less than nuclear annihilation. If John McCain had unleashed a threat of nuclear annihilation against Iran, the cry would go up that he was a crazy man

Not to fawn over today's piece to the point of a lack of a critical read, Allen's used of the now tired phrase, “Where's the outrage…?” followed by, “…is she getting a pass?” might not have been necessary.  But heck, this observation should be directed to the entire spectrum of national MSM.  

Besides today's editorial, we should note the high quality of Sue Allen's daily writing in the Argus.  Since an editor most often hears only about what readers don't like about their daily paper, I decided to send her a note last week to let her know what a good job she's been doing with the editorials.  

I've put Allen's column on my daily read list.  My note to her last week is below the fold.  But if you're pressed for time, just check out today's piece a la Allen.

Since you have been Editor of the Times Argus I am confident you have received commendations from readers on the rising quality of the daily news as well as your own editorials.  I would like to offer my thanks and appreciation for your leadership in journalism as well as your brilliance in writing. 

Today's  editorial, “Start Talking”  reminded me of a piece you wrote  several years ago titled, “Bankrupt” in your call for the level of integrity Americans deserve from Washington and the national media.

But I am not writing today to simply offer kudos on two particular editorials written by your hand.   My letter today comes from a cumulative impression about the rising level of quality of the Times Argus and how you have created this trend through your leadership, writing, and very smart political observations.

Thank you for work well done.  No breakfast is complete without you.

The United States by itself far outspends the entire rest of the world in military spending, and we are the world’s largest military weapons exporter to boot!

In a well written article for Axis of Logic, columnist Chalmers Johnson writes in part

There are three broad aspects to the U.S. debt crisis. First, in the current fiscal year (2008) we are spending insane amounts of money on “defense” projects that bear no relation to the national security of the U.S. We are also keeping the income tax burdens on the richest segment of the population at strikingly low levels.

Second, we continue to believe that we can compensate for the accelerating erosion of our base and our loss of jobs to foreign countries through massive military expenditures — “military Keynesianism” (which I discuss in detail in my book Nemesis: The Last Days of the American Republic). By that, I mean the mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy. The opposite is actually true.

Third, in our devotion to militarism (despite our limited resources), we are failing to invest in our social infrastructure and other requirements for the long-term health of the U.S. These are what economists call opportunity costs, things not done because we spent our money on something else. Our public education system has deteriorated alarmingly. We have failed to provide health care to all our citizens and neglected our responsibilities as the world’s number one polluter. Most important, we have lost our competitiveness as a manufacturer for civilian needs, an infinitely more efficient use of scarce resources than arms manufacturing.

(The Pentagon Strangles Our Economy: Why the U.S. Has Gone Broke, Axis of Logic, 04/26/08)

I would like to take this opportunity to thank the combined efforts of the Democratic and Republican parties for their part in bringing us the above. And I would like to point out that none of Clinton, McCain or Obama are looking to do anything different about this.

Go ahead … hit the play button …

by I know there is talk here and there about an Obama/Clinton ticket being the perfect combination.  The problem is that while she brings strong demographic assets to the campaign, but also brings a major political liability to it, in the form of her husband.  

Bill Clinton has made this combination impossible.  It’s not because of incidents like him ranting about Obama for 50 minutes or accusing Obama of playing the race card.

Any of those things, in fact, would prove irrelevant if not for one factor:

Absolutely no one can put any control whatsoever on him.  

If Bill weren’t part of the picture, Barack and Hillary could reconcile their differences and put on the proper face and play nice with one another, creating a unified party.  But no sane politician would put anyone on a ticket who’s so directly connected with Bill Clinton.  He’s just too much of a loose cannon in this race to be expected to behave appropriately, responsibly or (dare I say it) politically.

I think Obama knows this by now, which is one of the reasons he’s being so cagey about this.  Presidential candidates need to have a vice presidential ticket which is willing to submit to some control.  It’s admittedly a bad role for the VP candidate; it hurt Edwards in 2004 to be in that position and left Lieberman so bitter that what was left after the process was nothing more than a decaying husk of humanity, forced to roam the Senate, attaching himself to other politicians and bleeding them dry for his own survival, like…

Hmm.

No, I think Lieberman was always like that.  But I digress…

So this is what it boils down to: if Obama wants to win in November, he needs to pick someone who covers some of Clinton’s demographics, but doesn’t present the world with someone who’s so emotionally invested in the race that he can’t keep a lid on his darker instincts.

We need Clinton to go back to being a foundation leader who tries to inspire people to do better, not a public humiliation for his party and his legacy.

• First things first – congrats to Dottie Deans and Doug Racine, who were this year’s award recipients. Doug’s focus on poverty was heartfelt and sorely needed, and received kudos from others speaking at the event, in particular Senator Sanders, Vermont’s reigning DI-AB-NO (Democrat in all but name only). Dottie was terrific, highlighting her work on HIV/AIDS and Hepatitis C support. It was satisfying to see the two awardees forcefully speaking out on two issues that so make Republicans squirm (and thanks so much to Dottie for inviting me to come along and to sit at your table! Woo-hoo! Front row! It was even worth missing Battlestar Galactica!).
• If you’re curious – yeah, Rep. Gaye Symington gave a solid speech (trust me on this – I’d be the first to say if it sucked). The content was solid, punchy and quippy – maybe even a little too quippy. It was pure political stump speech, no hand-wringing about how mean the Governor has been to her, no rambling or repetition. It wasn’t exactly delivered with 100% confidence (yet), but it was offered to the crowd as though she wanted to be in charge of the room, rather than like a high school science fair oral presentation that she wanted to be finished as soon as possible.

  It was about a 1000% improvement – and it left little doubt that she has chosen to break free of her insistence on doing things the way she’s always done them. She wrote that speech with help, AND she practiced it. That tells me she’s approaching the task of re-introducing herself to voters with open eyes. If you can’t tell from my tone – I was surprised. Pleasantly so. She’s still got work to do (and precious little time to do it, if she’s serious), but the first step is admitting you have a problem, and in terms of communications and presentation, Symington is clearly into step two or three already.

• Yes, Anthony Pollina (who still gives a much better stump speech, there’s no doubt) was there. All I can say is that it must’ve been weird to be him in that room. Republican Senator Vince Illuzzi was also on hand. A shame $60 checks dont have to be itemized on political party contribution reports. That would’ve made for entertaining visuals.

I had a few more eloquent diary titles in mind, but that seemed more appropriate.

So, Obama’s wrapped up his voyage to the darkside, being interviewed on Fox News by Chris Wallace, so he could – as an aide said to reassure the base – “take Fox on…”

Yeah, right.

So was it worth setting back what has been an extraordinarily successful campaign to marginalize Fox news and label them as a GOP mouthpiece? Please. In fact, after weeks of serious backup on the Jeremiah Wright issue and others from the blogosphere, he used the opportunity to lay the groundwork for his inevitable Sister-Souljah-ing of the progressive netroots, just as many of us were figuring he would do from way back, by making a specific point of distancing himself from Daily Kos.

But through this episode, I think I’ve put my finger on what has always been so particularly annoying about Obama. It’s not simply that he doesn’t live up to his own hype – find me a politician that does, after all.

It’s that – as a relatively fresh, youthful face with great oratory skills (if lackluster debating skills), brief flashes of brilliance and a uniquely compelling personal narrative, you get your hopes up. Despite all common sense, he does get you to think that maybe he actually could live up to the hype. It’s all about expectations (and by comparison, I, for one, have little-to-no expectations for Hillary Clinton whatsoever).

But once again, we get shined on with a oh – it’s okay, he’s just going to Fox News to give them what-for! Yeah!, only to be not merely left utterly flat, but to find ourselves disrespected to boot.

Blehch.

So, it seems that Symington has all but announced for Governor, as Friday’s Democratic Party Curtis Awards dinner frequently took on the flavor of a campaign rally (despite Anthony Pollina’s presence, inconveniently seated on the side of the room with the most boisterous Symington-supporter contingent). As for Ambassador Peter Galbraith, who was making the rounds mulling his own gubernatorial run only a couple months ago? From where I was, it looked like he was seated next to Symington, so I guess that makes its own statement.

But that means… who’s gonna be the Speaker next year (assuming the Dems keep the majority – which they will)?

Now lets be clear: its beyond silly to speculate about this stuff now. But I, for one, feel quite comfortable in the land of beyond silly, so anybody who feels like jumping in, have a vote…leave a comment…I’ve included in the poll the names that were most recently whispered to me as possibilities, but that was days ago! A virtual eternity!

Poll after the flip! (remember, you have to be logged in as a registered user to vote)

NOTE: I’m not trying to leave anybody out here – like Majority Leader Carolyn Partridge, for instance, who I think is great. I’m just going up with names I got from a scuttlebutt rumor email last week, rather that making it a horse race poll.

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