Interim TE Fund
This document describes how Brassica Collective funds are managed during this interim stage where we are not incorporated. The intent is that once a legal structure has been prepared to represent the Brassica Collective, funds will be moved over to that system.
Adding Funds
Who can add funds?
Any Brassica Collective Voyager can add funds. If you are not a voyager, and are wanting to contribute to the Brassica Collective financially, please contact crew@radhousing.org to discuss. A Transitional Equity balance will be tracked for all Brassica Collective Voyagers, regardless of whether they have added funds or plan to.
I’m a Voyager, why would I add funds?
You are under no obligation to add funds. However, we encourage everyone to add some funds each month if they can afford it, even if it’s a really small token amount. This allows you to practice participating in the financial model that we’re planning to deploy for managing housing costs collectively, which is likely to be a much larger part of all of our budgets in the future. Additionally, we do actually need funds at this stage of the project, to pay for the services which will help us get moving towards our first house purchase.
How do I add funds?
By bank transfer. Please contact crew@radhousing.org to get bank details.
Transitional Equity Balances
What is my Transitional Equity Balance?
Everyone who participates in the Interim TE Fund has a Transitional Equity Balance (TE). Your TE represents how much equity you currently have in the scheme, and is fully backed by the scheme’s assets (money for now, and in the future, real estate and other assets). When you make your first payment into the account, your TE will become equal to that payment.
Over time, however, your TE will no longer equal your payments. This is due to both Negative Interest, and Asset Value Change. In this interim period, this will likely result in your TE reducing.
How does Negative Interest work?
We apply a negative interest rate to your TE. This reduces your total balance by a small percentage. The current Brassica Collective interest rate is: -2%.
The negative interest rate is a yearly rate, but applied monthly. This means that for 2% interest, your TE is reduced by one twelfth of 2% each month.
How does Asset Value Change work?
When you send money to the Brassica Collective bank account, you are issued with TE. This increases the total pool of TE issued, but it also increases the assets we have to back it by the same amount. However, if the value of our assets are reduced for any reason, everyone’s TE is reduced.
This Interim TE Fund is designed to mimic the planned Transition to Stewardship model, which discusses how asset value can change if properties are re-valued here. During this interim phase where there wont be any real-estate ownership, assets are mostly likely to just be cash on hand. Thus, if we spend cash on something we need to further the project, such as a lawyer, then our asset value goes down, and much like if property values go down, everyone’s TE is reduced proportionally so that the TE balances still equal the current asset value.
If in the future we gain some value back, then your TE value could rise again.
How does TE-MAX work?
When the value of our assets changes, it’s important that we reduce everyone’s TE to match so that we can continue to have enough assets to pay out someone who wants to leave. However, reduction of TE in this way is most likely to represent a temporary dip in asset value, such as when we’ve incurred a big expense in the project but not yet realized the benefits (such as an increase in property value).
During the use of this interim fund, we’re almost entirely in this temporary dip period. We’re funding expenses to setup the actual legal entity and legally represented Transitional Equity scheme, and yet we don’t get any material asset until we buy the first property which occurs after that.
To ensure that we don’t reduce TE during a short drop in asset value and never bring it back up, we maintain another number called your “Maximum TE Balance” or TE-MAX. This number is essentially your TE as if it had not been reduced due to asset change. If our total asset value increases, your TE is allowed to increase up to your TE-MAX, but never further.
Note that if your TE changes for non asset change reasons, including the negative interest payment, or if you withdraw TE for any reason, you TE-MAX goes down proportionally too.
Management and Reporting
Do I need to tell you if I send money, or add any reference code?
Ideally that wouldn’t be necessary, but bank account statements can vary a bit in what information they provide about the sender of money. If you could add your preferred name into the transaction reference, that would help, especially if your bank account is under another name.
If we find any deposits that we don’t recognise, we’ll ask the group and figure it out.
How often do you calculate my balance?
All scheme calculations are performed monthly (per calendar month). Any numbers calculated during before the month ends are estimates only.
How do you report on it?
You’ll receive a statement of your balance each month, no later than a week into the new month. This will be via email. We may also have a web URL you can use to check your balance, although probably not for the first few months.
What could the money get spent on?
We know that any expenditure of money reduces everyone’s TE balance, and we think that shouldn’t happen lightly. As such, expenditures should ideally be things that materially drive forward the project. Our process for this is that money is spent only by crews which have a delegated power to spend money towards a certain objective. Additionally to this the RAD crew will oversee that money is not being spent needlessly and will raise the alarm with the Voyagers if we seem to be getting off track.
In addition to expenditures based on delegated crew responsibilities, it’s also possible that our account might incur fees and charges, which are considered unavoidable reductions in our asset value.
Who can see my TE balance?
To avoid creating a disparity between those involved in bookkeeping and those not, TE balances are transparent within the Brassica Collective Voyagers. They are not shared outside that group.
However, while everyone’s TE is available to look up and all books are visible on request by any voyager, it is not proactively sent to others. You are only sent details of your own balance and group totals, and likewise any software developed will not proactively show you the balance of others, you’d have to go through a few clicks to find it.
Withdrawing Funds
When can I withdraw funds?
The Transition to Stewardship model provides three reasons for withdrawing funds. They are:
Reducing monthly contributions (a bit like rent)
During this Interim TE Fund, it is not envisaged there will be a requirement for Brassica Collective monthly contributions because we will not have bought a house yet.
Shelter assistance if living outside the scheme (paying for your rent elsewhere)
Strictly speaking the scheme isn’t providing housing at this stage, so we’re all living outside the schema and probably all need shelter. So, we’re going to focus on the intent of this and say: you can withdraw some or all of your transitional equity (without having to leave the collective) if you are experiencing financial hardship and need assistance paying for your housing.
Cashing out
If you leave the the Brassica Collective at any time you will automatically be paid out your TE. If you wish instead to convert it to a donation to the collective, that can only be done if we have some other means setup to accept donations (not covered by this document).
How can I withdraw funds?
Email crew@radhousing.org with your reason and bank details, and we’ll send you the funds.
Ending the Scheme
When does this scheme end?
The Interim TE Fund ends when either:
[a] The Brassica Collective decides to wind up the fund
This could be because the Brassica Collective decides to wind up without purchasing a property, or because it switches to a radically different model that doesn’t require a shared fund. In this case, any debts will be paid then the remaining funds disbursed in proportion to current TE balance.
or [b] The Brassica Collective moves to a fully legal implementation of a TE fund
In this case, we will attempt to move this fund into the new legal implementation as smoothly as possible. This might be done by disbursing the funds back to individuals, then inviting them to add them into the new fund on the new terms, or there might be a pathway to move the funds across directly