FOTSC/minutes3

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Meeting 29th

First item Donald Jackson

Black Star Coop on the board, have started a coop think-tank that advises Austin: strong coop support, wheatsville, REI, housing coops Credit unions are coops too

Coops are distinguished in that they are member owned and member controlled They exist to serve member needs equal voting shares, everyone pays in to get an equal equity stake IF you leave you get your money back and loose your vote The board operates the committee Blackstar has elections and a nine-person board worker coop vs consumer coop worker coop is a democratically owned and exists to provide stable long-term employment for its workers (compete and market), there are many examples mondragoon coop in spain is a famous example Round rapid backery coop is a new one (make bread) Isthmus engineerign is a worker coop, they make the machinery for scotch tape

Investment shares: non-member share have no voting capital, but does have dividend. They can be bought back This allows coops to sell finance, and offer a rate of return, but does not diminish the democratic aspect

Martin: are there precedents for becoming an LLC, and if so how does that work?

Donald: If an LLC sells its company to its staff it converts without capital-gains There is no reason a coop can't be instantiated, it is composed of democratic organization, and must serve the purpose of the members That’s about it

Marshall: The coop domain meet international standards, do they need you to do more?

Donald: Coops are much bigger internationally, they are tied to bigger entities and have more members We decided to conform [to european model] in order to promote the cooperative identity. Cooperation among coops is a big part of that For example, we buy our bread from Black Star, which is good for us, and also works The domain is part branding, and partially recognition and support of the cooperation between coops

Joe: The investment shares are still single vote per person?

Donald: That's correct, they exist to offer an investment and provide dividends

Matt: How do you actually form a coop in Texas? I had a hard time finding things other than agricultural coops could not find the formation of an association

Donald: I have a document here about the formation process... I can get specific documents after this

Matt: Who do you register with?

Donald: Its very similar to a business charter. So few had done it before that the department of business There has been a recent spurt of activity in Austin, so it’s pretty easy now

Matt: Is it still limited liablity? Or no? Donald: If the coop looses money, the members aren't liable for business liability issues.

Joe: We get tax benefits for the LLC, but...

Martin: The LLC protects the company assets, what happens if someone outside sues a coop (for injury) Does the coop offer any protection?

Donald: Board members might have liability, but the members... no. No, not possible [that they are liable]

Martin: Does it allow for unpaid executive?

Donald: Your staffing structure is flexible. The egalitarity of the coop is the ownership They aren't 501(c) 3, but they are NFP. All funds are either reinvested or used to pay off outstanding obligations: EG investor share Or equal dividend payed out to the members at the end of the year (EG wheatsville and REI)

Martin: So this sounds like an S-corp holding [that has stocks]. What sets their [stock] value?

Donald: We set them at the outset, those were used to gather investment. They are not tradeable Value is original stated value plus interest we can offer from profit (muttering other people have questions) we’re starting to pay those investment shares back, shooting for 6% ROI I can get more info tax and liability if you guys need it

Joe: What is the coop think tank?

Donald: We have a group that works together, it's very new and helps people to start coops

Matt: Could you share that with us? We still need the legal documentation, we need to know what to file

Donald: Sure!

NEXT ITEM

Martin: Mixed business models! 501(c)3 + LLC. I have news. Actually, the two entities are not joined by a string, they are divorced by an air gap firewall The landlord leesee situation could be that the owner gives away his facility and gets a tax writeoff but. The group that is. Since researching this it seems like it is riskier than I thought. I do think it is interesting, but tricky. It comes down to: you need a lawyer.

Joe: In that [example] case how did it work?

martin: Landlord donated half the value of the space, I give you a 50% off rate care

Joe: That doesn't really solve anything, it just divorces the structures.

Martin: ...yes. It’s tricky.

Eric: Taxable subsidiary is another option. In 501(c)3 have an LLC for special tasks outside your charity scope. 501(c)3 are limited to doing exempt activities, so if they want to do something that isn't exempty they can partially or fully own another entity, and that The example we know best could be mozilla foundation, which made a deal with google by forming mozilla corp The corp then maintains complete autonomy, but they have to maintain restrictions about how the two interact. 501(c)3 cannot do things at a loss, nor at a non-market value, but they can interact. It might let us do both exempt and non-exempt We would have to justify this

Joe: That would be the intent to get the donation [and] use it to do stuff

Eric: Educational uses versus non-education uses are in contrast. Educational use is tax exempt, but you can't take the same machine donated and use it for profit.

Joe: If we wanted to start a particular enterprise and get some donations to do it, we As soon as we put it out there, we have to carefully box it out. If a large corporation donated a CNC mill that was tax deductible, we can't take it and sell ultimakers....

Eric: Actually, that's still OK, but you can't just take the profit. It must go to charity (EG business itself)

Jeff: Not true! No, that’s a common misconception. After a long conversation with Mitch, we found that members can actually use the equipment for their own profit We can actually work around those issues, the space needs to be careful of the situation where 'the space' is doing a for-profit So, members can make profit, just not for the space.

Mert: There are several 501(c)3 organizations with an economic development mission, they actually provide manufacturing facilities! People profit from their offerings At some point we need to update that page: 'business incubator'

Martin: The problem lies in the transition between those two entities, how do we convert those assets? Once converted, all the prior assets have to be liquidated. They can convert to a foundation and don't come back out.

Joe: There are two point: Is it useful for us to be? How do we get there? We can't get there without attending this investment: EG Martin's It is conceivable we could buy out the investment, buy out the LLC Really we can’t do it because Martin’s investment is so big! (general mumblegrumble)

Martin: Wherever this goes, this is a question of finding the process, no I’m not stopping anyone. If I wanted to stop this, it would have been stopped. If he[Pointing to Matt?] didn't want to be a participant, he could have taken his ball and gone home. By default it would have caused damage, I don't want to do that, never has been. I Want the same things everyone else does I just have a 'heart' stake in it.

Eric: Regarding noisebridge. Isn't it open to the public? That makes a huge difference

Jeff: Yes, that's a big deal. You can't incorporate as a charity and let only members in. We do have to be providing a public benefit. We must not restrict activities to member only You cannot be a private club, you must be for the public You can have hours that restrict, but must be available to public

Matt: We can charge a fee, but we can't have a class that is member only

Joe: If we have the intent of being a business incubator, but we can't turn them aside, how do we keep them in line?

Jeff: you can't restrict your services only to members. I'm reaching limits of my knowledge, but...

Joe: you could provide a benefit to someone who donated something: EG Public radio, giving people CDs But public radio must still provide their service to everyone.

Martin: Yes, it just get trickier

Jeff: We might have to state clearly what our charity is, and ‘extra’ donor rewards.

Marshall: Like a volunteer dinner, or bonus widgets.

Joe: but what do we gain? One reason, give tax incentive for donations. so corps will donate to us IBM for instance will give us free stuff. The other part is equity stake in the entity

Martin: It doesn't happen in the 501(c)3, it does in the coop and other It always becomes a transition. (rabblerabblerabble)

Hannah: consensus! Do we want to continue the subsidiary nontaxable Do we want to consider the hybrid models (Weak humming)

Joe: If we continue to consider all options we will be here all night

Hannah: Yes, let’s break it down. Should we STOP talking about these structures. Humm for consensus NIX 501(c)3... silence NIX 501(c)3 subsidiary HMMMM! NIX partnership between 501(c)3 and LLC … HMMM! NIX coop ... .quiet NIX LLC improvement .... quiet

We have narrowed the playing field. LLC, coop, (c)3 charity.

Hannah: We are now going to make some concrete suggestions, we want to present this at the member and board meetings

Marshall: we have people who submitted ideas. Derek!

Derek: I had an individually owned and rented workspace.. You wanted to have your own bench, you can, and you get your own thing to maintain. Towards the end I paid up to $100 a month. If the space costs $1 per square foot Essentially private space underwrites publics space. There was clear designations Projects left overnight on public space are subject to liquidation with extreme prejudice You can use my bench if you ask, but I may set my own rules on it.

Joe: That sounds like a great idea, if we actually have a larger space that we can actually dole out. Presuming we can give that out, we can give away alot There is the option of renting that as a business space Say, open up the three spaces in the front:

Martin: We cannot do that. Joe: More easily, we could pay for more storage space out. First month's rent

Martin: When I said cannot, we cannot offer a sublease. It is forbidden in our lease, and forbidden specifically in second.. In the past 24 hours I have talked to our landlord about this. No sublease.

Matt: I would discourage the renting of rooms to private companies or individuals. It did not go well down south. It's weird to have a business in there inside your hackerspace HMMM! [spontaneous consensus] I've definitely done storage space, that's OK What does workbench space mean?

Derek: Actually I would like a lockable cabinet Use it don't abuse it, and clean up after yourself You can still share your workbench, so it’s not a true lease.

Joe: The difference is, you can throw other people's shit out if it's on your bench! [fist shaking]

Danny: If we do this, we will box out a grid that is your space, you do whatever you want with it! We can give people lots of options this way.

Joe: I care alot about the presentation. I think it's important to have non-suck space If we just give people an area and ‘let em go’ they will leave crap lying around If we want to grow considerably, it would be nice if you walk in and be impressed with the space. There is a chance that there will bad behavior this way

Mandie: I like the idea of increased monthly dues thing, is good. You can leave your stuff out, so it will be messy We don't want to just give it out.

Danny: Right now there is this space that we can't touch, we can set an opportunity cost We could settle at 'it takes an extra $300 per month' We would be making more money if we charge more money than the landlord charges The member area should not mingle with the tools and work area

Matt: I still have reservations about anything more than storage. I see this turning into "this is my bench space, I rented it" If we need to reallocate, we have to kick them out. Plus it reduces sharing The purpose of our space needs to be for a large number of people to be using it, not give people smaller space

Hannah: At the last space I visited [in seattle]everyone had their own space, and it was viable They each turned it into their own thing. Lots of personal expression. Each work area was its own, it was cool.

Matt: I don't want a true shared workshop, I don't want that to take over

Joe: Study Carols are a good example. 20% private space, 80% All:….? A few: Study.. carols?

Joe: Those wood enclosures in libraries you can study privately in! Study carols. ..That’s what we called them...

Matt: I would predicate: it's in the bigger space. Not here.

Mandie: Another way to do it would be to pay for a small slice of time on a desk. The round-robin desk, this is the project desk which we want people to keep a while We could do this on a high-demand basis. Lotteries for the space could be an option. We do need to set term limits.

Hannah: If we have to boot them out, that's ok.

Danny: I like this idea. We have no shortage of uses for income!

Hannah: Alright. Alright. Good ideas here but we should move on. It might not be possible to promise space [because of sublease restriction]

Marshall: Next item, LLC modification! Martin.

Martin: For Saturday I would like to propose a concrete method to bring people into the LLC We have touched on it in the past, but never explored it. I propose we turn shares back into dollars. We would now like to raise X amount of dollars We have something for an immediate need, now we are budgeting for a future need. So, we would like to propose

Joe: The fundamental problem is equity There is a disproportionate.... Martin investment in the LLC, so nobody will be able to come in coop with investment recognizes your voting rights equally By the time we get to the future, we will simply convert this investment to the real investment

Martin: We need to do this by December

Joe: What are we buying into then?

Martin: In this case you are buying a piece of the pie. The risk is that we are still planning the future of the space We have a concrete action we would like to take, but right now we're hurting

Joe: So what is the risk?

Martin: It's an agenda item for this week. Everything could change.

Joe: I just want to poke at it a bit. I want to know what the idea of where we're going. We might need to sous this out, but it doesn't need to go forever.

Matt: [objecting firmly] I am not willing to have a discussion by saturday. Right now we have an equal stake, we need to have a longer discussion We need to be more fair than that.

Martin: I just want to convert it all to actual dollars and dispose of nonsense.

Westin: I want you guys to all to have a discussion [first]

Matt: If we continue to be an LLC let's open it up and continue to be an LLC We need to consider all options. I don’t like this sudden conversion

Mandie: I would like to hear a deadline date on when you guys make a decision.

Mike: I would rather see a vote for status quo before we even consider it. This might not matter if we become a charity!

Martin: [Wants to speak. I interrupt because I keep trying to raise my hand while typing and it fails]

Marshall: I'm willing to invest and figure it out later. As long as the only powers of the LLC has are financial vetos. I don’t want it to imply more than that, and I’m OK being bought out or whatever.

Paul: What if you changed the rules of the LLC so that it acts as one vote per person?

Marshall: Sure. Why not just make this 1 voting share, and as many investment shares as you like?

Martin: ...We could do that.

[Someone interject here: What is the point of LLC membership anyway?]

Jeff: We don't really know if anyone will get their pants sued off, and you should talk to a lawyer

Danny: The LLC is no shield against fraud

Westin: It doesn't shield you from fraud, just civil action

[Some arguments erupt, Joe, Martin, Matt, and are polite and silent, but urgent to speak]

Hannah: You have had so many seconds! no more for you

It’s time for a break! [Recess]

Jeff: Be nice to guests or they won't come! Please reserve more time, and don't cut them off Donald got pushed out a bit there. Please s

Marshall: I did warn him. He got ‘we might have to cut you off at 15mins’ ….but yeah. Noted for the record: say sorry to Donald, get in contact and continue conversation.

[Reconvene]

Marshall: Next Item, how can small groups finance things they want? Mandie introduced NYC Resistor Lasercutter model idea.

Hosted Tool Funding

Mandie: Discussion on the list was about this.. I came up with the idea that a group of passionate people could invest The space could then charge for the use of the tool, which goes into a fund which will eventually pay them off

Hannah: Clarification, person or people

Mandie: Yes, either. Funds would effectively be held in escrow until the tool is paid back

Danny: This sounds like effectively a loan. "We can pay you back for this later"

Hannah: We are providing a structure and support!

Danny: It's still a loan. If you leave anything up here, it is for the use of the space. We have no provisions out there for charging for usage. The complication here is that it would require a contract IF the space won't pay or can't pay, we need to know how this would work out This strikes me as a failure of the space as a community.

Joe: I diagree. If you were just charging for the tool This is dependent on the demand. It is self-regulating, if the tool is used it will be bought off.

Danny: Would they pay for use of their own tool? Mandie: I think they would.

Joe: Another way would be to have them not-charged to help pay them back for it. There is a problem also of the rent in the square footage of the tool. That means that if I get a drill-press every day and If it sits there for a year, the space is going to buy this thing by default. Let's say you bring in something that's not usable or not possible. I put it in there.

Mandie: ...So the space owns it eventually. [nodding]

Joe:If we don't put a time limit on it, space is a commodity. So, some small charge for the space. Take some stuff The person who owns the tool is then motivated to teach people. Danny: But then the person who buys the tool is losing value, they lose their money to rent each month

Mandie: ...

Danny: One way is the membership fee that gets you special access. The other is the per-hour

Marshall: The space can provide support, power, maintenance, everything needed to keep it going

Mandie: this is a way of making the cost of use lower, and providing a tool for use.

Joe: this essentially amortizes the cost of people who want to use the tools

Westin: The whole idea that we charge for space sets up a conflict of interest. The members could essentially lure people in, and the members should be motivated to not use it! Right? The space owns the tool eventually and offers free use, why use it now while it’s expensive?

Joe: Before that point the people who financed the tool could come back. They bought it. We could keep that as escrow. The people who financed it can always take it home. Before that point [when we own it]

Westin: We could do without that, and just have membership give the space away.

Joe: [Disagree] This [charging pseudo-rent] sets up a feedback mechanism, at the very beginning

Westin: Then it sets up a situation where the investors want people to use it. OK.

Mike: Wait. First of all this sounds backwards/convoluted. If we have to do this it's a failure of the space to come together and buy shit. Second, consider logistics. Something big like the laser cutter is going to need a tracking/accounting system. Just look at the trouble Martin goes through to host that system. Just to get funds for a few machines would be a bitch

Danny: The early adopters are paying extra for that. What if they are stuck with a new funding expense. I could just wait until the other one is owned by us. To avoid the expense of using a nice new shiny one, we could ignore the expensive one we want to finance. That’s crazy.

Mandie: I was trying to come up with a per-use expense rather than paying a bunch of extra money. That is where that idea came from.

Jeff: Suggest what we need to do is so solve this in another direction What are the tools we need, what are the costs, what do we need to get? If certain machines are off-limits, it sends the wrong message. Hannah: I was originally gung-ho, but I have to agree that there are tools I would not have ventured to use if they were not open to use. Part of the shop is about growing and experimenting, so we would lose that. Charging for tool use makes it much more complicated.

Joe: Number 1. If we are doing this with every tool the space is failed, but we still need some items. This is the way to get the tools down at the bottom, that not everyone knows how to use. This is for the small subgroup of special tools. The nice stuff that isn’t for everyone. things that are popular and important come to the top, and the space get those Things that are not popular are at the bottom. Those are the things groups should get.

Tracking it! We need to solve problems with technology. We should make that part of the cost of every tool

Mandie: I think this speaks to a much larger issue. We have tried to come to a tools committee It is going to be very difficult to decide, we need someone to bring the propositino

Nathan: We should enable a few people to have specialty tools. It can't be that hard.

Marshall: Do we have access control committee support for the RFID of all the things?

Danny: RFID access? How does this work?

Hannah: This controls access [to it], it also tracks and allows payments.

Jeff?: Off topic, let’s close this until the tech is there that would let us do this. Paul: Actually, we were just talking about this [w/ access control committee] during lunch...

Hannah: Next topic! Agenda item: pricing scheme is bad. Danny!

Danny: The space right now, we do have a very low cost pricing scheme. The problem is we've had gratious donations from Martin If our whole expansion is based on that, we’re stymied I don't like the idea that further contributions from members who don't have a stake are unrecorded. This is not equitable

The regular way to do this would be for the space to act as a business and just go ahead. The company could just go ahead and take the money and spend it. They are already motivated to spend in such a way that it encourages their business to grow.

Mandie: Would you like to head the new tool committee? I think what is lacking is not lack of funds, it's lack of direction We tend to bring things up at a member meeting that someone would like to spend money If we had someone really serious about the tools committee, go for it

Nathan: Our big problems are words like 'donate' You aren't donating to someone's business. you are giving. My understanding was that everything should be member run. You need to have things go through the membership. When Matt gave his projector, it was a gift to the space. He took a loss, did that become part of his investment? Are we all in this together? or are we run by [gesturing]

Martin: Yes, but. Every item I have given to the space, the members were asked about it. The same thing happened when a projector came in. A loss was taken, it was donated.

Danny: The problem is that the membership isn't able to be involved in paying I have seen auctions where we need 10k investment buy everything we could ever need. good stuff Not crummy stuff. This is a lot of money though. We could get a plasma cutter. Those are options I looked at the past. If we have growth to the point of ~80 members $10 extra from all of them for one year, we would have $5k more per year. That would be half way to a full awesomeshop. Yes, we would lose some membership, but we would get more total dues. The literal meaning is that $25 becomes $35 We are asking people to pay for thing that are hypothetical. do not currently exist. Regardless, we need to raise rates eventually to have that surplus so that members actually fund things [implyin not founders]

Mandie: Also note, we are raising the rate there for things that not everyone will want. We need to declare what we will spend more money on.

Danny: I don't use the laser cutter, I have no problem with the space using its money to buy it.

Joe: Key points. We do have to agree on what we need as a capability. There are some things we disagree on. We can agree on basics: what does a good woodworkign shop require? Does $35 give us enough to acquire those items?

Hannah: Good points, let’s consider what is enough [later, next meeting] We are moving this meeting as a test to Thursday! Talk on Saturday about this!

[Adjourned]

Discussion did take place after-meeting. Sparse notes are available if members express interest.