Ed Whitfield discusses the building of cooperatives and the question of reparations in the fight against racism.
Recorded at RLS–NYC panel on “Black Cooperatives” at the Left Forum 2015.
Ed Whitfield discusses the building of cooperatives and the question of reparations in the fight against racism.
Recorded at RLS–NYC panel on “Black Cooperatives” at the Left Forum 2015.
During recent Kwanzaa celebrations there was a call for collective economics. “Ujamaa (Cooperative Economics): To build and maintain our own stores, shops, and other businesses and to profit from them together.” This was explained by many as a call to “Buy Black” with others accepting that it was a call for supporting “Black Capitalism.” I want to offer a critique of this understanding from the standpoint of what would be progressive and beneficial in a transformative way to the black community.
Here at F4DC we are really excited about the upcoming Eastern Conference on Workplace Democracy! This event, held every two years, brings together people from across the eastern half of the United States to learn about democratically run workplaces and cooperative economies.
The conference takes place at Drexel University in Philadelphia, PA from July 26-28. This year’s conference them is “Growing Our Cooperatives, Growing Our Communities:”
Democratic Community Economic Development Through Worker Ownership
We have a voice in our own communities’ economic development through democratic workplaces! Democratic workplaces – such as worker-owned cooperatives – are growing in many ways as a viable alternative to a society that lacks meaningful humanizing jobs and democracy in everyday life.
As we seek to grow in response to the massive need for workplace democracy, let’s take time to explore how we can best thrive – as individual members, as cooperatives, as communities and as a movement. We can help each other understand just what it means to grow sustainable democratic workplaces. Exploring how to grow healthily is even more important in democratic workplaces for building relationships and solid processes.
Let’s discover together how we can cultivate and maintain our democracy while reaching out to share this opportunity with others!
Our friends at the Food Co-op Initiative are making grants to new food co-op startups. Below is the press release they issued yesterday:
Food Co-op Initiative today announced they are accepting applications for grants up to $10,000 for development of new grocery co-ops. The Seed Grant program provides a cash award along with proven resources to help organizations achieve success. Food Co-op Initiative advisers will work closely with awardees throughout their organizing process, including making at least one in-person visit to the community.
Food Co-op Initiative’s Seed Grant program is designed to streamline the startup process to foster the maximum number of successful, sustainable co-ops. These competitive grants must be matched by the co-op with funds raised locally. Grants may be used for payment to professional consultants, registration fees and expenses to attend training opportunities, and initiatives supporting member recruitment, capital-raising, community outreach, or other aspects of organizing the co-op.
Food Co-op Initiative was founded in 2010 in response to a continuing wave of interest in establishing new retail food co-ops. The Initiative provides a range of services to the hundreds of volunteer groups working to bring improved access to food and the other economic and social benefits of cooperatives to their communities.
In 2012, Food Co-op Initiative awarded $100,000 to 14 organizations in 12 states. Grants are funded by the USDA, Blooming Prairie Foundation, and the kind support of cooperators nationwide. Applications and guidelines are downloadable at www.foodcoopinitiative.coop. Deadline for applications to be received is August 1st. Awards will be announced by September 1st.
About Food Co-op Initiative: Food Co-op Initiative is a non-profit foundation created to provide resources and support for communities that want to start new food co-ops. Food Co-op Initiative provides support, referrals, and training to help communities nationwide create successful grocery cooperatives.
Updated August 7, 2013
F4DC first published A Pathway to Responsible Community Ownership of the Renaissance Center in May 2013. Since that time, many of our elected leaders have indicated by vote and public comment that they are anxious to “get out of the shopping center business” as quickly as possible. Urgency to sell the Renaissance Center has led Council to consider a competing proposal that asks the City for $2 million in a 0% fully forgiveable loan.
In respect of the City’s urgency to sell the shopping center, we have updated this version of the Pathway to include a fourth scenario in which the Community Land Trust could purchase the Shopping Center as early as 2015, with the City playing a stronger financing role. We note, however, that the City’s financing role in this new scenario does not ask the City to make any forgivable loans. Every dollar will be paid back in this and all scenarios we discuss in this document. Why? Because we want the City to be able to replicate this approach to economic development in other parts of the community!
In addition, we have heard some Council members discuss the supportive rent arrangement that the Renaissance Community Cooperative (RCC) has sought from the City as a financially unsupportable burden that undercuts the viability of the shopping center. That may be true for a private developer seeking maximum return on investment, but the City’s interests, we believe, are more nuanced and community focused.
In this version of the Pathway, we are highlighting the fact that the supportive rent figure sought by the RCC enables the community to save up the money to purchase the shopping center from the City at Fair Market Value. In this context, the supportive rent figure isn’t a problem—it’s part of the solution, helping the community achieve its big picture dreams of community ownership, health, and wealth while providing the City with a responsible way to sell the shopping center to an entity that has the betterment of the community as its fundamental mission.
The best option for ongoing community wealth building in Northeast Greensboro is for the City to allow the community to purchase the Renaissance Center. This document maps out several pathways to that end. Community ownership is made possible by the development of a Community Land Trust. This community-owned and controlled entity would buy the shopping center from the City using a combination of financing including accumulated profit from the operation of the Renaissance Community Coop, financing from Self-Help Credit Union and, in some scenarios, loan assistance from the City of Greensboro. Debt service would be repaid using the net operating income of the Center, leaving a balance of funds available to finance other community projects. This analysis includes provision for vacancy rates and fulfilling the existing lease agreement to Family Dollar Store.
Four scenarios of purchase and ownership are included, each having different dates for purchase of the property and retirement of all debt. Also analyzed is the rate and amount of accumulation of community wealth under each scenario. Spreadsheets are attached that summarize these scenarios. This document also looks at the process of preparation of the community to exercise the responsibilities of ownership through a Community Land Trust.
Our hope is that this document will illustrate possible pathways to community ownership of the Renaissance Center and help the City Council to be able to evaluate community ownership of the Renaissance Center as a serious option as they decide the fate of the Renaissance Center.
For more than a decade, residents of Northeast Greensboro have been faced with the run-down, nearly empty Renaissance Center (formerly the Bessemer Center). In its current decaying shape, the Renaissance Center is an eyesore and a symbol of economic desolation. The City of Greensboro, recognizing the need to turn this situation around, committed to improving the area. In 2008, the City purchased the Center, and then built the beautiful McGirt-Horton branch library on the front quarter of the property.
Extensive community discussions and negotiations with the City established several ways the community wished to see the balance of the buildings and property be put to use. Concerned Citizens of Northeast Greensboro, Citizens for Economic and Environmental Justice (CEEJ) and others who participated in the many forums, charrettes and endless meetings believed that they were on the road to a vibrant, healthy facility that would meet a range of community needs, including a full-service grocery store, a health facility, job training, and other retail and commercial opportunities.
Sadly, these efforts to turn the shopping center around sputtered and stalled. Taking matters into their own hands, residents of Northeast Greensboro began working together to meet the long-standing community need for a full-service grocery store. They formed themselves into the Renaissance Cooperative Committee and are making great strides towards turning their dream into a reality. The Committee is on track to open the Renaissance Community Cooperative (RCC) Grocery Store by June of 2014. They completed a market study and pro forma business projections that establish the viability of the project. The market study and pro forma have been examined by experienced grocery professionals (Uplift Solutions) and lenders (Self Help) who believe that the RCC grocery store has real financial viability.
The City is now contemplating whether to maintain ownership of the Renaissance Center or sell it to a private development group (with the RCC grocery in the mix either way). City Council is weighing which of these two paths will cost-effectively lead to a turn-around of the Center and the community’s economic fortunes. There are many factors to be weighed, including the question of whether it is feasible and appropriate for the City to own and operate a retail shopping center.
There are also questions about whether private ownership of the Center will lead to the kind of development the community wants—stores that meet real community needs and jobs that pay a decent wage—or whether private ownership will result in extractive “slum” type stores that do little in the way of providing jobs and building community wealth and health. The logic of profit as the sole business motivation creates these types of stores. This logic requires that businesses strive to make the maximum profit, taking advantage of every fad, prejudice, weakness and dependency existing in the neighborhood in order to sell at the highest allowable price while making the lowest possible expenditures on wages and benefits and providing as little upkeep and maintenance as possible to their facilities. In low-income neighborhoods, where there is little competition and a captive audience with limited transportation, slum-type businesses operating with profit as their sole motive need not worry about providing high quality goods and services.
There is a Third Option: Community Ownership
There is a third path, however: the community could buy the Renaissance Center and democratically own and control it, using it as a major asset to leverage on behalf of ongoing community wealth-building. Some people have raised concerns that this is not a realistic option, saying that the community is not now and will not soon become capable of purchasing or governing a shopping center. We at F4DC dispute this bleak view of the current and potential capability of the community. After working closely with the RCC Steering Committee and other Northeast Greensboro organizations for more than a year, we have a gained a good sense of the community’s current and emergent capabilities. We see a clear pathway to responsible community ownership of the Renaissance Center within the next two to ten years within a range of financial scenarios.
The Importance of Community Ownership
There are some who question why the City or the community should own the real estate in which community-owned businesses, like the RCC Grocery Store, operate. While the RCC Community and F4DC strongly prefer that the Renaissance Center be owned by the City until the community can buy the Center, the RCC Grocery Store could conceivably exist inside a shopping area and building owned by another developer, as is the case with Deep Roots. The reason that we think we should move down the path toward community ownership is because it is clearly better for the community. While community ownership comes with greater responsibility, it will create opportunities to stabilize the community, along with opportunities to create, accumulate and retain wealth that will improve the quality of life in the community for years to come. The ownership of the center is both a business opportunity and an opportunity to enhance the community in the following ways:
As important as it is to select good tenants, it is also important to exclude tenants that do not contribute to the community and instead extract the community’s limited wealth. Unhealthy fast food, predatory lending establishments, high priced rent-to-own centers, and speculative businesses such as sweep-stakes parlors that prey on community members’ economic uncertainty do not help the community reach its full potential. Even the provision of “creating jobs” doesn’t help very much if the jobs are at or near minimum wage and without benefits. A study done by economics professor Christopher Gunn of Hobart and William Smith Colleges, using standard industry data, shows that in a typical McDonald’s franchise the total surplus exceeds the payroll and of that surplus, more than 75% is taken out of the community (Reclaiming Capital, Cornell University Press, 1991, 28-29). In contrast, community ownership of the shopping center will ensure that the majority of the surplus generated by the co-op grocery and the shopping center will stay in the community. It will be controlled and managed by the people who live there, put back to work developing economic strength, quality of life, and general well-being that community desires. We think that creating good jobs and community wealth must be the objective of community economic development.
The City has a commitment to help alleviate some of the long-standing inequities that are evident in the disparities shown in numerous studies, including the recent parity study, and which are reflected in the lives of Greensboro residents. The city’s use of economic incentives for job creation along with its involvement with community redevelopment efforts are expressions of that commitment. Helping to create the democratic structure and the opportunity for ownership of the Renaissance Center as a hub of the economic life of this Northeast Greensboro community will be important steps on the road to parity.
Cities across the country are in similar positions. The current economic crisis increases the urgency of these efforts at equitable community development, but it did not create it. Greensboro will have the opportunity to be a model for other cities in answering a question on the minds of many: How can we best develop the economic and physical infrastructure that will allow all of our neighborhoods the chance and the means to help themselves?
The balance of this document attempts to responsibly tackle this big question in the specific context of Northeast Greensboro, by addressing three questions that collectively assess whether community ownership of the Renaissance Center is a viable option:
By answering these questions, we will map out multiple pathways to community ownership of the Renaissance Center so it can be evaluated as a serious option while the City Council makes up its mind about the fate of the shopping center.
Question 1: Can the community raise the money to purchase the Renaissance Center?
Purchase Price of the Shopping Center
The first step in answering the question of whether the community can raise the money to purchase the shopping center is to establish an estimate of its purchase price. The City’s own studies show current fair market value (FMV) for the Renaissance Center at $490,000, though this may be merely an estimate of the residual value of the land following the sectioning off of the portion used by McGirt Horton Library. An April 2013 report prepared for the City by Michael Watts estimates a projected FMV of $1.9 million, should the City invest the roughly $2 million it is considering investing in improvements.
We assume the community’s purchase of the shopping center would take place after the City has made its improvements, so we will use Watt’s estimate of $1.9 million as the purchase price. Of course, if the Center takes off over the next few years and becomes a bustling, vibrant shopping destination filled with tenants paying high rents, the FMV will go up. That’s not the scenario we have data or experience with, so in this paper, we’ll not consider this as part of our analysis. Even if the FMV of the center goes higher, the rents that could be charged would go up accordingly, which would cover the debt service on extra financing needed to cover the increased purchase price.
We note that the City will consider its own public policy, fiscal, and statutory concerns in setting a purchase price for the Renaissance Center. Some of the relevant statutes require sale at FMV as determined by three independent appraisals, whereas others allow sale at a lower price, if certain public notice and public hearing requirements are met. For purposes of this analysis, we’ll work with the $1.9 million figure, which seems a fair estimate of FMV.
Financing the Purchase of the Shopping Center: Net Operating Income from Rental of the Shopping Center Goes to Debt Service
In all scenarios in which the community purchases the shopping center, the presumption is that the net operating income from the leasing of stores would be used to cover any debt service related to financing. In the attached spreadsheet, we do a quick-and-dirty, non-discounted, non-depreciated, non-inflated cash flow analysis where we calculate an annual net operating income, before debt service, of $91,414 per year. We based our revenue and expense figures on explicitly named assumptions drawn from the Michael Watts’ report and the May 20 proposal of New Bessemer Associates. With a healthy reserve of .35 per square foot included, we think our assumptions are conservative and responsible.
Financing the Purchase of the Shopping Center: Equity
To obtain the $1.9 million purchase price, the community would bring some amount of equity to the table, with the balance financed by Self Help Credit Union and, perhaps, the City. In scenarios 1-3, the community would bring a minimum of $400,000 in equity, with the largest part of the equity stake coming from surpluses generated by the RCC grocery store. RCC’s cash flow analysis suggests that the RCC can contribute a minimum of $250,000 of surplus accumulated during the first five years after launch, and as much as $800,000 over ten years. In scenario 4, the “fast-purchase” scenario, there is less time for the RCC surplus to accumulate, so the community would bring $100,000 in equity, 20% of which comes from the RCC, and the balance from grassroots fundraising and grants.
The Role of the RCC Grocery Store in Capital Formation
It is important to highlight the important role of the RCC Grocery Store in the purchase and success of the overall plan for community ownership. In addition to being an anchor store that will attract other tenants to the Center, the RCC plays a critical role on the financing of the shopping center, specifically in providing equity for the down payment.
Within the RCC community, there is already a great deal of support for the longer-term goal of purchasing the Renaissance Center. Members of the RCC see ownership of the shopping center as good for the co-op as well as connected to the co-op’s larger mission of contributing to the community’s ongoing economic development, health, and well-being. There is explicit understanding that the supportive rent figure that the RCC is seeking ($2,000 per month, or $24,000 annually—$2.40 per square foot) is to be tied to community benefit, including using a portion of surplus to buy community-owned assets such as the Renaissance Center.
Some people have criticized the supportive rent figure for the RCC as a financially unsupportable burden that undercuts the viability of the shopping center as a business enterprise. That may be true if the shopping center is to be owned by a private developer seeking maximum return on investment, but neither the community nor the City as owners of the Renaissance Center have such a narrow interest. In fact, it is in both the City’s and the community’s interest to set the rent figure for the RCC at a level that ensures that the Center’s basic expenses are covered (“lost” property tax, maintenance, insurance) while allowing for the community to accumulate surplus at a faster rate.
In this context, the supportive rent figure isn’t a problem—it’s part of the solution, helping the community achieve its big picture dreams of community ownership, health, and wealth while providing the City with a responsible way out of the shopping center business.
Support from Foundations and Grassroots Fundraising
Rounding out the RCC’s contribution to equity, we are confident that we can raise additional funds in donations and grants from individuals as well as local, regional, and national foundations. In Scenarios 1-3, we estimate a minimum of $150,000 from foundations, individual donations, and government sources, such as the federal government’s Healthy Food Financing Initiative. In Scenario 4, the fast-purchase scenario, we do not have as much time to do the grant-seeking and fundraising, so this figure is smaller, at $80,000.
It may well be possible to raise considerably more financial support from foundations and government sources, which would be applied toward increasing the equity stake: there is a great deal of interest nationally and regionally in the use of community land trusts as a tool for turning around blighted areas and rebuilding local economies. However, in the interest of presenting responsible scenarios, we’re holding to the conservative range of $80,000 to $150,000 for donor, foundation, and government support.
Financing the Purchase of the Shopping Center – Lending
F4DC has had a preliminary conversation with Self-Help; they have indicated that they could bring financing of up to $1,500,000 into a deal in which the community purchases the shopping center from the City, holding the land and buildings as collateral.
While Self-Help has the capacity and interest to meet all the need for outside lending, the debt service on $1.5 million is too big to be covered by the annual net operating income from the center. That shortfall can be addressed in two ways: (1) the City of Greensboro could participate as a 0% interest lender in a subordinate position to Self Help, thus lowering the cost of borrowing, or (2) the community can wait longer to purchase the shopping center, which would allow more time for a larger equity stake to be raised (from RCC surpluses).
Lots of Ways to Accomplish The Purchase: Four Possible Financing Scenarios
Please see the attached spreadsheet in which we compare four different financing scenarios, with different timelines and implications for cash flow.
Scenario 1: The community is able to purchase the shopping center in 5 years and pay off the debt within 40 years of purchase (45 years from now).
Down-Payment: $400,000 (21% equity)
Lending: $1,500,000 (79% financing)
In Scenario 1, the debt to Self-Help is retired before the City’s debt begins to be paid off.
Scenario 2: The community is able to purchase the shopping center in 10 years and pay off the debt within 15 years of purchase (25 years from now).
Down-Payment: $950,000 (50% equity)
Lending: $950,000 (50% financing)
In Scenario 2, both the City and Self Help are paid back within 15 years of purchase.
Scenario 3: The community is able to purchase the shopping center in 10 years and pay off the debt within 20 years of purchase (30 years from now)
Down-Payment: $950,000 (50% equity)
Lending: $950,000 (50% financing)
The City does not participate as a lender in Scenario 3. Self Help is paid back within 20 years of purchase.
Scenario 4: (Fast Purchase Scenario): The community is able to purchase the shopping center in 2 years and pay off the debt within 30 years of purchase (32 years from now)
Down-Payment: $100,000 (6% equity)
Lending: $1,800,000 (94% financing)
In Scenario 4, the debt to Self Help is retired first, in years 1 – 5. The debt to the City is retired over the next 25 years (Years 6-30).
Community Wealth Building
The four scenarios have different implications for the goal of building community wealth, as can be seen in some detail in the Comparison spreadsheet. From the perspective of community wealth-building alone, Scenario 2 is both the fastest and most effective, achieving debt retirement by 2038 (20 years earlier than Scenario 1, five years earlier than Scenario 3, and seven years earlier than Scenario 4), and generating almost $2.5 million in cash by 2058.
Question 2: Are there viable forms of legal ownership and governance that would allow a community to responsibly and democratically own and operate a shopping center?
Community Land Trusts
Across the U.S., communities are turning to community ownership of real property to accomplish a number of goals: building community wealth, renewing decaying residential and commercial properties, providing economically sustainable opportunities for affordable housing and commercial development, combatting the destabilizing effects of gentrification, and gaining community control over the environment.
Many communities are using the 501(c)3 non-profit Community Land Trust (CLT) as the legal formation to manage community ownership of shared real estate assets. The closest CLTs we know of are in Orange County (Community Home Trust) and Durham (Durham Community Land Trustees). For information about CLTs, check out these websites:
While most CLTs have focused on housing stock, some are purchasing and managing commercial property as well.
In this preliminary discussion, we don’t want to go too far in specifying the details of how the land trust should be set up or governed—these are matters that have to be worked out in the community among the people who take the responsibility of forming the land trust, working with knowledgeable legal and financial experts. However, we think it’s appropriate to talk about the need for authentic democratic governance structures and practices to be in place, embedded within a strong Policy Governance framework.
We are sometimes asked how it is possible for a whole community to operate a grocery store, a shopping center, or any kind of business. Some people believe that if there are not one or two people “at the top,” then all decisions will be labored and fraught, requiring far too much patience and taking far too much time. Policy Governance is a system of governance that clarifies the roles and relationships of membership, board, and management. Policy Governance is widespread in the cooperative movement, because it allows for coherent, flexible, and effective day-to-day management of business operations, while long-term policy, strategy, and direction are determined by the membership, either directly in the annual meeting, or through their elected representatives, the Board.
Roughly, Policy Governance applied to community ownership of the shopping center would work like this: the CLT would be established as a non-profit membership-based organization, consistent with North Carolina and federal non-profit law. The membership would elect the Board and decide major strategic direction in an annual meeting. The Board would follow that strategy in establishing policy. The Board would contract with a professional property management firm to handle day-to day operations of the shopping center, following policies outlined by the Board. Management is accountable to the Board. The Board is accountable to the Membership. This model affords tremendous flexibility to management. As long as the management successfully enacts the strategic direction and follows the policies established by the Board and the membership, it is free to carry out operations in any way that works. This enables the daily operations to be carried out efficiently and effectively. (For more on Policy Governance see www.governancecoach.com.) If you remain skeptical of the effectiveness of Policy Governance in a business setting, consider the success of Weaver Street Market (annual revenue $14 million) and Company Shops Market (annual revenue $5 million), both of which utilize Policy Governance structures and practices.
Authentic Democracy and Community Control
Broad membership, anchored in the immediate neighborhood and joined by allies from across the city, is the starting point for democratic functioning of the CLT. The membership in the CLT can begin rather small (say 50 to 100 people) and easily grow to 500 to 1,000 or more people. It will be important for members to have financial or time commitment requirements as an expression of their seriousness about the organization. There are various ways other CLT’s have decided membership, but ultimately these requirements will be decided by the community. Any resident of North Carolina could become a member, but membership recruitment would be focused on the area immediately surrounding the shopping center, with secondary attention to the wider community of Greensboro.
We propose that the CLT’s board be elected entirely from its members. The majority of board seats would be reserved for members who live within a 1-2 mile radius of the shopping center. This would ensure that the shopping center would be operated with the concerns of the immediate community most in mind. Two to three seats could be reserved for members who live outside the immediate community, to bring in outside perspectives, expertise, and connections to complement those of the immediate community.
Taking its cues from the membership meeting, the Board will need to set policy on a number of issues, starting with the question of what needs of the community are to be met by the shopping center, by whom, and at what cost. The Board will also have to set policy around uses of the community space that is in the shopping center, and guidelines for the recruitment of tenants and the setting of lease terms that sustain the CLT while encouraging appropriate community economic development.
The Annual Membership Meeting would need to be conducted in a substantive, democratic way, so that members have real say about the strategic direction and questions facing the CLT. The cooperative movement can provide many examples of annual meetings with large memberships where serious matters are decided by the membership. One key question that should be addressed in each annual meeting will be whether and how to spend any annual surplus. The CLT’s bylaws will almost certainly restrict certain kinds of expenditures, to prohibit self-dealing and ensure maintenance of a charitable and community focus for the CLT.
Throughout the year, there need to be ways for members of the CLT to affect policy and day-to-day practices, while building community among members. For example, members can serve on committees, attend sponsored social and educational events, and volunteer for community improvement efforts sponsored by the nonprofit land trust.
Non-members who live in the immediate community should be invited to at least one event each quarter, designed to strengthen the CLT’s connection to the immediate community and to hear about any issues or opportunities facing the community. The CLT should also conscientiously interact with other community organizations and institutions in the area, including CEEJ, Concerned Citizens, Woodmere Park Neighborhood Association, Peeler Recreation Center, and McGirt-Horton Library.
As stated earlier, it isn’t appropriate in this paper to specify all aspects of the governance of the CLT: it’s critical that members of the community be engaged in deciding how they want the land trust to be structured. What’s key, though, is an initial and sustained commitment to authentic democracy. That means governance structures and practices that are inclusive, transparent, and accountable, backed up by well-understood and agreed-upon decision making processes. It’s not enough to get articles of incorporation and bylaws in place—it’s about building a living, dynamic capacity for practicing authentic democracy.
Question 3: How will the community gain the requisite capabilities to pull this off?
What capabilities are needed?
We see three broad capabilities that the community will need to succeed:
Where will the community get these capabilities?
Keep in mind that there are different spheres and contexts in which the needed capabilities can reside:
Our experience organizing in Northeast Greensboro on the grocery store project has taught us that there’s more capability already present in the community than it is generally credited with. The RCC experience is not a fluke: after all, the same community came together in a highly effective way to stop the re-opening of the White Street Landfill. CEEJ and Concerned Citizens have proven themselves to be well-organized, purposeful, hard-working, and in it for the long-haul. So there is clearly a solid set of capabilities to work from.
We are also confident that the experience of launching and operating a cooperatively owned grocery store will prove to be a valuable training ground for both individual leaders and the larger community in the areas of democratic functioning, community engagement, finance, retail operations, etc. In fact, we see the next few years of RCC start-up and operations as essential to getting the community ready for the larger project of owning a community asset like the shopping center.
Frankly, we’re suspicious of other proposals that have suggested “giving” part or all of the shopping center to the community, without any serious consideration of the community’s preparation to take on that responsibility, or who, exactly, represents “the community.” Without an extended, concrete opportunity for learning and practice at democratic governance of a business and in the absence of an organization with a mechanism in place to carry this out, we don’t see how the community will be able to identify its most important goals in owning the Center, elect an accountable Board, and secure and supervise appropriate qualified management.
We have sketched out four scenarios for community ownership, three of which provide five to ten years for the development of capacity, leadership, and democratic organizational structures to assume responsible ownership of the Renaissance center. These longer-term scenarios are needed to raise larger equity stakes, but they also have the benefit of providing ample time for community development. The fourth scenario, in which the community land trust is able to purchase the shopping center in two years, is achievable, but requires an acceleration of community development activities and a more serious commitment on the part of the City to creating a supportive environment for that work.
In both the RCC grocery store project and the shopping center project, F4DC is willing to commit significant staff time and some financial resource to supporting ongoing individual and community capacity building. Through our relationships with national and regional non-profits and cooperative development agencies, we can provide workshops, consultants, and trainers who can help prepare the community and its chosen leaders in the various tasks and roles required. We believe that other foundations in the region would also like to participate in these kinds of capacity-building efforts ensuring that the community and its leaders will have ample support to grow the capacities they need to succeed.
 The RCC has a plan to obtain $2.1 million in equity and debt financing, has already secured almost $800,000 in promised lending, and is on track to raise the balance by Spring of 2014 through member equity and loans, grassroots fundraising, foundation and government grants, and City sources. The RCC has established relationships with several national groups that are working on the food desert issue, including the Food Coop Initiative (where the RCC is under consideration for a $10,000 development grant and extensive technical assistance), the Food Trust (which partners with The Reinvestment Fund to bring CDFI, federal, and state investment to food desert projects), and Uplift Solutions (which pairs extensive urban grocery experience with a holistic vision of grocery stores as community anchors of health and economic well-being).
 Readers should note that this document is speculative in nature, even as we attempt to anchor our speculations in realistic assumptions. It is not a prospectus, pro-forma, statement of commitment, or formal feasibility assessment. Nor is it a business plan. Its purpose is to provide rough-cut, good faith estimates and information that help to answer the question of whether there is a realistic pathway for the community to assume ownership of the Renaissance Center.
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Next Wednesday, January 26th, F4DC is hosting the second movie in its Film Series on people building grassroots economies anchored in communities. We’ll be showing SHIFT CHANGE, a film about worker-owned cooperatives, at 6 pm at the Carousel Theatre. Click here for more info about the screening.
If you’ve looked around our website a bit, you know that we’re excited about cooperative business as a key to rebuilding the economy. Here I want to say a bit about why worker-owned cooperatives, in particular, can make a difference. On the outside, they seem to function much like conventional businesses: they sell goods and services at a price that allows them to cover their costs (rent, labor, raw materials, etc.), and then some. Like any business, they have to make a profit; otherwise they have to shut down.
It’s this question of profit—its place in the grand scheme of things—that distinguishes worker owned coops from other kinds of businesses. Because the workers themselves own the business, they don’t make business decisions simply on the basis of maximizing profit, like most conventional businesses do (and all corporations are required to do by their very charters). A worker coop’s decision-making is based on the long-term need to sustain the business in a way that keeps providing the worker-owners with good jobs. So, for example, a worker coop isn’t going to up and move to a new location where lower wages prevail.
This isn’t to say that sometimes worker coops don’t have to make tough decisions, even cutting hours, wage rates, or jobs during tight times. This has happened at lots of worker coops around the globe during the current recession. But because the workers themselves are democratically making the decisions, it’s done with an eye to the long-term well-being of the workers as a group, rather than short-term profit-taking.
It turns out that this kind of long-term thinking and democratic governance leads to worker owned businesses having better track records for economic resilience, surviving downturns in greater proportions and making faster comebacks. This has been thoroughly documented in a study (pdf) that analyzed data from 50,000 employee-owned enterprises in 17 countries.
Contrast the inherent “long-termism” of worker-owned cooperatives to the “short-termism” of corporations focused on maximizing profit for shareholders who have no connection to the day-to-day operation of a business or the community in which it exists. Down the road from us, in Rocky Mount, the closure of the Merita Interstate Brands Bakery put 286 people out of work. That’s a lot of jobs in a town the size of Rocky Mount. If you followed the news last November, this closure was part of a national strategy by Hostess, the parent company, to liquidate all its bakery holdings, throwing more than 18,000 workers out of their jobs. Initially, the company tried to blame the liquidation on striking workers, but it later came to light that the company had long planned the closures, well before any strikes took place. Furthermore, Hostess had been owned and managed by a sequence of private equity firms that had no expertise or interest in operating an ongoing bakery business. They were essentially loading the company up with debt in order to pay outrageous compensation to top executives. Oh yeah, and they raided the workers’ pension fund while they were at it.
Could the Rocky Mount bakers – the people who actually do the work of the bakery—operate their own bakery? I don’t see why not: collectively, they know how to work in and operate a bakery, and people will always need bread. Sure, some work would have to be done to develop a viable business model and some money would have to be raised, but that’s what’s involved for anyone who takes over the business. It wouldn’t be the first time workers came together to revive a failed business: former workers at Republic Windows have formed a new worker-owned business called New Era Windows. They have raised money from a broad base of community supporters and unions so they can buy the now-closed factory and its contracts.
I am still weighing whether the strategy of converting failing corporate enterprises to worker-owned businesses can succeed at scale. Some people say that such businesses tend to have been mismanaged for so long that they make for very weak beginnings that are hard to overcome. Other people say that the existence of a group of skilled workers who already know how to work together makes for a good basis for a successful enterprise. It’s probably a case-by-case kind of thing.
In any case: come on out to see SHIFT CHANGE next week, and get inspired about the potential of worker-owned coops! Whether launched from scratch or as a conversion, worker-owned businesses need to be a big part of rebuilding our local economy!
Despite what many people believe, there are not many ways for city governments to directly impact economic development in communities. Cities don’t directly start businesses that provide goods and services and create jobs. Cities will tell you that their job is to create and sustain the infrastructure needed by business, and then let the market take over. That means to let businesses be created where owners will profit, let sellers sell for as much as the buyers are willing to pay, and let jobs be created paying wages that allow investors an adequate return on their capital.
But there are clearly times when market forces are not adequate to provide the development that a community desires. If market forces alone were sufficient, someone would have put vibrant stores back into the Renaissance Center (formerly the Bessemer Center, located on Phillips Avenue in Northeast Greensboro) years ago. What developer after developer has found is that the projected return would not make their investment worthwhile. That does not mean that they could make no profit, only that they couldn’t make enough for their investors to be satisfied.
What the city is able to do in such situations is to offer incentives that ‘sweeten’ the deal for a developer. This benefit to the private developer is justified in the hope that it will lead to a pubic good. The idea is that incentivizing a developer will enable enough profit to justify the investment, and the community will indirectly benefit as a byproduct of the profits made by the developer.
That’s the idea, but things don’t always work out that way in practice. What often happens is that the city buys a distressed property at its market value. It is then made available to a developer at below-market rates, so that the developer can “improve” the property, and thus justify renting it at market rates to entrepreneurs who try to make their businesses succeed. In good economic times this might happen. But in rough economic times, like now, we often see a series of businesses moving in and then failing in newly developed areas. We end up with a lot of empty commercial space, run down business districts and underserved communities. In times like these, high rents can be the death of businesses.
On Phillips Avenue there is an opportunity to directly benefit the community by bypassing the below-market-rate deal to a private developer and instead making an incentive deal directly with the group putting together the community-owned cooperative grocery store. Incentivizing this group would facilitate a vibrant community business operation that would be the hub of future growth in the area. Unburdened by high rent, a coop grocery store could meet the need for convenient, quality food at reasonable prices and allow for surplus to remain in the community to enable additional economic development and further enhance the community.
The city should engage in a public/community partnership with the Renaissance Co-op Committee. This is the community group that is working to build a community-owned cooperative grocery store in the center. In this relationship, the city would agree to make funds available as grants and loans with negotiated rates and payment schedules to help make this project a success as they have done with private developers on other projects. With the reduced cost of business space, a well-designed and efficiently operated cooperative grocery store has a great shot at thriving and becoming an engine for economic development in the area.
We often measure economic development by the amount of capital we can attract. I think we should begin to measure it by the capital we can retain in the community. This is what can be used to enable job creation, satisfy community needs, and increase community wealth. We need to find better ways to measure local economic development activity so that we do not celebrate putting money into a community in such a way as to mainly facilitate sucking wealth out of it rather than keeping it in and building on it.
We have lots of money in our community like a river. But the money flows out as people spend to take care of their wants and needs. Currently money that flows through is gathered by investors seeking the highest returns on their investment. This causes them to seek to invest in areas where they find low taxes, lax environmental protection, and low wages—the very factors that damage communities.
We need to slow this flow. We need to construct dams to create the pools of money that can remain in our communities to be used for ongoing development. Cooperative economic ventures that are by their nature democratically owned and controlled provide a means to do this. When communities control the wealth that they produce they can use it to create jobs, meet community needs and elevate the quality of life even subsidizing the arts and recreation, environmental sustainability and community healthcare. With the proper incentives to the right people, the city’s economic development policy and practices can be important parts of helping this happen in the interest of the city as a whole. Public resources should only be used for public purposes, not to further enrich private investors.
This week’s issue of Yes Weekly features a lengthy article from Eric Ginsburg about the Renaissance Cooperative Committee’s effort to launch a cooperative grocery in Northeast Greensboro. The Fund for Democratic Communities is thrilled to be supporting their work to bring a community-owned store to their neighborhood!
Last month, F4DC hosted a film screening of “Fixing the Future,” where movie-goers had an opportunity to travel along with David Brancaccio across the country and back again, as he talked to people who are imagining and actively building their local economies through projects like time banking, local currency and cooperative businesses.
After the film, local panelists spoke briefly about just a few of the grassroots economy efforts going on in North Carolina. We heard from the Greensboro Chapter of Slow Money, a network of people in the Triad lending and borrowing money to grow small food and agricultural businesses; Bountiful Backyards, a Durham-based worker-owned cooperative that creates edible landscapes; and Greenleaf Coffee Cooperative, a student-run coffee shop at Guilford College.
There was a dynamic energy in the room afterward as folks chatted about plans and ideas they may have mulled over for months or even years. Several people spontaneously agreed to gather to talk about how time banking might work in Greensboro. And plenty of people talked about local projects already in the works, such as the Renaissance Co-op Committee (RCC), a community led effort to develop a cooperative grocery store in Northeast Greensboro. Hope and determination came together as this community of people were reminded in just a couple of hours that WE can build the new economy ourselves.
The conversations didn’t stop that night. In the weeks that have followed the film screening, I’ve overheard several people talking about rebuilding our town’s economy from the ground up, and had some of these conversations myself! In fact, my husband and I just took advantage of a time bank inspired exchange this weekend. We had a morning of hands-on learning from someone in our neighborhood who’s an experienced contractor. He’s agreed to help us with a home construction project that required a fairly high skill level. We’ve offered up a few possibilities for a trade and look forward to seeing which of the options he’ll choose for his exchange.
These creative and real ideas that are taking root in places across the country because they fill a need we have to feel a sense of community. It feels good to be able to offer our skills and benefit from those of a new friend. Most importantly, we are participating in a cooperative, do-for-ourselves approach to changing our local economies.
Movie-goers at the “Fixing the Future” screening made a clear request to learn more about cooperatives. In response, we’ve decided to host another screening next month. On January 16th, we’ll show “Shift Change,” a documentary film that tells the stories of employee owned businesses that compete successfully in today’s economy while providing secure, dignified jobs in democratic workplaces.
From the birthplace of the modern cooperative movement in Mondragon, Spain to cleaning cooperatives in the Bay Area, to North Carolina’s own Bountiful Backyards and Opportunity Threads, worker-owned cooperatives are creating scalable and replicable businesses that are changing people’s relationship to their work and local and regional economies in dramatic ways. Watch the trailer and save the date of January 16th!
I just got home from the International Summit of Cooperatives, in Quebec City. My head is still grappling with the people and contesting ideas that swirled around me for four days. Generally, I hate conferences, but I am grateful I went, for a number of reasons, not the least of which that I had a chance to meet brilliant, inspirational coop leaders from other countries, especially Canada.
I traveled to the conference equipped with a long list of names of people whom my Southern Grassroots Economies Project (SGEP) friends told me I just had to meet. I copied all these names out on a card in a feeble effort to burn them into my brain, in the hope that somehow, I’d recognize them in the crowd of 2,800. (Believe it or not, I am shy, so this was frightening to me!) I arrived, picked up my translation equipment and sat down, thinking, “Now what? I don’t know a soul here!” I introduced myself to the woman sitting next to me. She was polite and immediately resumed her conversation with her friends to the other side — in French. I was really starting to sweat it, when a woman who was animatedly speaking with two other people walked down the long row of seats and sat down next to me on the other side. Serendipity! It was none other than Hazel Corcoran, Executive Director of the Canadian Worker Cooperative Federation (CWCF)! Hazel’s name was the top name on every list of suggested contacts that I received in advance of the conference! We introduced ourselves, and over the next three days Hazel made sure I got a chance to meet with just about everyone who cares about worker cooperatives in Canada and on the international scene. Thank you, Hazel!
Through these personal connections and in the course of a vibrant forum on worker coops on the second day of the conference, I became more solidly convinced of the importance of F4DC’s work in the area of worker coop development, as a primary vehicle for democratic, just, and sustainable economic development. I got lots of exposure to the benefits of consumer coops (especially credit unions—they were there in huge numbers) and producer coops. But it became clearer as the week went on how easy it can be for these kinds of coops to lose the thread of democracy. There is something about the worker coop movement — especially its assertion of the “instrumental and subordinate nature of capital” — that keeps worker coops grounded in the democratic principle of one person—one vote and the idea that humanity’s real power lies in our coordinated, productive labor from which we generate community wealth.
Don’t get me wrong — I learned about lots of principled, successful consumer and producer coops at the conference. But I also saw how many coops are coops in name only, especially some of the very large ones. In fact, the dominant paradigm of the conference, as promulgated from the main stage via a stream of “experts” from McKinsey & Co, Deloitte, Price Waterhouse Coopers and the Harvard Business School, was that coops should do a better job adapting to capitalism, and grow (up) into mega businesses using more or less the same unsustainable business practices of the mega-corps. And that we should accept the current capitalist frame as the only possible economy. Sure, these experts conceded, the global financial crisis (or GFC as many called it) shows us that capitalism has had some problems, and maybe capitalism can learn a thing or two about sustainability from coops. But the cooperative model can only ever be a small portion of the capitalist economy. After all — capital has other plans!
What was really encouraging was the steady growth, throughout the four days of the conference, of a noisier and noisier pushback against this paradigm, coming from this very polite crowd! Sonja Novkovic began the critique on the very first morning, asserting that coops needed to guard against becoming part of the problem by developing new kinds of growth models rooted in values. By the last day, several main stage speakers (Jacques Attali, Felice Scalvini, and Ricardo Petrella in the final panel) cogently and directly critiqued the capital-centric focus, and called on the cooperative movement to establish itself as a revolutionary, new kind of economy that will replace capitalism. Whenever any speaker would make a comment along these more hopeful lines, the crowd applauded wildly!
I return to our work in North Carolina and the U.S. South more hopeful than ever, more convinced we’re onto something vital in our focus on cooperative economic development, and absolutely terrified by the work we have laid out for ourselves. Thank heavens we have some more friends around the globe to help us figure it out!