Issue #23 - May/June 2004 A publication of Cooperative Development Institute www.cdi.coop
Feature: Cooperative Development Institute redesigns itself
NE News: Co-op activists: VT credit unions, Northeast worker co-ops
Legal Focus: Where to incorporate?
Outside the Region: Italy's social cooperatives
Bulletin Board: Is your important event or award here? Why not?
Values in Action: (9, 10) Social Responsibility and Caring for Others in the South Bronx
CDI Services: Contact us FMI at info@cooplife.coop or (413) 774-7599
Co-op Quiz! You gotta play to win!
Cooperative Development Institute (CDI) is the Northeast's non-pforit center for cooperative development. CDI's mission is to increase economic opportunities and benefits for people in the Northeast by fosteing the growth and success of all types of cooperative enterpirses. Please contact us if you or someone you are working with would like assistance in starting or strengthening a group-based business: info@cdi.coop.
FEATURE:
CDI's new look: Partnership forms
At 277 Federal Street in Greenfield, Massachusetts, the phone is ringing off the hook at the Cooperative Development Institute (CDI). A University of Connecticut law professor is helping a group of people try to organize a town dairy, and wants to know more about legal options for group-based businesses. A worker co-op of photovoltaic installers in Western Massachusetts, which CDI helped start, is looking for ways to integrate their cooperative identity into their marketing plan. An upstate New York food processor wants to attract producer co-ops. Six emu producers and an association of fish farmers want help forming marketing co-ops. A 33-year old independent bookstore in Amherst, Massachusetts recently converted into a democratically-owned workplace, wants help with its structure and fundraising. There are calls about housing co-ops, healthcare co-ops, and purchasing co-ops. A group of writers want to form a publishing co-op.
An upsurge of interest in co-ops and other group-based businesses is fuelling a rapid increase in demand for the kinds of services CDI provides, more work in the past few months than ever before. CDI Partners have worked with specialists to complete a marketing plan for an emerging consumer-owned energy co-op in Rhode Island, a feasibility study for a biodiesel co-op in Western Massachusetts, and a business plan for a food co-op in Connecticut. Significant work has been done on a feasibility study for potential worker-owners of The Green Mountain Spinnery in Putney, Vermont, not to mention the board training that has been an offering since CDI's inception in 1994, when it was established as the Northeast's regional cooperative development center.
In response to rising demand, CDI has undergone a major transition from a conventional non-profit organization --hiring staff and independent consultants -- to a worker cooperative. Both the prior CDI board and its sister organization, Cooperative Life, the federation of the region's cooperatives, agreed to the change in order to enhance and expand CDI's capabilities.
New structure, increased productivity
Thanks to the new partnership structure, CDI has been able to provide increased technical assistance to new and exisiting New England cooperatives, including recent feasibility studies and business plans for several food cooperatives and a community-owned retail discount store.
A new web resource for group-based agricultural businesses in the Northeast, available online as a PowerPoint presentation, is one of CDI's most recent collaborative efforts. "Group-Based Business Sustaining Agriculture in the Northeast U.S." can be found at: http://www.cooplife.coop/sustag.html.
May also marks the third year CDI has published the Cooperative Life Leader, e-mailed monthly to 1,200 readers and still the only cross-sector, regional co-op development e-letter in the nation. And of course partners have provided technical assistance to projects like the ones mentioned above -- more than 16 so far this year. They work with existing cooperatives, start-ups, and those trying to decide if a co-op structure is for them. And in addition to co-ops, CDI partners advise and assist non-profits, employee stock ownership plans (ESOPs), limited liability corporations (LLCs), associations, and other group-based businesses.
The change in structure was strategic. "We wanted to be able to recruit very high caliber people with cooperative, business, and industry sector expertise. Participating in a worker-controlled business was attractive to the people we wanted," says Lynn Benander who has served as CEO for eight years. The strategy enabled CDI to double the staff. Benander explains, "We set up a plan that combines a part-time base salary with additional compensation for work on collaborative consulting projects. That's why we refer to ourselves as Partners, because we are partners in cooperative development."
CDI Partner Profile:
Ron Allbee
Currently there are four Senior Partners-Ron Allbee, Lynn Benander, Lynda Brushett, and Bob Rottenberg--and two Associate Partners-Stacey Cordeiro and Jennifer Gutshall. They live in four different states in the Northeast region, with an office in Greenfield where several support staff ably assist them. Each member of the team will be featured in upcoming editions of the CL Leader.
Ron Allbee remembers riding with his father to the Eastern States Farmers Exchange in Brattleboro, Vermont to buy feed for their cows, his first memory of co-ops. Later, he served as Vermont's Commissioner of Agriculture and Director of Energy, and worked to support the creation of farmers markets (that included food coupon programs), solar energy programs, farm finance and other rural lending programs. As Commissioner of Agriculture, and later as a consultant to dairy farmers, Allbee worked with many farmer-owned cooperatives. He has also has worked extensively with credit unions, as well as with consumer-owned food and energy co-ops.
How does he view the future of cooperative enterprise today? Allbee responds: "The same forces that face all of us -- market consolidation and a world economy -- put pressure on co-ops. I think co-op development in the Northeast must be looked at in sectors. If we look at the financial sector, credit unions are quite healthy and some innovative things are happening in the credit union sector. The Vermont Development Credit Union in Burlington that serves the lower income segment of the community is a shining star when it comes to serving those that have difficulty finding credit elsewhere." As for the food chain, Allbee continues, "The dairy co-ops have been and will continue to consolidate. Cooperatives like Agway and others have faced continued difficulties in a changing market. But, beyond that we see food cooperatives thriving and expanding, and workers cooperatives developing."
Ron Allbee became a CDI Partner because, as he says, "Co-ops have had a long history in the agricultural world. I believe in agriculture and in cooperatives, and CDI has a role in assisting them." He notes that in the early stages of cooperative development, for example, it's essential that individual producers share a common goal. Sometimes, in the drive to form a group-based business, it can be helpful to have someone hold people's feet to the fire when it comes to putting everyone's agenda on the table. To succeed, Allbee says, CDI Partners themselves must work cooperatively with others. "We have a piece of the pie, not the whole pie," Allbee says. "We can't accomplish our mission by ourselves. We work with community development corporations, organic farming and food associations, Cooperative Extension, USDA, state agriculture commissioners, legislators, lenders, and other co-op sectors such as the rural electric co-ops. We need to keep bringing these groups together, to build the infrastructure we all need to move forward." FMI about CDI's Programs and Partners: www.cooplife.coop
NORTHEAST NEWS
VT Credit Unions Organizing To Win
[Ed. note-See the related cover story 'Tax Battles on the Brink: Co-ops Join Fight Against Bankers' in the April 2004 Cooperative Business Journal published by the National Cooperative Business Association: www.ncba.coop. NCBA is calling on all sectors of the co-op economy to support this nationwide struggle of credit unions, whose outcome may well impact us all.]
In 2002, the Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISCHA) and the Vermont Credit Union League began the process of modernizing the 40-year old statute under which state chartered credit unions operate. This culminated in a proposal to the state legislature that would preserve the tax-exempt status of Vermont credit unions as non-profit, member-owned cooperatives while strengthening BISHCA's ability to monitor and oversee credit union operations.
The new law will give state-chartered credit unions the ability to provide the same financial services as federally chartered credit unions, and it will allow them to make small business loans to members. It will also allow more flexibility in defining who's eligible to join a credit union. In an unusual show of solidarity, both the regulator and the regulated industry agree on the changes.
But the Vermont Bankers Association has testified against the new law, seeking instead further restrictions on credit unions -- who can join them, what services they can provide -- and has even proposed new taxes on credit unions. In a 100-page document submitted to the legislators, the association asked among other things that locally-owned, member-controlled credit unions, which exist under most of the same restrictions on equity and returns on investment as other cooperatives do, be put in the same tax category as for-profit, commercial banks whose headquarters and (typically well-paid) directors are usually not located in Vermont.
The re-write has become a lightning rod in the ongoing struggle between banks and credit unions in Vermont, a struggle that is taking place around the country. Following repeated delays, the Vermont legislature's outgoing Commerce Committee Chair Mark Young (himself a bank owner) set aside the credit union re-write discussion until next January. Another representative commented that this delay was a disservice to credit unions and their members, laying blame squarely on the banker lobby. At the annual business meeting of the Vermont Credit Union League, participants heard from the Deputy Commissioner of BISCHA who expressed confidence that the legislation would move along swiftly next January and that it will eventually be enacted into law.
To counter the bankers' attack on their re-write proposal, the Vermont Credit Union League mounted a proactive campaign featuring petitions in credit union lobbies and links on its website where members find their representatives' phone numbers and e-mail addresses. Response from members has been strong, although League officials caution they still need as many signatures and e-mails as possible in preparation for the next session of the legislature. FMI: www.vermontcreditunions.com
Cooperating for social justice
"I think many people realize at some level that unless we build an alternative and democratic economy, few of our social justice movements will be able to succeed in the long run," writes Isaac Ashton in the January/February 2004 issue of GEO newsletter published by the Grassroots Economic Organizing collective. He is recounting his trip to the World Social Forum in India last January where upwards of 100,000 people attended more than 1,200 workshops, speeches, discussions and performances around the theme "Another World is Possible."
Ashton, who helped found the Student Organized Movement for Ownership Solutions (SOMOS), is actively promoting worker-cooperatives as a means of achieving economic and social democracy. Recently he became a member of the GEO collective, which helps organize around "inter-cooperation" and "globalization from below." He was surprised to find that his workshop "Worker Cooperatives and Economic Justice" was the only one of more than a thousand at the World Social Forum that "addressed the idea of taking the economy into our own hands through control and ownership of business."
Union organizing, boycott campaigns, electoral politics, and the fair trade movement were well represented, Ashton continues, "yet there seemed to be an appetite for something else, an answer not present. To me that answer has been the movement for worker cooperatives and democratic businesses."
Len Krimerman, one of GEO's original members and an activist for both worker-ownership and global justice for years, says he's not surprised at the low visibility of cooperatives at the Forum. "While I may think there's nothing more important than the creation of worker-owned businesses," he says, speaking from his home base in Connecticut, "we also have to integrate, collaborate, and consolidate with all these other interests. We've accumulated a lot of useful research and learned a lot of lessons that need to be shared, and that need to be expanded as well, by what people in these other groups have been learning."
One hopeful sign, Krimerman adds, is that in the past year he's been contacted by at least half a dozen people under thirty who already have tremendous experience as organizers and activists, and who are learning quickly about the potential of cooperative enterprise to help make the dream of universal economic and social democracy come true. With the founding convention of the first ever U.S. Federation of Worker Cooperatives and Democratic Workplaces just ended, and coming only weeks before the next global forum -- the Boston Social Forum to be held during the Democratic National Convention in late July -- the flame of hope still burns that the disconnect between global justice activism and cooperative economics may soon be a thing of the past.
The CL Leader will keep you posted on the new national federation of worker-owner coops and on the Boston Social Forum. FMI on the federation: www.usworker.coop FMI on GEO: 1-800-240-9721 or: www.geo.coop.
LEGAL FOCUS
Where should we incorporate? by Patrick J. Deluhery
One of the most often asked cooperative start-up questions is: Where should we incorporate? The answer is, of course, that it depends on your needs. Generally, I advise staying in your home state, unless there is a good reason to go out of state. For one thing, if you organize out of state, you have additional filing requirements and costs at home, since you have to register as a "foreign corporation." You may also lose opportunities for local funding designed to benefit local business or industry.
If you are looking for the "new generation" cooperative form, then you will need to look west to Minnesota or North Dakota law. This new law allows for creating a cooperative that acts very much like an LLC, and would be attractive to a small group where each member is making a large capital investment, and looking for a return on that investment.
As a whole, New England cooperative laws tend to be older and less flexible, but they may still work well for you. However, if your state cooperative law has restrictions that do not fit your business goals, such as prohibiting preferred stock, or requiring a sinking fund, or any one of a number of other "paternalistic" requirements designed to protect you from yourself, then Ohio is a good choice, as its cooperative law is flexible, with minimum technical barriers and requirements. Also, some states have laws that accommodate a particular industry, such as the Maine Fish Marketing Association law, so don't overlook these specialty laws if they apply to you.
If you are planning a worker-owned cooperative or a housing cooperative, you may find that your home state law is friendlier since, at least in my experience, these laws tend to be newer and a little more uniform. Still another alternative is to form a regular business corporation in your home state and adopt cooperative bylaws. A common misunderstanding is that you need to be organized as a cooperative to take advantage of the cooperative tax advantages. The tax law allows any organization operating " on a cooperative basis" to take advantage of the favorable tax treatment of Subchapter T. While this approach provides great flexibility, be sure that your lawyer is experienced with cooperatives if you take this approach.
Ed. note: Patrick J. Deluhery is a Massachusetts-based attorney serving the legal needs of cooperative businesses in the Northeast. FMI: pdeluhery@aol.com. This article is intended to provide information and is not legal advice.
OUTSIDE THE REGION
Emilia Romagna: la vida cooperativa
"Within civil society, many activities are carried out by organizations created to achieve things that are best accomplished by people acting together rather than alone. They constitute that sector which is neither the state nor the commercial market, and which includes non-profit and voluntary organizations, charities, and co-operatives. This has also been described as the third sector or the social economy," writes John Retsakis in the Winter 2004 InterSector, the newsletter of Canada's new cooperative development system known as 'Co-opZone.'
"Reciprocity," he continues, "is the defining element of civil society and it lies at the foundation of all forms of voluntary co-operation." In the Emilia Romagna region of northern Italy, "social co-operatives are inventing models of care that are advancing the values of civil society as a clear alternative to both state and market systems," Retsakis continues. The co-ops were formed in the early 1980s by caregivers and families of people with disabilities to provide services to the disabled that were unavailable from the government.
In Italy, there are now 6,000 social co-operatives providing social services throughout the country and employing 160,000 people -- 15,000 of them disadvantaged workers. They employ twenty-three percent of the non-profit sector's paid workforce even though they represent only two percent of non-profit organizations. In the city of Bologna, over eighty-five percent of social services are provided through social co-ops. Two types of social co-ops have emerged: Type A, which provides social, health, educational and recreational services, and Type B which provides employment for marginalized and disadvantaged groups in various occupations.
Italian legislation allows Type B social co-ops to be exempted from paying mandatory payroll costs; government pays this cost in order to encourage hiring people with employment barriers. Also, Italian law now provides that membership may be comprised of several categories (workers, users, volunteers, investors, and public bodies), all of whom have an interest in the production of the service. Retsakis writes, "This multi-stakeholder aspect reflects the expanding focus on community service as opposed to the traditional co-op focus on member benefit. In those social co-ops where the service users are also members, the operation of control rights has the capacity to transform the user from being merely a passive recipient of care to being an active protagonist in the design and delivery of the care. The debate on this issue is just beginning. And, there are understandable fears concerning the manner in which an increased role by civil society might reinforce the trend toward more privatized care. But the same pressures of service quality and service cost which drove the Italian system to take seriously civil society's role continue to raise the issue of progressive alternatives in this country."
John Retsakis is executive director of the Co-operative Association of British Columbia and is co-founder and program administrator for the Bologna Summer Program for Co-operative Studies at the University of Bologna, Italy. To read the complete article: www.coopzone.coop.
BULLETIN BOARD
June 4: The Vermont Employee Ownership Center presents the second annual Vermont Employee Ownership Conference on Friday, June 4, 2004 at the Wyndham Hotel in Burlington. Highlights: welcome by Gov. Jim Douglas; keynote by John Logue, Director of the Ohio Employee Ownership Center (www.kent.edu/oeoc), and sessions on topics of interest to those considering employee ownership, those who work in employee-owned companies, and those interested in the potential of employee ownership to improve local communities. Conference underwriters are Chroma Technology; Gardener's Supply Co.; Trust Company of Vermont; the Community and Economic Development Office of the City of Burlington; REM Development Co.; Gravel and Shea, Attorneys at Law; Vermont Sustainable Jobs Fund, and the Vermont Department of Economic Development. FMI: www.veoc.org or (802) 861-6611.
June 10: "Co-op 101: An Introductory Course on Cooperative Business Development," a popular course offered by Cooperative Development Institute (CDI) in co-sponsorship with USDA Rural Development will be held at Green Fields Market, 144 Main St., Greenfield, Massachusetts. A donation of $20 is requested, making this a remarkably low-cost way to learn how to start and maintain a healthy cooperative business, and how to decide if the co-op option best meets your needs. Space is still available. To register, and for e-mailable flyers/posters to help spread the word: (413) 774-7599 ext. 118 or 119, or: www.cooplife.coop/events/coop101/
June 10 - 12: Consumer Cooperative Management Association Conference, Minneapolis, MN. Sponsored by National Cooperative Business Association. FMI: www.ncba.coop
June 12 - 15 Cooperative Communicators Association, Annual Institute, Louisville, KY. FMI: www.ncba.coop
June 16-17: ERS is offering a two-day workshop on agricultural and food cooperatives in rural development, at ERS in Washington, D.C. The focus is to explore what makes cooperatives succeed or fail, and the implications for public policy. FMI: http://www.ers.usda.gov/Emphases/Rural/AgCoopWorkShop/
June 17-18: 6th Annual National Value Added Agriculture Conference in Peoria, Illinois. Ways that university and extension staff can better support agricultural entrepreneurs, and the transfer of government research to private commercialization are keynote themes. The event will address different interpretations of 'value-added' and offers valuable "lessons learned" to improve the success rate of these ventures. A series of "Reports from the Trenches" will cover the highs and lows, the hassles, headaches and mistakes made along the way. The event is sponsored by a consortium of universities, state agencies, and farm organizations, and is geared to producers as well as to the people who work with them. FMI: Mary Holmes at (309) 298-2674 or http://www.value-added.org
Aug 4-7: Association of Cooperative Educators Annual Institute, Montreal, Quebec. Thanks to a grant from the George and Gladys Dunlap Cooperative Leadership Program of the Nationwide Foundation, there will be simultaneous translations in French, Spanish and English! FMI(recently changed): http://www.wisc.edu/uwcc/ace/ace.html
Aug. 18-21: National Association of Housing Cooperatives Annual Training Conference at the Marriott Copley Place in Boston. This is a great chance to learn what housing co-ops are about, or how to strengthen your co-op.
National Credit Union Association Board member JoAnn Johnson officially assumed chairmanship of the NCUA Board on May 3rd. She was appointed by President Bush, succeeding Dennis Dollar who left the Board; she has served on the NCUA Board for two years already. The Bush Administration has to name Dollar's replacement, and the subsequent Senate confirmation process could take awhile during this election year (the current two members include one Republican and one Democrat). Johnson says her priorities will be financial education, risk-based capital, and risk-based regulation while maintaining safety and soundness. FMI: www.ncua.org
The National Federation of Community Development Credit Unions has announced this year's recipients of the Annie Vamper Helping Hands Award. The 2004 Awards went to José Feliciano Vélez, Board Member of Cooperativa de Ahorro y Crédito Electro-Coop (San Juan, PR), and to William Myers, CEO of Alternatives Federal Credit Union (Ithaca, NY). José Feliciano Vélez is an active member of three credit unions in Puerto Rico, Electro-Coop, Geren-Coop, and CooPACA (the country's largest). In 2002 the Puerto Rico League of Cooperatives honored him for his volunteerism and leadership in the cooperative movement. William Myers helped found Alternatives and has been Manager and CEO for 25 years. Among his many contributions, he developed the Credit Path Model of Financial Empowerment, a tool to help low-income people understand ways they can advance themselves economically.
The award, this federation's highest honor, is named after a pioneer African-American credit union manager who became an official at the National Credit Union Association in the late 1970s and early 1980s. FMI: www.natfed.org.
Now this: there's more to correct about our story in CLL 22 on Amalgamated housing co-op in New York City. We foolishly identified Herb Cooper Levy as president of NAHC (it was Herb who set us straight last month on the difference between Amalgamated and Co-op City). Douglas Kleine, current ED of NAHC, writes that Herb held that post a few years ago, but he was never the president. FMI: www.coophousing.org.
CO-OP VALUES IN ACTION
(9) Social Responsibility and (10) Caring for Others
Cooperative Home Care Associates (CHCA), headquartered in New York's South Bronx, provides home health care aides on a contract basis to large health-care providers and major hospitals. The worker-owned cooperative was established nearly thirty years ago on the premise that, by aggressively intervening as an employer in the home health care industry, the entry-level occupation of home health aide (already accessible to women with fewer skills and less education) could be improved for the benefit of the worker. Home care services, although technically not temporary work, are organized in much the same manner. Most agencies fill their rosters with as many part-time aides as they can hire, train them to minimum required standards, and assign work with little regard for the aides' need for full-time hours or other professional treatment. As a result, turnover in the industry is high (forty to sixty percent), care provided is erratic, and both home care aides and home care clients suffer.
CHCA was created by people who believed that by changing the nature of the home care job, the industry could be shown that a strategy of investing in the front-line worker could provide both better jobs and better patient care. All CHCA home care aides are first trained by a nonprofit organization housed in the same offices and funded 1:2 by public and philanthropic sources. The entry-level program includes four weeks of on-site classroom training, plus ninety days of on-the-job training. Role-playing, educational games, simulations, and hands-on demonstrations reach people who may be uncomfortable in a traditional classroom. There's also a "career ladder" in which workers can progress to higher levels of expertise; several aides have even become licensed practical nurses.
Today, CHCA employs more than 690 people, almost all of them women of color. Wages and benefits are twenty percent above the industry average, and the annual turnover rate is one-third to one-half the industry average. Contractors report that CHCA's home care aides are more desirable that those of other companies: they deliver a higher level of reliability and responsiveness, and have raised standards of expectations industry-wide about what a home care aide is capable of doing. The linking of quality of job to quality of care is what CHCA attributes its success on two fronts: the original mission to create good jobs for low-income people, and becoming a valued and integral player in the home care sector.
(Compiled from information available at www.wisc.edu/uwcc/ created by the University of Wisconsin Center for Cooperatives. See also at the same site: We Are the Roots published in 2003 by the University of California at Davis-based Center for Cooperatives, which tells the fascinating story of CHCA.)
Each month we tell stories that embody one of the Seven Co-op Principles or two of the Ten Co-op Values approved by the International Cooperative Alliance www.ica.coop/ica/. Please send us YOUR suggestions!
CDI SERVICES
FMI: (413) 774-7599 or info@cooplife.coop.
The Cooperative Life Leader is produced as a service to the regional community by the Cooperative Development Institute, which is dedicated to developing and strengthening cooperative enterprise in the Northeast. CDI staff and consultants provide comprehensive support services, including the following:
* Customer service training
* Annual evaluations (manager, board, co-op)
* Business and strategic planning
* Executive search
* Board and management development
* Membership development
* Cooperative start-ups
* Fundraising
* Legal and personnel issues
* Public policy advocacy
CO-OP QUIZ 015:
Name the three men inducted into the Co-op Hall of Fame this year, and identify the sector and/or cooperative(s) with which they are most commonly associated. (Hint: Readers of the National Cooperative Business Association's Cooperative Business Journal will have an advantage here. FMI: www.ncba.coop)
Answer to Q014: What country does this passage describe?: "The rapid economic growth that started in 1960 brought a variety of problems for society, beginning with pollution and harmful food products. These problems gradually became more severe with the oil crisis of the 1970s. A large number of citizens' organizations were formed based on opposition to the corporate philosophy of 'profit first.' In this social setting, consumers' cooperatives developed into a consumers' movement through the organization of full-time housewives." If you said Japan you were right. (Find out more about the global cooperative movement in Making Membership Meaningful, Int'l Joint Project on Co-operative Democracy, 1995.)
TO CONTACT COOPERATIVE LIFE LEADER
Send your news and comments to lbroussard@cooplife.coop. To subscribe, unsubscribe, or for FMI on a program or event contact us at info@cooplife.coop. Please feel free to forward this newsletter to your colleagues.
Cooperative Life Leader is supported by a grant from the United States Department of Agriculture's Rural Development program. In accordance with federal law and US Department of Agriculture policy, this Cooperative Life/Cooperative Development Institute is prohibited from discrimination on the basis of race, color, sex, religion, age, disability, marital or familial status. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, Room 326-W, Whitter Building, 1400 Independence Avenue SW, Washington DC 20250 or call 202.720.5964 (voice and TDD). USDA is an equal opportunity provider and employer.
Cooperative Leader Staff
Lynda Brushett, Senior Editor, brushett@metrocast.net
Jane Livingston, Principal Writer and Editor, mejane@gwi.net
Laurie Siggillino Broussard, Production Manager, lbroussard@cdi.coop