Issue #28 - December 2004 A publication of Cooperative Development Institute www.cdi.coop
Feature: Bargaining with the force of law in Maine
CDI Partner Profile: Jen Gutshall
NE News: VT credit unions, NH food co-op
Legal Focus: Capitalizing Co-ops, Part 3, by Patrick Deluhery
Outside the Region: Bay Area Worker Solidarity
Bulletin Board: Work Opportunities, Films and Videos, & more
Values in Action: Principles in Action: (4) Autonomy and Independence: CooperationWorks!
CDI Services: Contact us FMI at info@cdi.coop or 1-877-NE COOPS
Co-op Quiz: Get into the Act!
Cooperative Development Institute
1 Sugarloaf St.
South Deerfield, MA 01373
Tel: 413-665-1271, toll-free l-877-NE COOPS (632-6677)
Email: info@cdi.coop Website: www.cdi.coop
Above photo: Brandon Roope, pictured here with his brother Bruce, is a ME potato farmer and is also on the ABC board of directors.
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.
The Maine Agricultural Bargaining Council (ABC) was formed in 1970 by a group of potato growers in Aroostook County, or 'the County' as it's known locally. The ABC is a 501 (c)(5) non-profit corporation that acts essentially as a marketing cooperative. It has approximately 300 grower members and is governed by a 21-member board of directors, all growers, who are elected by their peers. The council operates on a one member, one vote basis, and there is no cost to join. Operating costs of the ABC are paid by an assessment, currently one-and-three-quarter cents per hundredweight of potatoes sold under an ABC approved contract. The processor withholds this from member's proceeds and forwards it to the ABC office on a monthly basis, with a full accounting of where it came from. The Board addresses the amount of the assessment on yearly basis.
When growers join the ABC, they have more clout in the marketplace. And they have Vern DeLong as their spokesman, who works with a committee of grower members who negotiate the agreements. DeLong has been with ABC since 1984, as Executive Director since 1990. He also serves as Secretary-Treasurer to the Potato Marketing Association of North America (made of 12 similar members organizations coast to coast) and as Director of the Pacific Coast National Bargaining Conference. It's no surprise, therefore, when he remarks offhandedly, "I feel most growers think our office is the most knowledgeable on the [potato] processing industry in the United Sates." When he talks about his work with PMANA, you can see why: "We start bargaining around the first of February and may go until the first of April…during negotiations, we're in communication once a week or more often if necessary. As Secretary, I'm responsible for disseminating information concerning the bargaining effort. I have to know what happened in a meeting within half an hour after it ends."
The power of law
It's widely agreed, says DeLong, that Michigan, California and Maine have "the best bargaining laws on the books." In the case of Maine, that's because in 1986, the law was amended to bring about a requirement for mediation and binding arbitration. Maine potato growers were instrumental in bringing this about. As a result, in a state where only one processor dominates their industry, Maine growers are working cooperatively to get the best possible deal, and remaining competitive with other growing areas in the US and Canada. They also have a conduit to the best information available about their industry, and have instituted crop rotation programs with edible soybeans, canola, and mustard. The council monitors state and federal inspection programs and acts as a buffer between processors and growers, so that farmers do not have to do their negotiating individually.
Part of the bargaining law stipulates that, if the ABC's membership comprises 51% or more of growers delivering to a processor, or 51% or more of the volume a processor receives comes from ABC growers, that processor is required to negotiate with the ABC in good faith to reach a contract agreement. Certification for bringing about the bargaining process is conducted by the Maine Bargaining Board, a state-appointed board.
DeLong says of their experience with arbitration. "We've won and we've lost, and we've lost some by winning." He adds, "There's a whole list of things we've learned. The 'free rider' element is always a problem. And some handlers see us as a sort of union." Despite this, there is no denying the ABC has made a positive difference for Maine potato growers. Outside Aroostook County, other agricultural producers in Maine seem unaware of its existence, or at least that it's a statewide organization, open to any produce grower in Maine. FMI: ABC Executive Director Vernon DeLong (207) 764-3380 or vernd.abc@mfx.net.
More than a year ago, CDI began the transition to a cooperative operating structure to better align our systems and experience with the cooperative and group based businesses we help people build across the region. We doubled the size of our staff and have thrived under the leadership of Co-Managers, Bob Rottenberg and Lynn Benander. In furtherance of our goal to share management functions among partners, Jen Gutshall has agreed to take on the role of Managing Partner in our consulting group for the coming year. Lynn has moved back into full-time program work; Bob will serve in a part time program and management capacity.
CLL: What drew you to become a CDI partner in the summer of 2002?
JG: I had worked with CDI both as a client [in creating the Connecticut Energy Co-op] and a consultant for eight years. That work had a major impact on the way I view the world and the potential for cooperatives as vital vehicles for community economic development—access to resources, to quality jobs, to products and services of the quality people are looking for. Community ownership and control are both philosophically and practically in line with my values and what I want to do in my life, and CDI is the one organization in the Northeast whose mission is to build that cooperative economy. In the summer of 2002, when CDI decided to reorganize itself [as a partnership], I was excited to join this team of consultants with such depth and diversity of skills and experience, who were willing to take some financial risks to work collaboratively.
CLL: How do you see cooperative development evolving in the Northeast?
JG: For one thing, CDI received 55% more requests for assistance in 2003 than in 2001! I think there's a trend that people are looking for opportunities to increase their sense of ownership and control over the resources that drive their lives. As more people experience insecurity, whether it’s a loss of wealth, of jobs, of income, people are increasingly looking toward themselves to define their own futures, but also looking to work collaboratively and cooperatively with others to define their economic future. There's less faith that the market mechanism will take care of us; therefore we have to design and develop our own. Co-ops become an increasingly important and popular vehicle for realizing that. On a parallel level, there's greater alienation, and people desire a sense of community. People who engage in building their own cooperatives get back the satisfaction to work with others, to build with others. Ownership and control over assets and resources are what allows people to do whatever they want to do. A lot of awesome community development is going on that could use an economic component, instead of being supported by grants. Cooperatives offer an addition or an alternative to their current strategies.
CLL: What are the biggest challenges to developing the cooperative economy?
JG: First of all, co-ops are more often than not attempting to provide something not being adequately provided by the marketplace, or else it's not being met in a way people feel okay about. So right off the bat, you're trying to build something that doesn't exist for good reasons. Second, I probably spend at least half of my cooperative development time working with people to figure out how to work in a group, how to be effective, how to deal with interpersonal relationships, how to re-frame your thinking to get your point across, how to let go of your ideas when they don't fly. Cooperative developers talk about building capacity, but when we do we’re talking more about the business skills of people at the table, and about building the capacity of the project. What you're also doing is building the capacity of the individuals themselves, and that is a long road. Every person you work with brings his or her own personal baggage to the table, to help them learn how to work constructively rather than distracting or derailing the process. It's not purely a systematic process; it's an organic process.
For two decades, residents of New London, New Hampshire, enjoyed shopping at 14 Carrots, a natural food store owned by a sole proprietor. In 2001, when a recession hit while the supermarket next door was starting to carry natural foods and a new natural foods specialty shop opened up across town, the owner decided to call it quits. General manager Rick Libbey recalls, "The three managers sat down with the employees and said, 'We can either throw in the towel or go for it.'" With the help of CDI consultants they got a lawyer, transferred ownership, and formed the board. "We just celebrated our second year as a co-op. We have 300 members, and we think we're doing pretty well," he says.
Since the co-op formed, the specialty store has gone out of business. "New London is a pretty affluent community," Libbey explains, "but it's a tiny town. That new store had a tremendous amount of buying power. But we had these loyal customers who stuck with us. Those were the first hundred and fifty members of the co-op." Membership in the co-op requires a one-time, lifetime fee of $125 that can be paid quarterly. The store, upwards of 2,000 square feet, has a paid staff of ten. The presence of as many as six or seven employees at a time in a fairly small store is unusual. "That's what makes us what we are," Libbey states. "Way back, a high level of customer service was established and we didn't want that to change. Then, we were getting twenty customers a day. Now, we're getting one to two hundred." Payroll is tough, yet in such a small community the co-op is a significant employer, and one that offers flexible hours to parents who want to be home after school.
Libbey believes one key to the co-op's future lies in its ability to offer things not available at the supermarket. "I can't sell soy milk any more," he says. "We need to get those niche products, something a small [local] company is making on their kitchen stoves." A recent boost to business came in the form of a woman who walked into the co-op one day and offered to cook for their tiny take-out business, the 14 Carrot Express. For years a handful of locals a day would come in for soup and salad. Now, the Express is bringing in about 50 people a day and $1200-$1300 a week serving homemade soups, hot and cold salads, and baked goods, many made with local and organic ingredients. And the customers who come for take-out (and pick up a few groceries on the side), also take home the knowledge that they too could become owners of the store.
NewsLines Express, the online newsletter of the Vermont Credit Union League, reported last month that Election Day was on the whole good for "the Vermont credit union movement." In addition to a number of known credit union supporters re-elected to the state legislature, there are several new legislators who expressed support for credit unions in a candidate survey conducted last fall by the Vermont Credit Union PAC. The survey was returned by three-quarters of the candidates who received funds from the PAC. Both Governor Douglas and Lt. Governor Dubie, who easily won re-election, are on record as being supportive of credit unions. This is critical to the upcoming initiative to get Vermont's 40-year old statutes improved so that all state chartered credit unions can successfully compete with conventional banks.
In Washington, the Express notes, "The votes were barely tallied for congressional Republicans when credit union lobbyists were already maneuvering to push forward the long-stalled bankruptcy reform bill. CUNA lobbyist John McKechnie said he was already talking with congressional representatives to see if they couldn't move the credit union-backed bill during the coming 'lame-duck' congressional session, when many members of Congress who have either announced their retirement or have lost re-election bids will participate in final business for the 108th Congress."
Meanwhile on the local scene, Vermont Development Credit Union and Heritage Credit Union will receive the National Federation of Community Development Credit Union Foundation’s 2004 Bridge Grant (see CLL 26). Funded by the Ford Foundation, the program pairs "mainstream" credit unions with community development credit unions (CDCUs) in places where people's financial needs are underserved. The two will share resources to help VDCU develop an e-banking system with access to consulting services from HFCU, and will install a full-service electronic kiosk that provides additional access to members of both credit unions. The kiosk will dispense cash, accept deposits, cash checks, provide e-banking services and operate an interactive video connection during normal office hours. Consumers using the kiosk will also have access to credit union staff through free telephone and video links. VDCU's very successful home ownership program will be offered to low-income members of both credit unions. Heritage CU's VP of Marketing Matt Levandowski pointed out, "This project is about two credit unions working together to bring better levels of service to both sets of members. You wouldn’t see banks doing this. Credit unions can work together and pool resources to make the whole credit union movement better. We’re a financial co-op and this is really in line with our mission.”
Last time, we talked about developing a capital plan and a solicitation campaign. Here we examine preferred stock options and member loans or notes as vehicles for raising capital for the co-op. If you are incorporated in a state allowing the use of preferred cooperative stock, the board will want to consider setting up a preferred stock program (by board resolution) to allow the purchase of preferred stock in the cooperative as part of its initial capitalization. Be sure your Articles of Incorporation allow preferred stock; it may be necessary to amend these Articles before you begin your program. Establishing preferred stock should be done early in the capital solicitation process so as to allow the potential contributor a choice of direct contributions, preferred stock, (or member loans, if offered as discussed below) or any combination of these vehicles to contribute capital. This will also save time and money, since you can solicit all three at once rather than making two or three visits.
The technical legal, accounting and securities law issues involved are beyond the scope of this article, but it is critical that the board seek competent legal and other professional advice early in the process in order to assure compliance with applicable laws. In particular, securities laws may limit how and to whom you can offer to sell the stock. Preferred stock is stock that will be "preferred" (paid out ahead of member equity) if the cooperative should ever be liquidated. Often, preferred stock pays an annual dividend that can be cumulative or non-cumulative, and it is usually non-voting, except with respect to issues affecting its issue or value. There are other choices to be made in setting up a preferred stock program, adopting a suitable bylaw, and soliciting purchases from members and others. Professional advice is critical in making these choices legally and correctly. Funds secured from the purchase of preferred stock should be properly recorded in the cooperative's books and financial records, and these funds should be appropriately safeguarded.
Finally, some of the cooperative's needs may be able to be met by a member loan (member note) program. Since new ventures are often not seen by lenders as credit worthy, the members become, in effect, the lender or banker for the cooperative. Leaving aside the issue of whether "debt" is also "equity," it will be necessary for the board to determine how much it wants in member loans, the interest rate to be paid, repayment terms of both interest and principle, whether collateral will be set aside for repayment of the debt, and any other issues surrounding the note and the loan. While borrowing is prudent for new ventures, care should be taken not to "mortgage the future" of the cooperative to an excessive extent. Also, the cooperative's debt repayment ability should be conservatively estimated since there is no actual business history to draw upon. Competent legal advice should be obtained early in the process of setting up this program, and be aware that solicitation may be subject to securities laws.
Successful new cooperatives will employ a well thought-out, coordinated solicitation using all or as many of these three approaches as fits their needs. In the process, they will also build membership and credibility as well as develop the business and professional relationships they will need to be successful once the cooperative is up and running.
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.
San Francisco's Bay Area, according to those who should know, boasts the largest concentration of worker cooperatives in the United States. Last September, a group of them hosted a weekend conference, film festival, co-op fair and social gathering called "No Bosses Here! Worker Co-ops: Democracy in the Workplace and Responsibility in the Community." Sponsors included the worker-owners of Alvarado Street Bakery, Arizmendi Bakery, Cheese Board, Inkworks Press, Lusty Lady, Nabolom Bakery, and Rainbow Grocery Cooperative.
All of these are members of the Network of Bay Area Worker Cooperatives or NoBAWC (pronounced, of course, 'No Boss'), which includes 55 worker-owned businesses. The event was a great success, from the opening film festival (Civilizing the Economy: Italian Social Coops; Sasetru: Argentine Factory Occupation; Made in the USA: Worker Coops across America; Worker-Powered: Bikes and the Cooperative Movement, and Democracy in the Workplace: SF Area Cooperatives) to the preview and discussion by author John Curl of his forthcoming history of worker co-ops in the U.S., Worker Cooperatives vs. Wage Slavery. There was Spanish translation and childcare, food donated by local co-op groceries and prepared by a co-op catering service, a midday festival featuring co-op wares, an evening cabaret and auction. Entertainment included the famed San Francisco Mime Troup, as well as numerous local musicians.
Conference topics included "What is a co-op and why should you care?", "Worker cooperatives and labor unions" and "Worker cooperatives as a community development model for African-American communities." Also discussed was the state of the worker co-op movement and the new US Federation of Worker Cooperatives and Democratic Workplaces, formed last May in Minneapolis (see CLL ; the GEO newsletter also devoted much of issue #62 to the founding event: www.geo.coop) Now, the Portland area has formed a network of worker co-ops and is planning a similar 'think global, act local' gathering. FMI: NoBAWC (510) 549-1514 or www.nobawc.org.
Co-op T.A. Needed! The Citizens Network for Foreign Affairs (CNFA) is a small non-profit based in Washington DC and funded by the US Agency for International Development. CNFA is seeking cooperative managers for 18-day volunteer assignments in Ukraine and Moldova. All expenses related to the assignment are paid by CFNA, from airfare to translation services to food and lodging. Dates are flexible with a completion target of spring, 2005. Ukraine volunteers will help farmers with a needs assessment and a survey of potential members, as well as a vote to decide whether to continue working together as a group (electing a Board, conducting a membership drive, working on loan applications and hiring a manager). Experience marketing and selling vegetables helpful, but not required. Experienced volunteers to Moldova will work with a farmer’s service cooperative that needs help with marketing and business services development. FMI: Eric Wallace at ewallace@cnfa.org or 1-888-872-2632 x42, or go to: www.cnfa.org/volunt.htm.
Credit Unions Satisfy Best! For the 20th consecutive year since American Banker newspaper has been doing its consumer survey of the financial services industry (and the 13th year since AB began partnering with Gallup on it), credit unions have ranked first in consumer satisfaction, ahead of banks and thrifts. Results appear in an article by David Boraks in the October 5, 2004 edition of the paper. The survey, conducted April 5-May 7, 2004, was of 1,000 heads of households throughout the US, with a statistical margin of error of plus/minus 3%.
The Vermont Development Credit Union recently became USDA Rural Development's eighth Intermediary Lender in Vermont with a $500,000 loan. The funds will leverage existing public and private credit union capital, and will expand VDCU's ability to meet the credit needs of low-income rural businesses in Addison, Bennington, Franklin, Lamoille and Washington Counties. (More on VDCU in Northeast News, above.)
Food co-ops in the Northeast are well represented in the Nov-Dec issue of Cooperative Grocer (www.cooperativegrocer.coop) These include GreenStar Market in Ithaca, NY, whose General Manager Patrice Jennings has written a detailed account of the co-op's decision to purchase a failing natural food store a few blocks away and open a second store. Good groundwork led to vigorous discussion and a 3:1 vote by more than 900 members. Another article looks at how two food co-ops in Brattleboro, VT and Berkshire, MA are using homemade videos to educate members, school children and the general public. "A Trip to the Co-op" was written for kids by co-op members, it stars co-op members, and it's available from Brattleboro along with a kids' coloring book version of the story, drawn by an artist who's a co-op member. FMI: (802) 257-0236. "Sweet Soil" grew out of last year's Consumers Cooperative Managers Association conference, when a Berkshire Co-op Market manager was inspired by Hanover's Rosemary Fifield to think about a video lending library that would help members and others in the community grasp the value of whole food nutrition, local farming, and other benefits of the co-op. Two members took on the project of making a documentary of local farmer suppliers. Working on a shoestring, they shot the footage in nine days and edited day and night in order to have it ready by the grand opening of Berkshire's relocated store. FMI: www.berkshirecoop.org/sweetsoil.
The Organic Consumers Association (OCA) is a grassroots, public interest non-profit that deals with crucial issues of food safety, industrial agriculture, genetic engineering, corporate accountability, and environmental sustainability. Their on-line newsletter Organic Bytes is a resource for keeping food co-op staff and customers up to date. Check it out at http://www.organicconsumerrs.org.
"A classic victory for the little guy!" That's how the New York Daily News describes The Take a new film by Canadian producer-director Avi Lewis (of Counterspin) and his activist-writer wife Naomi Klein (of No Logo fame). The International Herald Tribune says it's "a cross between Michael Moore's caustic style and Ken Loach's eloquence." The "real life thriller" co-produced by the National Film Board of Canada chronicles the takeover of hundreds of bankrupt and idle factories by workers, who converted them to worker cooperatives after Argentina's economy went into free fall in December 2001. It eloquently addresses a positive alternative to neo-liberal globalization, and has become a rallying point for the worker cooperative movement in Canada, where it was officially released in cinemas on October 29th and is now touring. A US tour was being set up at press time following a preview screening in late November in Washington, DC, with public showings set to begin December 3rd at the E Street Cinema. If this venue is successful, the film may be shown at other Landmark theaters around the country. This is a golden opportunity for community organizations and co-ops to engage the public in action-oriented discussion about economic democracy and cooperative enterprise. FMI and for downloadable posters and flyers: www.thetake.org or thetake@hellocoolworld.com.
Correction: In CLL 27, we erroneously identified David Fowle as a former representative of CGANE to the original National Cooperative Grocers Association. He was not; he does write, however: "I had the pleasure of participating in the creation of NCGA, and was on its board for the first three years."
CooperationWorks! is the national network of cooperative development centers launched in 1999, with CDI one of the co-founding members. It was the result of a decade of partnership building among a handful of existing centers, along with the National Cooperative Business Association and the Cooperative Development Foundation. In 1990 the fledgling group won significant support from the US Department of Agriculture's Rural Business and Cooperative Services program, and the rest, as they say, is history. Today, the network's membership has grown from eight to nineteen centers located all over the country. Each center pays a share of the operating costs.
While the centers develop their own programs with and for cooperatives and conduct their own fundraising activities (in the most recent USDA cycle, every one of the centers was approved for funding!), they share critical information in order to optimize each center's effectiveness. As well, they have created a web of experienced leaders who give one another the kind of support and assistance that can only be had from colleagues dealing with similar challenges and opportunities. Working together, they've created standards and practices for professional co-op developers--such as the Madison Principles--in an arena where demand threatens to outpace the supply of experienced practitioners.
The programs they have co-created include a rigorous professional development training course, a series of study tours to Canada, Italy, and other centers of cooperative success, and WoodWorks, a national initiative to develop sustainable forestry cooperatives among small woodlot owners (such as many Northeastern farmers are). Currently, they are exploring home healthcare co-op development, as these worker-owned businesses have shown a marked ability to raise the standards of care, to create good jobs and stabilize the workforce, and to enable many people to live at home where the care comes to them, rather than having to move to a care facility.
In the process of its investigation into the various models of home healthcare co-ops in operation, CW, with support from the Cooperative Development Foundation, is assisting in the production of a 'how-to' manual for developing rural home health care cooperatives, which will be broadly distributed to medical, social service, governmental, community development and research organizations across the United States. From a good idea, to a small group, to a powerful national network, CooperationWorks! has demonstrated how autonomous and independent organizations can choose to collaborate for change. FMI: Audrey Malan, ED (307) 655-9162 or cw@vcn.com.
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.
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
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* Executive search
* Board and management development
* Membership development
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* Legal and personnel issues
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Answer to Q027: The National Cooperative Bank was created in 1978 by an Act of Congress, and was privatized as a cooperatively owned institution in 1981. It currently has 1,841 customer-owners. To date, the NCB has provided more than $6 billion in financing, including financing 30,000 units of affordable housing, 3,000 units of affordable assisted living housing, fostered the creation of 10,000 jobs for low-income individuals through community-based employment initiatives, and supported 43,000 students through the creation of new school facilities in underserved communities. To find out more about NCB: www.ncb.coop
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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