Issue #31 - March 2005 A publication of Cooperative Development Institute www.cooplife.coop

Features: FY 2006 and the Future of Co-ops, CDI Partner Profile: Lynn Benander
NE News: RI's Dairy Solution, VT's City Market  
Legal Focus: Behind Closed Doors
Outside the Region: Go Team Go!
Bulletin Board Announcements: Co-op Workshop, Internships & Etc.
Principles in Action:  (7) Concern for Sustainable Community: CSI
CDI Services: Contact us FMI at info@cooplife.coop
or (413) 774-7599
Co-op Quiz!  Did You Get It?




Cooperative Development Institute is the Northeast's non-profit center for cooperative development. Contact us if you'd like assistance starting up a new cooperative or strengthening an existing one: info@cooplife.coop

Photo: Burlington, VT's City Market recently launched a 'Lunch with Neighbors' program that provides a hot lunch once a week to residents of local senior apartment complexes. Earl Bell, the co-op's GM hired as part of the transition (see story below) says the lunch program "allowed me to realize that these groups of people are a resource of knowledge and history to our community."

FEATURE
FY '06 Budget: Bad News for Agricultural Co-ops?

In releasing the proposed FY 2006 budget last month, the Bush Administration confirmed it would slash funding for the USDA Rural Cooperative Development Grants program. The news did not go down well in the cooperative community, which has built itself on the bedrock of education and training.  The threatened cuts will come right as cooperatives are attracting increased attention as a business model with much to offer in delivering food, health care, housing, power and light, good jobs and quality of life to rural and urban communities around the country.

NCBA responds
Just as the professional cooperative development community is gearing up for expanded education, training and assistance programs, the USDA, a major supporter of the past decade of growth, may be forced to leave the table. While reduced federal support could offer opportunities for local, state and regional initiatives, the transition could be tough.

Paul Hazen, CEO of the National Cooperative Business Association, was quick to respond to the news. In a press release sent out by NCBA February 7, 2005, he pointed out, "Cooperatives are a key tool if rural America is to rebound economically…shortchanging [cooperative development] centers is shortchanging millions of Americans who live and work in rural communities."

Hazen recognized that many federal programs are under scrutiny this year, but he emphasized that cooperatives are exactly the kind of self-help tool the Administration praises. With very little support, US cooperative businesses have created hundreds of thousands of jobs and helped stabilize communities, keep money in the local economy, and offer products and services that would be otherwise unavailable (like electricity to farmers and ranchers in the 1930s).

Cooperatives' Request
NCBA is asking Congress to approve $7 million for the Rural Cooperative Development Grants program. In all, USDA discretionary spending has been cut 10 percent. To realize the $8.2 billion Bush expects in cuts over 10 years, much of the 2002 Farm Bill will need to be scrapped.

The program, which began in the early 1990s, has supported the growth and development of agricultural and other types of co-ops to the tune of more than $45 million. Funding has declined in recent years, with $1.5 million of the total $6.5 million request dropped in the 2003 and 2004 budgets. For the past two years, Congress approved $1 million more than the $5 million Administration recommended.

The Administration's budget for 2006 again recommends $5 million for the Cooperative Development Grants program. Another USDA program, Value Added Producer Grants, has been utilized by cooperatives to provide start-up support. When it was inserted in the 2002 Farm Bill it had a price tag of $40 million; today, it is a discretionary program and this year it was flat-funded at $15.5 million.

Who's Up, Who's Down?
The 2006 budget proposal also cuts farm support payments by five percent and reduces the ceiling on payments from $360,000 to $250,000. Other changes will include cutting funding for the Renewable and Energy Efficiency Grant Program from $23 million to $10 million; the CCC Bioenergy Program from $150 million to $60 million, and the Healthy Communities Access program by $94 million.

Rural health grants will be phased out and the Rural Business Enterprise Grant and Enterprise Zone programs will be eliminated. Also zeroed out will be the 2002 Farm Bill Biobased Products Federal Procurement Program and the Biodiesel Fuel Education Program.

Budget increases will go to the Food and Agriculture Defense initiative, a $78 million boost to $376 million. The Conservation Security Program would be capped at $273.9 million, a $72 million jump from 2005, but a 58 percent cut from the $649 million projected by the Congressional Budget Office.

Children and Health, Here and Abroad
A cool $100 million is on the table for the McGovern-Dole International Food for Education and Child Nutrition Program, an increase of 15 percent over 2005. This proposal also seeks to move about $300 million from the USDA foreign aid program to the U.S. Agency for International Development, allowing foreign aid food purchases from overseas, rather than from U.S. farmers. The Community Food and Nutrition program will be terminated.

The budget predicts 'increased participation levels' in the WIC (Women, Infants and Children), Food Stamps and School Lunch programs as more households require public assistance. WIC participation is expected to grow to new record levels, with an increase of more than 3 percent above the 2005 estimate to a projected 8.5 million participants at a cost of $5.6 billion. Food Stamp participation is also projected to increase, by a hardy 10 percent each year.
In addition, the Bush Administration's FY '06 Budget seeks cuts in Community Development Block Grants, Rural Health Flexibility Grants, the Small Hospital Improvement Program and the Rural Health Network and Outreach Grants. 

[Ed. note: Thanks for this information to NCBA's Art Jaeger and Field to Table's Elizabeth 'Apple' Ahearn who alerted us to the Council of State Governments' Rural and Agriculture Task Force newsletter. On the plus side, in Congress, a number of bills were introduced to provide incentives for agricultural producers using alternative energy, investing in value-added enterprises and agricultural waste management and to reform and increase funding for the Senior Farmers' Market Nutrition Program. Sen. Herb Kohl (Wis.) introduced the Extension of the Milk Income Loss Contract (MILC) program, scheduled to expire in September 2005. For more, go to www.ncba.coop and www.csg.org/agriculture]

CDI PROFILE
Lynn Benander
Accentuating the Positive

CLL: How did you first get interested in cooperatives?
LB: In college, I became interested in how communities can say 'Yes' to what they want. So many seemed to be saying 'No' to what they didn't want. I was a member of a local food co-op, and the credit union, so I did know about cooperatives but I was unaware of other co-ops in the area. Then in the early 1990s, I was consulting on strategic planning with a number of non-profits and schools in the Amherst area. Some of my clients were involved in cooperatives. I became interested in the model, and in 1996 I joined CDI.

CLL: You've been involved in cross-sector education and assisting agricultural, energy, food, and other types of cooperative development since that time. What stands out as a particularly common need to you?
LB: One thing is the need for board leadership, for defining member and board roles, in order to create a dynamic and healthy environment. Good board policy governance enables the board to add value to the co-op, leaving management free to use its creativity and expertise. The new bio-diesel cooperative I'm working with adopted an outcomes and policy draft that [took them through the critically important] process of prioritizing. They took a small set of criteria and honed it and crystallized it, clearing out the extraneous and finding points of consensus. But most of the work I do now is on business development and strategy. It's very rewarding. I'm able to be more effective while spending less time since we instituted the Interim General Manager model. Serving as an interim GM puts us in position to work with the board directly and to work on board and manager relations. Many of the start-up functions of a manager are the same for any co-op. We know how to move that process along quickly and smoothly, to get the co-op up and running. We help the co-op search for a qualified manager to take over and we make sure the transition process goes smoothly.

CLL: What changes do you think would be beneficial to cooperative development in the region?
LB:  We need more sources of equity that allow more ventures to launch, as everyone knows. What's exciting on the horizon right now, though, is the public policy effort the Cooperative Life regional federation is taking in every sector of the co-op industry. It's critical to mobilize rural and urban communities around public policy that supports groups of people owning and controlling businesses rooted in their communities in ways sole proprietorships and large public companies cannot offer. Co-ops can retain assets and jobs in ways other businesses can't. A lot of co-op legislation is antiquated. It's one reason people incorporate in states like Ohio, Minnesota or Delaware, where people have a belief system that says they can make a difference. We need to come together on initiatives that promote cooperative enterprise and find ways to transform policies that block cooperative enterprise.

NORTHEAST NEWS
Got 'Rhody Fresh'?

Last summer the Rhode Island Dairy Farms Cooperative (RIDFC) announced it would soon be selling milk in local stores under its new brand name 'Rhody Fresh' which replaces its original brand 'Proud Cow of Rhode Island' (see CL Leader # 16). The new label shows a more sedate black and white cow with one spot in the shape of the state of Rhode Island. Attending the ceremony to introduce the new brand was U.S. Senator Lincoln Chafee, an advocate for rural preservation who praised the farmers for their perseverance and entrepreneurial spirit.

Senator Chafee remarked, "It's a beautiful morning, with the smell of cow manure in the nostrils. It doesn't get any better than this." This observation was seconded by Rhoda the cow spokesperson who made a mooving statement to the assembled crowd as they feasted on cookies and Rhody Fresh milk. The state Economic Development Corporation gave the co-op a $125,000 grant to launch the products. The milk, which comes in whole, fat-free, 1 percent and 2 percent, will be marketed exclusively in Rhode Island stores, including all Dave's Markets.

"It's a great day in Rhode Island's dairy industry," said co-op member Louis Escobar at the launch party. "As a lifelong dairy farmer it's something you dream about. Something I always thought would be very, very successful." With his wife Jane he owns and operates Escobar's Highland Farm in Portsmouth, which has been in his family since 1937. When their barn was destroyed by fire in 1998, community members raised money for them to rebuild a brand new milking facility. They have deep ties to their land and their neighbors.

In all, five of this region's smallest state's 18 remaining dairy farms are members of the co-op. ("As Rhode Islanders," they claim, "being small gives us a sense of pride.") The James family is hoping to restore their herd from its present 80 to 150 milking cows on their 42-year old Tomaquag Valley Farm in Bradford, which adjoins land farmed by Jameses for nearly a century. The Kenyons in Richmond milk a herd of 115 cows on Meadowburg Farm which they've been working since 1954, paying special attention to environmental impact issues. The Cottrell family has been on the Cottrell Homestead in West Kingston for more than 100 years. Today they raise corn and hay for feed and sell garden produce at a roadside stand. Their dream is to see their kids and their kids' kids carry on the family farming tradition.

Joe and Jessie Dutra operate Wanton Farm in Jamestown, once the property of Joseph Wanton, Jr., a deputy governor in the late 1700s. Around 1900, the farm was purchased by an Azorean immigrant, Joseph Furtado Dutra, the current owner's grandfather. Joe and Jessie also dream of passing the farm on to their three-year old son Joe, along with a lifestyle in a state where small really is beautiful. !FMI: www.rhodyfresh.com.

VT Food Co-op Goes Mainstream
Rosi Gowdey started at City Market in Burlington, Vermont on Opening Day three years ago. The event marked the culmination of a controversial move by 32-year old Onion River Food Cooperative from mostly natural to much more mainstream consumer products. After a diligent two-year process, members voted 75% in favor of bidding to become the city's last remaining downtown supermarket.

They won the bid despite vigorous opposition from competing chains and from neighbors who preferred the chains to what they viewed as elitist clubs of people who ate weird food. The bid was opposed as well by some local leaders who may have doubted the co-op’s business acumen, and by members, some of them longtime and loyal co-op supporters, who felt their co-op was losing its identity, if not its value. They had relied on the co-op, Gowdey points out, to screen out harmful products. She recalls, "But now, they were coming to me in disbelief, saying, 'There's Coco Puffs in the cereal aisle!'

"We took an almost 30-year old business and put it into start-up mode all over again," Gowdey explains. "And we lost some members in the process of changing the nature of the co-op's sales program from catering to our natural food membership to catering to the needs and demands of our larger community." There were other glitches, a slow point of sale system, a spike in staff turnover. The employees unionized. It was a time of flux.

But from the moment City Market opened, sales started doubling their projected figures, and the store now stands as the third largest single-store food cooperative in the nation. Rosi Gowdey notes the store's location made its success more likely, as all of the competing chains with their superior buying power have pulled out of downtown. She says the co-op's relationships with the city and the public are much stronger today, and neighbors are showing their appreciation for the store and the co-op's many community activities. More than seventy local businesses have joined the Community Business Program that offers co-op members discounts. After riding out the storm, the future looks good for City Market. Gradually, through what Gowdey calls the 'blending of cultures', a traditional natural food co-op has transformed itself into a neighborhood marketplace where everyone belongs. FMI: www.citymarket.coop.
 

LEGAL MATTERS
The Executive Session by Patrick Deluhery

An "executive session" is a meeting of a board or other governing body which takes place behind closed doors. All staff members and anyone else present must leave. Executive sessions are not recorded in meeting minutes, except it is noted that they took place. No discussion of the subject or any action will appear in the minutes. There are several good reasons to hold an executive session, including personnel reviews, disciplinary actions or matters which might unfairly embarrass or prejudice someone. Executive sessions are held in cases of confidentiality, or restricted access, such as classified documents. Matters which might have an adverse effect on the cooperative if made public (propriety product data, for example) can be confined to executive session. So can consultations with professional advisors--accountants, auditors, attorneys or regulatory authorities--as well as matters in litigation or under other action by a decisional authority. Sensitive matters, where board members might reasonably feel constrained to speak or act due to the presence of non-board members, can lead to holding a closed meeting.

How executive sessions work
The board has sole authority to decide when to hold an executive session, and is not required to announce it in a meeting agenda. That said, they should be relatively rare occurrences, not an excuse to expedite meetings or make tough decisions in secret. Often, the executive session is the first or last item on an agenda, so that it does not disrupt the entry or exit of those not attending. Some boards schedule an executive session at every board meeting, a practice that could lead to the habit of holding unnecessary closed meetings. Members are expected to trust in the discretion of their elected board, unless it is being abused. Any board member has the right to request, by motion, a vote on holding or terminating an executive session. If carried, the regular meeting rules (Robert's Rules, etc.) and bylaw provisions (quorum, voting requirements, etc.) apply to the closed session.

Opening the door back up
Usually executive sessions are not covered in the bylaws, the wisdom being that it is better to trust in the good judgment of the board than to limit its options, especially at a time when circumstances might dictate otherwise. (As an aside, meetings of public or quasi-public bodies that are subject to state open meeting laws allow executive session, but these laws have different procedures and requirements due to the governmental accountability of the bodies.) The board can act on the matter under discussion within executive session, or the board may discuss a matter in executive session, then act in an open meeting. The latter works if no reference to the confidential matter is needed in order to call a vote. Some bylaws require all board actions to be taken in open session, even if discussion was in executive session, but in this author's experience such provisions only make everyone uncomfortable, when the reason for the action cannot be disclosed.

In the spirit of open meetings, the board should disclose to members (usually in summary form) the actions and issues addressed in executive session when this can be accomplished in a way permitted by law and consistent with good judgment.

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
1st and 2nd Super Bowl Winners

In the 1996 book Cooperation Works! co-author E.G. Nadeau points to the irony in pro sports today, where strong fan loyalty and deep municipal favors are not repaid by the owners of the hometown teams so ardently supported. Instead, they move from place to place, or threaten to unless their demands for more luxury seats and more tax breaks are met. In Green Bay, Wisconsin, things are different. Nadeau writes, "The Green Bay Packers are the only major league sports franchise in the United States and Canada that is owned by the community in which it plays."

Despite being the smallest community in North America with a professional sports franchise, he goes on to say, "the Packers rank in the top 20% of all major league sports teams in terms of its franchise value" and adds, "It's common for season tickets to be willed from one generation to the next and to be hotly contested in divorce proceedings." And of course, no one forgets the Packers won the first and second Super Bowl games ever held.

How does the model of a community-owned team work? The Packers started out in 1919, but with insufficient capital from too few sponsors it was nearly bankrupt by 1923. Then a handful of local businessmen (including Nadeau's great uncle, team physician Webber Kelly) formed a corporation that would funnel all its profits to the American Legion chapter. The 1500 shares of stock they sold at $5 per share took them into the '23 season. Ten years later they fell into receivership due to low sales during the Depression. They dissolved and re-incorporated, held another stock sale and recuperated. In 1950 they conducted another stock sale drive. Offering a limit of 200 shares per person at $25 per share, they raised $125,000.

Shares entitle their owners to voting rights, although shareholders don't own the corporation itself. The non-profit corporation is controlled democratically, directed by a 20-member board which elects a seven-member executive committee. Of all these people, only the elected team president is paid a salary.

While it's true that today a community would have to come up with considerably more than $125,000 to launch a pro football team, the challenge isn't impossible. For more of this story and some distilled wisdom on community ownership of sports teams from an interview with Ed Garvey, former ED of the NFL Players Association, pick up Cooperation Works! by E.G. Nadeau and David J. Thompson. FMI: (608) 258-4393 or egnadeau@inxpress.net.

ANNOUNCEMENTS

NASCO Internships! At press time, the North American Students of Cooperation was still looking for participants for this year's Internship Network program. If your co-op has an opportunity for an intern, or you are interested in applying for an internship, go to the Internship Network page at www.nasco.coop. Past internships have placed students in co-ops or support organizations where they gained experience in accounting, organizing workshops and conferences, designing brochures and websites, creating databases, conducting research, writing grant proposals, producing newsletters, and more. Be part of this effort to nurture the next generation of co-op leaders! Check the site for news about an Eastern gathering this Spring for NASCO members and interested others.

The Mid-Atlantic Alliance of Cooperatives will host its annual Eastern Member Relations Conference, “Preserving Order Amid Change” May 4–6, 2005 at the Sheraton Station Square, Pittsburgh, PA. To register: www.maacooperatives.org/ or call (814) 238-2401. MAAC will also host a series of one-day training programs for an anticipated 500 young cooperators in PA and MD beginning in March. Programs are designed to help older teens understand more about business structures, with an emphasis on the principles of cooperative businesses. The programs also establish an environment that facilitates team building and leadership training. FMI contact Tom Ritchey at tritchey@scsd.k12.pa.us, Mike Hosterman at mhosterman@agchoice.com, Jerry Phillips at GPhillips@midatlanicfarmcredit.com. About 50 outstanding participants will be chosen to attend the 2005 three-day Summer Institute, sponsored and funded by MAAC and its members. From there a number of scholars will be selected to attend the National Institute of Cooperative Education. MAAC is an organization of 19 cooperatives in Pennsylvania and Maryland that have joined together to provide educational opportunities and nurture leadership for youth, directors, members, and employees as well as promote and strengthen cooperative ideals by combining efforts to meet their specialized needs. FMI: www.MAACooperatives.org.

Agricultural Tax Credit legislation, authored by Indiana representative Bill Friend, provides for certification of investors in qualifying agricultural businesses as "investor members." Investors can get tax credits equal to 75% of the investment, up to $25,000. Total credits are capped at $6 million per year for the whole state. Supporters hope this will attract pro-agriculture investors to 'new generation' cooperatives. FMI: www.csg.org/agriculture. 

 
CO-OP PRINCIPLES IN ACTION
(7) Concern for Community: CSI Support & Development Services

Cooperatives work for the sustainable development of their communities, through policies approved by their members.
Nobody could have foreseen what it would lead to in 1940 when chemist Fred Thornthwaite quit his job at a pharmaceutical company in Detroit and, with his wife Virginia, chose the path of cooperative development. Co-op Dairy Service operated a milk plant and home delivery service for a decade. When the plant closed, the co-op merged with a local food co-op and formed Cooperative Services, Inc. The food co-op, Fordson, had also created Co-op Services Credit Union (today one of the largest of its kind in Michigan). When research indicated that the co-op could offer quality optical care at a reasonable price, members raised the venture capital necessary and started Co/op Optical. Many local unions and the City of Detroit included the insurance as part of their employee benefits package. It was the income from this venture that launched CSI into the housing sector.

In 1957, CSI bought a nine-family building in Detroit. Through the 1960s, they managed other co-op housing organizations, gaining experience that led them to seek support for their own housing programs. CSI was one of the first organizations awarded funding under a new federal program for senior housing development by non-profits, which included consumer cooperatives. It took the first co-op five years from start to Open House, but soon CSI had four more ready to go and had formed Cooperative Services Construction Company and Co-op Planning and Design. All of their buildings utilized the US Department of Housing and Urban Development's affordable housing programs, and in this they were breaking new ground socially as well as literally.

In the 1970s, CSI engaged in a lengthy lawsuit against the federal government for withholding funds that had been allocated for senior housing. When the US Supreme Court refused to hear the case on appeal, the co-op took its winnings and invested them in housing cooperatives coast to coast. On January 1, 2005, Cooperative Services, Inc. changed its legal name to CSI Support & Development Services, pledging to "continue to be guided by the basic co-op principles set forth over 160 years ago in Rochdale, England" and by the co-op's original mission, which reads like another definition of the 7th Co-op Principle: "building a family system in which people care about one another and share what their efforts produce." FMI: www.csi.coop

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/. We are eager to hear 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 31: When was the Mondragon cooperative created, what was its primary product or service, and why does the town where it is located have two names? (Bonus point: what are they?)
Answer to Q30: (From the Jan. 28, 2005 Bi-Weekly Report of Doug Kleine, ED of National Association of Housing Cooperatives, www.nahc.org ) "We submitted comments on proposed rules issued by USDA’s Rural Housing Service (RHS). In general, the rules did a good job of deregulating a very tightly regulated program and simplifying use of Section 515 [but we pointed out] a number of areas where co-ops need to be treated differently than rental housing. Because of those differences, we asked that a separate handbook be written for Section 515 co-ops. RHS anticipates an increasing number of Section 515 landlords exiting the program, and [is] supportive of providing an option for conversion… to limited equity co-ops."

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 Life Leader Staff
Lynda Brushett, Senior Editor
Jane Livingston, Editor
Laurie Siggillino Broussard, Production Manager