Issue #37 - October/November 2005 A publication of Cooperative Development Institute www.cdi.coop
Features: CDI on the Move!
NE News: Bronx Co-ops Fight Back; Maine Gets Down to Co-op Business
Legal Matters: The Lowdown on LLCs by Pat Deluhery
Outside the Region: ICA Assembly Winds Up in Colombia
Bulletin Board: Take a Look at the Action in Co-op World!
Values in Action: (1) Open & Voluntary Membership:'New Generation' Coops
CDI Services: Contact us FMI at info@cdi.coop or 1-877-NE COOPS
Co-op Quiz: We celebrated 25th anniversary of our first loan in March '05
Please note Cooperative Development Institute's new location:
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
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.
FEATURES
CDI on the Move, Physically and Strategically
The region's cooperative development center has moved! Founded by cooperative and credit union leaders in 1994, the Cooperative Development Institute (CDI) is committed to building sustainable rural and urban communities in which people work together to meet their needs, have access to quality jobs, affordable services and shared ownership of essential resources. We work to foster cross-sector communication among cooperative leaders in our region and nationally.
We help create cooperative businesses and programs for cooperatives such as 'Co-op 101', the 'Co-op Atlantic' and 'Co-op Fever' study tours, Marketing Our Cooperative Advantage (MOCA), and Farmers' Market Business Planning, as well as workshops tailored to specific cooperatives' needs.
We strongly support regional, national and international organizing and coalition building within the cooperative movement. And we commit substantial resources to encourage and support more and better education about cooperatives in our communities, all of which require talented people positioned around the region, a supportive home office, a strong and well-linked presence on the web and many co-op development partners.
New Digs in South Deerfield
In response to changing staff and program needs CDI celebrated Co-op Month with a move to South Deerfield, Massachusetts and a new web site. We are delighted to be sharing space with Communities Involved in Sustaining Agriculture (CISA), the Massachusetts Woodlands Cooperative, and Field to Table--which includes longtime CDI friends and associates Elizabeth 'Apple' Ahearn and Christine Serrentino. True to our mission, we are working with our new office mates to organize cooperative purchasing as well as shared services and equipment. While still a work in progress, do check out our brand new website: www.cooperativedevelopmentinstitute.coop or www.cdi.coop. Feedback welcomed! Our new mailing address, phone number and e-mail address are noted above. Call us! Drop us a note! Stop by for a visit!! And.....PLEASE make a note of these changes in your address books.
Current Events
From New York to Maine, our new offices and web site allow us to better serve a growing list of clients across the region. These entrepreneurial groups are engaged in the development of very different enterprises: a produce distribution co-op network, cooperative agricultural economic development on the Akwesasne reservation, a disabled workers' greenhouse cooperative, CSA and farmers' markets, an interpreters' worker co-op, retail and food store cooperatives, an open ocean aquaculture co-op, a telemarketing cooperative, a construction workers cooperative, senior cooperative housing, and more. Altogether this is an exciting time for our organization and for cooperative development in our region.
Expanding Our Network
We know we cannot do this work alone. The success of the Maine Cooperative Business Development Conference last month (see below) reinforces our belief that the time is ripe to enlarge the pool of people who are knowledgeable about the cooperative business model and how it can help strengthen local economies and communities.
We look forward to increased collaboration with business and economic development specialists, agriculture, energy, housing and health care professionals, policy makers, funders, community leaders as well as with our client base of cooperatives and entrepreneurial start-up groups.
The staff and associates of CDI welcome inquiries from all of these allies of cooperation, and we hope you will forward this invitation to colleagues in your network. We depend on word of mouth from satisfied clients and our development partners to further our mission of expanding and strengthening cooperative enterprise in the Northeast.
Looking forward to another great year of collaborative cooperative development,
Jennifer Gutshall, Lynda Brushett, Laurie Broussard, Julie Paquette, Kathleen Fekete-Bauerlein
and the entire CDI family of Consultants, Associates, Directors and Friends
NORTHEAST NEWS
Maine Co-op Enterprise Conference a Winner
In September, CDI, USDA Rural Development (Maine), and the Maine Department of Agriculture hit a home run with a one-day symposium highlighting the cooperative contribution to economic and community development. The 'Maine Cooperative Business Development Conference' brought together staff from Rural Development, the state agriculture department, Cooperative Extension, community development corporations, small business consultants, lenders and funders, senior staff of Maine's congressional delegation, and half a dozen groups who are seriously considering some form of cooperative business. Eighty-seven people took part in the conference, and two of the three TV networks as well as the Bangor Daily News spread the message throughout the state.
Heavy hitters in the starting lineup
The 87 participants could not have asked for a better collection of speakers and presenters. Delivering the keynote was Bill Patrie, a nationally respected leader of 'new generation' value-added agricultural cooperatives (he has helped create more than 200 co-ops, to date) and chairman of CooperationWorks, the national network of 21 co-op development centers which CDI helped to found more than 10 years ago.
In his opening remarks, Patrie focused on the seven international principles of cooperation, agreed upon by hundreds of co-ops of all types around the world who unite to form the International Alliance of Co-operatives. Briefly, they are: (1) Open and voluntary membership; (2) Democratic member control; (3) Member economic participation; (4) Autonomy and independence; (5) Education, training and information; (6) Cooperation among cooperatives; (7) Concern for community.
Bill Patrie emphasized that today, co-ops are not only achieving success by responding well to marketplace failures, as the rural electric co-ops did in the 1940s when they brought power and light to farms and ranches across the nation. More and more, they are acting on marketplace opportunities, creating niche products and services, identifying new markets, and building local alliances for mutual benefit, the cornerstone of cooperative enterprise.
Workshops and panels cover the bases
The conference luncheon presentation was made by Margaret Bau, who traveled from her post with USDA in Wisconsin to share her experience with homecare worker cooperatives. She has helped 14 of these caregiver-owned businesses start up in the Midwest in recent years, and is considered one of the most knowledgeable sources of information about this emerging co-op trend. Her workshop attracted several people interested in moving forward with this idea.
CDI associate Patrick Deluhery delivered a legal overview of how cooperatives differ from other businesses, and he and CDI's Jen Gutshall offered participants a condensed version of their popular 'Co-op 101' workshop. Conference-goers also received a beta version of a Maine cooperative enterprise manual being edited by Cooperative Leader editor and longtime CDI associate Jane Livingston, who is a Maine resident.
The illuminating panel presentation on 'Funding Strategies for Cooperative Development' included Ray Nowak, CEO of Farm Credit of Maine; Valarie Flanders, Cooperative Specialist with USDA-Rural Development (Maine); Phebe Quattrucci, Maine Outreach Coordinator for the Cooperative Fund of New England (CFNE); and National Co-op Bank VP Terry Lewis, who also gave an information-packed workshop on housing cooperatives. A session on artist cooperatives led by Tracy Michaud Stutzman, Executive Director of The Maine Highlands Guild rounded out the program.
The hard-working conference planning committee-John Harker of the Maine Department of Agriculture, the USDA's Valarie Flanders, and Lynda Brushett of CDI who also served as emcee-can take a bow. All of the event's presenters and co-sponsors--USDA RD (Maine), the Maine Department of Agriculture, CFNE and CDI-were pleased by the turnout; participants were engaged and enthusiastic.
After such a great opener, could Maine be headed for the big leagues in cooperative development? We'll keep you posted. As for CDI, the organization is looking forward to replicating this event in other states.
South Bronx Rising
The South Bronx abuts northern Manhattan, just a stone's throw from Trump Tower, Fifth Avenue, and the Met. It is the nation's poorest urban county. Look at a map of New York City. See where five or six interstates loop and intersect as they funnel the traffic of the Northeast megalopolis up and over this part of town? That's the South Bronx. It's a place where few people go who don't live there or drive a truck full of the waste and unwanted detritus of thriving communities that find ways to send their leavings somewhere else. This is the somewhere else.
Omar Freilla lives in the South Bronx. He recalls the fires set by fleeing landlords in the 1970s and '80s, as they cashed in on their unmarketable real estate by collecting fire insurance. In the 1990s, local residents began to pick themselves up, to rebuild on the ashes of the old neighborhoods.
But while the area has come a long way, the unemployment rate in the South Bronx is still as high as 27 percent in some places. Manufacturing businesses have been replaced by waste transfer stations, power plants, and trucking distribution centers that do not employ many workers. Even the retail jobs are at low-budget retail stores, rental centers or other places that pay the lowest wages and offer workers no brighter future down the road.
Making dollars and sense
Faced with the triple threat of high unemployment and accompanying stress on workers and their families, the increasing degradation of the local environment, and the profoundly inadequate resources being brought to bear from outside, residents of the South Bronx are fighting back. And Omar Freilla is right in there with them.
Several years ago, as a student at Morehouse College in Atlanta, Georgia, Freilla learned about the Federation of Southern Cooperatives, the 40-year old organization of black farm families that create agricultural and worker cooperatives to benefit communities in 10 states. Later on, he learned about the gigantic Mondragon family of cooperatives in Basque Spain that began as a handful of factory workers.
In the Bronx, it didn't take him long to connect the dots. He began to talk to people about the idea of a worker cooperative that would salvage unwanted building materials, keeping them out of the waste stream and turning them into a marketable inventory of flooring, doors and windows, appliances, hardware, lumber and reusable rubble.
The response from residents was swift and positive. "It just makes sense," Freilla says. "We're suffering here. The South Bronx is poor. People don't have jobs. It's an easy case to make. Do you want another waste transfer station, another Rite Aid where the best you can hope for is a low-wage job in a business where all the profits are going to absentee shareholders? Or would you rather have higher wage jobs that bring benefits to the whole community?"
Green light for sustainable development
Today, a board of seven hard-working members heads up Green Worker Co-ops, currently incorporated as a non-profit and working toward creating a worker-owned business. They have started a 'Co-op Academy' where the public is invited to open discussions about what cooperatives are, and what they can do for the South Bronx. They watch films such as 'Made in the USA' and 'The Take', and the board recruits new members where they see leadership surfacing.
The idea is to start with a small worker co-op, four to eight people, and build to about 20 members. "We know the first one will be challenging to get off the ground, because we're creating a new industry as well as a new co-op," Omar Freilla points out. As far as he knows, this will be the first building salvage cooperative store in the country, which he describes as "a Home Depot for used stuff." They are looking at rental spaces now. A web site will be up and running soon.
Later this fall, Green Worker Co-ops will be bringing together local churches and community-based organizations to take part in a public meeting to discuss the formation of the first cooperative. And Omar Feilla has been asked to present at the prestigious Bioneers conference, which highlights cutting edge 'biological pioneers'. Stay tuned for more on this promising initiative in the South Bronx. FMI: omar@greenworker.coop.
LEGAL MATTERS
What's the Deal with LLCs?
by Patrick J. Deluhery
This 2-part series looks at Limited Liability Companies, what they are and how they relate to cooperatives.
The Limited Liability Company is a recent creature of state law that is not a corporation, but offers corporate protection from liability combined with the flexibility and tax treatment of a partnership. The owners are called "members". LLCs can be run by the members or by a manager, who may or may not also be a member. All states have an LLC statute.
To form an LLC, one or more persons or organizations file articles of organization with the state. The next step is to adopt an "operating agreement" which functions as the rules under which the LLC operates. Filing fees and annual report fees are generally minimal ($25 - $100), except in Massachusetts where these fees are $500.
How LLCs operate
Filing the articles is easy. The hard work is the operating agreement. This document must specify whether the LLC is a member-run or manager-run organization, how members are admitted and discharged, the contribution made by each member upon joining, how profits and losses are divided, the authority of the manager, and any other agreements needed to run the business.
Organizational formalities are minimal: no annual meetings, no board of directors (unless the members want one), meeting minutes can be very simple (as there are no shareholders to satisfy) and business reporting can be structured as desired by the members. It operates like a partnership but with the liability protection of a corporation.
Two LLC models
LLCs are formed either on the "corporate model," having features more like a corporation, or the "partnership model," having features more like a partnership. Tax treatment of LLCs comes under an IRS "check the box" procedure that lets organizations select how they wish to be taxed. Unless the LLC selects the corporate tax treatment, it will be taxed as a partnership.
This means the LLC's profits and losses will flow through it to the individual members, according to the distribution method set out in the operating agreement. The LLC files an informational tax return and the members treat the LLC's profits and losses on their individual tax returns.
An LLC might elect corporate tax treatment if the overall tax is less at the LLC level than at the member level. Tax treatments can be altered, but must remain in place for five years once elected.
Next time: How LLCs work with cooperatives.
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
Coop's International Body Holds Biennial Assembly
The International Co-operative Alliance is an independent, non-governmental association that unites, represents and serves cooperatives worldwide. Founded in 1895, the ICA has 221 member organizations from 88 countries active in all sectors of the economy. Together these cooperatives represent more than 800 million individuals worldwide.
Every two years, the ICA holds a General Assembly. This is the highest authority of ICA and is made up representatives appointed by member organizations. Its purposes are to formulate and implement policy on major issues affecting the future of ICA and the world-wide cooperative movement; to approve the ICA work plan, elect key officers and committees and ratify the election or appointment of others, including the Director-General; to amend the ICA Rules, Policies, Procedures and Standing Orders; to decide on the membership subscriptions and representation formulae, and to approve ICA's annual audit and reports.
The more recent General Assembly concluded in late September in Cartagena, Colombia. The theme was "Co-operative Values: A competitive asset in a globalised economy". Ivano Barberini was unanimously re-elected for a four-year term of office by representatives of the Assembly; among the 15 new Board members elected was Paul Hazen, CEO of the (United States) National Cooperative Business Association. (www.ncba.coop)
Gender equality committee on Microfinance
Already on the ICA web site are the presentations and remarks of the 'Microfinance is OUR Business' plenary seminar convened at the Assembly by the ICA Gender Equality Committee. Chairperson Stefanie Marcone, in her concluding remarks, stated:
"I do hope that thanks to our guest speakers and the many interventions from the floor we all have understood the importance of this issue in developed and developing countries, and its relationship with poverty reduction and gender."
Emphasizing the role she hoped the committee will play with ICA sectoral organizations--banking and insurance, regional ICA offices, development and anti-poverty programs, etc.--Marcone added, "It is important also to make our voice be heard in the global debate now under way about microfinance. Never before as this year, participating in several meetings at national levels organized by many-fold actors (institutions, non-governmental or microfinance organizations, etc.) I have heard the word 'co-operatives', either as providers or beneficiary of microfinance programmes. This is why it is important, for us co-operators, to bring in this debate our contribution, from our own perspective, and establish closer relations...at the national and international level."
[Note: This article is edited from the ICA website: www.ica.coop]
BULLETIN BOARD
Calendar
December 1, New York, NY: 'Toast to the Future Cooperative Green Republic of the South Bronx' You can help support Green Worker Cooperatives by attending a benefit event at Junno's Bar, 64 Downing Street in Manhattan. Features delicious food, cash bar, live auction, excellent conversation, and and a screening of the documentary film "Made in the USA: American Worker Cooperatives." FMI: omar@greenworker.coop
Dec. 8, St Paul, MN: 'Trading Water Quality Credits' Conference will address the emerging role of credit trading as part of federal and state water quality improvement policy and will highlight lessons learned from recent credit trading experiences, as well as the potential for farm supply co-ops to generate new revenues through the sale of water quality trading credits. FMI: Vicky Chaput at (651) 265-3678 or vchaput@cdsus.coop.
Announcements
Co-ops convening like crazy. There is so much going on in the cooperative community, we can hardly catch our breaths. With CDI's recent move, we just did not have time to gather updates on the National Cooperative Business Association's 'Capital without Compromise' seminar in Chicago in September, preceding the annual NCBA Conference for Purchasing Co-ops, or the National Association of Housing Cooperatives 2005 Annual Conference that just concluded, or the even more recent Credit Unions National Association's 'CUNA Future Forum'. Check their web sites to stay in the know.
Duncan Hilchey with the Community, Food, and Agriculture Program (CFAP) at Cornell University would like to identify up to 5 farm organizations, businesses, or cooperatives in the Northeast who would be interested in exploring the potential for a cooperative farm-owned grocery store in their community. Contact Duncan at dlh3@cornell.edu or (607) 255-4413.
CO-OP VALUES IN ACTION
(1) Open and Voluntary Membership: 'New Generation' Coops
As Bill Patrie pointed out in his opening remarks at the Maine conference (see Northeast News above), this principle originally meant that "everyone eligible for membership [in a co-op] could join without fear of being discriminated against for any reason including the amount of services they intend to buy or products they intend to sell. It meant, as a philosophy of governance, that you would never be required to join as a matter of law or economic monopoly." In this way the entrepreneurial, democratic cooperative model that developed in Western Europe during the Industrial Revolution differed dramatically from the centralized state-run cooperatives of Eastern Europe and Eurasia.
'Co-op fever' on the Plains
Partly as a response to the dire straits into which Midwestern family farms and ranches were thrown in the 1980s, during the 1990s a whole new crop of agricultural cooperatives sprouted across this country's Great Plains and flourished to the point that people began to speak of the phenomenon as 'co-op fever'. These 'new generation' co-ops were open to those who could accept the responsibilities of membership, which might include substantial start-up equity and guaranteed product delivery, in order to make a cooperatively-owned processing facility or marketing initiative viable. It also included limiting a specific co-op's membership to whatever number would keep that business healthy. If more people wanted to join, they could start another co-op.
Today, one commonly used definition of the first principle is: "Cooperatives are voluntary organizations, offering services to people willing to accept the responsibilities and benefits of membership, without gender, social, racial, political or religious discrimination. Many cooperatives operate as not-for-profit corporations with elected, volunteer boards of directors."
Principle meets practice
"As an operating principle today," notes Bill Patrie (who has helped more than 200 groups of people create co-ops), "I believe that only about 10 percent of the eligible investors in a new generation cooperative will actually join. That means that I have to talk to about 10 people to get one to invest in the cooperative." The principle of open and voluntary membership means that cooperatives can only grow through attraction, not coercion. Democracy requires the building of trust and accountability in relationships. It is appropriately the first principle of cooperatives, as developed by the Rochdale Pioneers in England's troubled mill towns of the mid-1800s. For a spellbinding account of the birth and growth of the cooperative movement, see Weavers of Dreams by David J. Thompson (Univ. of CA/Davis, 1994).
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) 665-1271 or info@cdi.coop or 1-877-NE COOPS (632-6677)
The Cooperative 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 education and technical assistance in food, housing, energy, agriculture, forestry, fisheries, retail and service sectors.
Services include :
* Market research
* Feasibility assessment
* Business and strategic planning
* Financial management
* Board and management development
* Membership development
* Cooperative start-up planning and support
* Conflict management
* Fundraising
* Legal and personnel issues
CO-OP QUIZ 037: Who are we? Last year, we were approved as a participating lender in a unique public-private-nonprofit initiative called the Third Party Transfer Program under New York City's Department of Housing and Preservation and Development (HPD), thanks to a two-year effort by our development corporation to educate HPD on the special underwriting requirements of cooperatives. Through this program, the city transfers titles to properties acquired through tax delinquency or abandonment to qualified third-party developers, who then make repairs and maintain the buildings as affordable housing.
Answer to Q036: [How many credit unions are there in New England and New York state, and how many members do they have, all together?]As of Dec. 31, 2004 there were 955 credit unions in New York-New England, serving more than 7.6 million member-owners. Nationally, there were 9,206 credit unions serving more than 85.2 million member-owners. [Thanks for this data to Stephanie O'Brien at Maine Credit Union League.]
TO CONTACT COOPERATIVE 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@cdi.coop. Please feel free to forward this newsletter to your colleagues.
Cooperative 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, the 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.
Any article with an author byline requires special permission. All material without an author's byline can be reprinted in membership or other non-paid publications, with the following credit: "Reprinted from Cooperative Leader, published by Cooperative Development Institute: info@cdi.coop or 877-NE COOPS."
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