“Not just a job, but a future”
Goal of Evergreen family of worker co-ops is to
help struggling neighborhoods prosper
By Dan Campbell, editor
leveland Rocks! —
according to the theme
song of the longrunning
Drew Carey
TV comedy show. But
not all of its neighborhoods rock
equally, at least when it comes to jobs
and economic opportunity.
The business district of downtown
Cleveland has undergone a dramatic
revival in the past 15 years or so, with
popular new attractions such as the
Rock and Roll Hall of Fame, the East
4th Street food and entertainment
district and new downtown stadiums
and an arena for its professional sports
teams helping to lay to rest those putdowns
about the city being “the mistake
on the lake.” Yet the poor
neighborhoods that surround the
University Circle area — the cultural
center of the city — have not shared in
this revival.
These neighborhoods are home to
about 43,000 people, who suffer from
an unemployment rate near 40 percent.
The median annual income is less than
$18,500. Vacant lots, deteriorated
buildings, water shut-offs and
foreclosure signs are common here.
This contrasts sharply with
University Circle, which has a vibrant
core of major health, cultural and
educational institutions, as well as some
major international businesses that
together employ tens of thousands of
people in good-paying jobs.
“But University Circle has been
radically disconnected from the poor
neighborhoods surrounding it,” Ted
Howard, director of The Democracy
Collaborative, told attendees at the
2010 ACE (Association of Cooperative
Educators) Institute in Cleveland last
summer. “So the question has been:
How do we break down this barrier and
create opportunity for the people of the
surrounding neighborhoods?”
Laundry and solar
co-ops launched
A key part of the answer, Cleveland
is hoping, is a network of workerowned
cooperatives. The first two of
these co-ops were launched in October
of 2009. The Evergreen Laundry
Cooperative is serving several large
health-care institutions in the
University Circle area, while Ohio
Cooperative Solar is installing solar
panels on the roofs of large institutions
and businesses.
Many of the worker-owners of these co-ops are people
who in the past have had to struggle to find any kind of
decent job, including some who have had to overcome
records of incarceration and substance abuse. For them, just
to find a steady job in their depressed neighborhoods is an
accomplishment, let alone a job in which they are part
owners and can accumulate equity. For them, these new coops
offer a second chance, not just for a job, but a future.
Next year, a third Evergreen cooperative, Green City
Growers Cooperative, plans to break ground on one of the
nation’s largest urban food production greenhouses. The
Neighborhood Voice, a free, student-operated online and
print publication, is also part of the Evergreen family of
cooperatives. It will publish monthly, reaching about 100,000
residents and employees in the Greater University Circle.
Ultimately, the hope is that there will be dozens of
worker-owned co-ops operating under the Evergreen
umbrella in Cleveland, transforming and lifting the economy
in much the same way that the worker-owned cooperatives
have done in the Mondragon region of northern Spain.
There, the Basque people began 50 years ago with one small
worker co-op and a handful of jobs. Today, it encompasses a
large, diverse network of worker co-ops that provide more
than 100,000 good jobs, according to James Anderson of the
Ohio Employee Ownership Center (OEOC), which helped
spearhead the launch of the Evergreen project. He and
Howard provided the ACE conference attendees with an
overview of how it was done.
Planting seeds
In December 2006, The Democracy Collaborative — a
research and policy center based at the University of
Maryland that focuses on community wealth-building
strategies — held a community-wealth roundtable in
Cleveland to explore innovative ways to help break the cycle
of poverty in the Greater University Circle area. It attracted
45 participants who represented a broad array of thinking and
talents, including university faculty members, community
development experts, leaders of Employee Stock Ownership
Plans, chamber of commerce leaders and the CEO of a
hospital, among others.
As a result of this meeting, the Cleveland Foundation —
the region’s largest philanthropy — asked Howard and his
colleagues to help develop a new economic inclusion plan for
the Greater University Circle area — one that would offer a
different approach from the failed efforts of the past.
“We were lucky to have the Ohio Employee Ownership
Center (OEOC) just down the road and access to low-cost
capital, the lack of which is the biggest restraint on the
spread of the co-op movement,” Howard said. He recalled a
conversation with the leader of an economic Empowerment
Zone that had been created years earlier to direct more
financial resources into the Greater University Circle area.
Despite the expenditure of some $34 million in these
neighborhoods under that effort, “there was virtually nothing
left behind afterward. It just didn’t stick — it did not make a
difference.”
The consensus was to instead try attacking the problem
with a business development strategy. “We wanted to create
for-profit businesses, owned both by workers from the
community and the institutions that are their customers,”
Howard said. These worker-owned businesses would pay
living wages and offer the opportunity for wealth building
through the accumulation of equity in the businesses.
“We wanted to root capital in the community so that it
would not get up and leave. Worker-owners of a business are
not going to offshore their own jobs,” Howard said.
To help refine the strategy, 120 people were interviewed
over the ensuing six months – most of them leaders of large
institutions and businesses of the University Circle area who
were eyed as the primary customers of the new co-ops. “It
was determined that there was a huge economic opportunity
to source business locally. Evergreen
emerged from this,” Howard said.
Institutional buying power
key to strategy
When looking for someone to
organize and launch the first Evergreen
business, Howard recalled that the late
John Logue, founder of OEOC said:
“This project cannot be allowed to fail,
so we must have Jim Anderson on
board.” This was a tribute to the
business acumen and organizational
savvy of Anderson, who formerly led
the Republic Storage system in Canton,
Ohio, and had a long professional
career working with employee-owned
firms.
Anderson served as the CEO of the
Evergreen Cooperative Laundry for the
first year of the effort, but turned over
the leadership role in August to a
management team of co-op members,
in keeping with a goal that the co-op
should provide a career ladder that
allows employees to climb into senior
management.
The strategy from the start has been
to focus on tapping the purchasing
powers of the large institutions of
University Circle. These “anchor
institutions” purchase goods and
services worth about $3 billion annually
(exclusive of payroll and construction).
Yet, virtually none of their purchases
were being made in the area. Buying
locally was not a significant part of their
institutional business model. So there
was a huge untapped potential for them
to do more business locally.
A parallel focus of this effort has
been to launch “green” businesses that
operate in an environmentally benign
manner. Evergreen Cooperative
Laundry, Anderson says, “is the
greenest laundry in northeast Ohio,
probably in the entire state.” Heat and
water used in the operation is recycled,
harsh chemicals are kept to a minimum
and the operation is housed in a LEED
(Leadership in Energy and Environmental
Design) silver building — an
internationally recognized “green
building” certification system.
It took $5.7 million to launch the
laundry co-op. Of that, about $2.5
million was for equipment, $1.5 million
to refurbish the building and most of
the balance was to cover the early
operating losses. The business plan calls
for the co-op to break even within 18
months, and it has been running ahead
of schedule. The building is leased from
Enterprise Cleveland, a local nonprofit,
and the co-op has first right of refusal if
there is a sale of the property.
The first $750,000 raised for the
Evergreen project came in the form of a
long-term, 1-percent interest loan from
the Cleveland Foundation. That money
was then used to leverage the rest of the
$5.7 million. Next on board was the
city of Cleveland, which provided a $1.5
million loan from its Housing and
Urban Development 108 funds.
“This gave the project legitimate
legs, so we could go to other lending
institutions,” Anderson recalled. “Those
investments created credibility for us.”
The co-op then got more funds from
two commercial banks and qualified for
a $250,000 loan from the Commonwealth
Revolving Loan Fund (which
had been established by the Ohio
Employee Ownership Center at Kent
State University). A New Markets Tax
Credit allocation from US Bank was
also negotiated.
The Evergreen Cooperative
Development Fund was created as the
financing entity for the family of coops.
The plan calls for this fund to
grow from $5 million at present to
about $50 million. Evergreen Business
Services is the corporate entity that
supplies “back office” services to all the
co-ops; it houses the CEOs, human
resources and finance offices.
Community on board
As the laundry co-op neared opening
day “there was a lot of excitement in
the neighborhood about it,” said
Medrick Addison, a worker-supervisor
with the laundry who was one of the
first two employees hired. “There was
also some negative feedback at first; but
once people understood what we were
doing, they got behind us.”
The desperate need for good jobs in
the area was underscored by the co-op
receiving about 500 applications for the
first dozen jobs. “We pay a significantly
higher wage” than for comparable jobs,
Addison noted. Evergreen also provides
its worker-owners with a no-cost health
package.
The laundry currently employs about
25 people, but hopes to expand to 35
workers in the near future. Plans call
for 50 workers to be co-op members by
the time it reaches its “mature” level of
operation, when it will be cleaning 10
million pounds of laundry annually.
Each new employee goes through a
six-month trial period, after which the
other members vote on whether to
accept them into the co-op. “You have
to prove yourself to your fellow
workers, because you are essentially
choosing to go into business with
them,” Addison said. Once a worker
becomes a co-op member, he or she
qualifies for a $2-an-hour bonus and for
benefits.
When the business becomes
profitable, 10 percent of profits will go
back to the Evergreen Development
Fund to help start other co-ops; 80
percent of the rest of the profits are to
be distributed among the members, of
which 20 percent is to be paid in cash.
Members have to invest $3,000 for a
share of co-op ownership, but they can
pay that off at 50 cents per hour,
deducted from their pay increase. As
the company earns profits, earnings will
be placed annually in worker capital
accounts. The goal is to generate up to
$65,000 in co-op equity for a worker
who stays on the job eight years. This
money belongs to the worker, and
when they leave the company or retire,
they take it with them.
New co-op business ideas are being
developed, including: a worker-owned
co-op that would refurbish houses in
the neighborhoods; recycling
companies; and a business to turn
hospital medical waste into energy.
“We want to keep the money
circulating locally — to stop it leaking
out of northeast Ohio,” Anderson said.
Keeping customers satisfied
The future success of the co-op rests
with keeping customers satisfied —
especially the large health-care
institutions that account for most of its
business. Whenever the co-op receives
any kind of quality-control complaint,
Addison personally visits the customer
to find out what happened and ensure
that the problem is addressed.
“If there is a problem for a
customer, we do not let it fester — we
get it fixed,” he said.
One seat on the board of directors
of the laundry is reserved for a
customer. The other directors include
two co-op members and two more
appointed by the Evergreen
Cooperative Corporation, the co-op
network’s “holding company.” No
lenders sit on the board, and the bylaws
have been set up to ensure that the coop
is never demutualized.
Many people in the area have been
through various job-training programs
in the past, only to find there were no
jobs for them when they completed the
training. So this project sounded much
more attractive: a good job from day
one. Training is still part of the picture,
but it involves much more than simply
how to do the work.
Worker training, provided by the
Ohio Employee Ownership Center,
includes personal financial literacy
classes. Once that study is completed,
the training shifts into basic worker coop
issues, such as knowing when a
worker-owner needs to “wear the
owner hat vs. the worker hat.” Training
also includes business financial literacy.
In all, it is about a one-year program,
with classes held every other week.
Calling the Evergreen effort both
exciting and daunting, Anderson said
that while it is worth celebrating key
accomplishments to date, “it is way too
early to celebrate” this effort as an
ultimate success story. “We have miles
to go.”
Ultimately, the success of worker coops
such as these depends upon
building a culture of ownership, says
Howard. Thus, he takes heart from a
brief exchange heard after a group from
Pittsburgh — including two union
representatives from a laundry there —
recently toured Evergreen. One of the
union representatives said: “This
laundry is sure superior to the one we
work for.” An Evergreen co-op member
responded: “That’s the difference; we
don’t work ‘for’ this business, we own it
and we work for ourselves.”
Editor’s note: To view a video about
Evergreen and learn more about this
economic development strategy, visit:
www.community-wealth.org.”
Solar co-op will double
Ohio’s PV-energy output
As of the summer of 2010, there were only two megawatts of installed
solar power in Ohio. With just the orders it already has on its books, that total
will be expanded by an additional three megawatts by 2012, thanks to the
work of just one business: Ohio Cooperative Solar (OCS), a member of the
Evergreen family of worker-owned co-ops.
OCS owns and/or installs photovoltaic (PV) solar panels on large
institutional, government and commercial buildings. Customers of the co-op
to date include Cleveland Clinic, University Hospitals, Case Western Reserve
University, the city of Cleveland and the Cleveland Housing Network.
The co-op offers two types of contracts. It can sell and install the PV
equipment to a building owner, who then is responsible for arranging tax
credits and working with its utility company and securing insurance coverage
and maintenance service. Or the co-op will maintain ownership of the PV
equipment and take care of all the related arrangements. It then sells the
electricity via a power-purchase agreement. These typically involve a 15-year
equipment lease arrangement.
The co-op has about 25 worker-owners at this time, but hopes to expand
to 75 to 100 at maturity. The rules of membership, equity accumulation and
most other bylaws are basically the same for the solar cop-op as the laundry
co-op.
A solar panel array that can generate 100 killowatts of electricity costs
$500,000, installed. Proper installation is critical, so panels must be attached
to the roof in a manner that stands up to high winds and winter conditions,
and should avoid placements subject to shadowing.
When the weather doesn’t permit solar panel installations, workers keep
busy doing home weatherization work. This program uses federal government
assistance to help low-income and handicapped homeowners acquire new
or repaired furnaces, hot-water heaters, wall/attic insulation and weather
stripping/caulking for doors. There are 38 million qualified households
nationwide, notes co-op CEO Stephen J Kiel.
The average low-income household spends about 17 percent of its income
on energy, according to the co-op. After a home is weatherized, the average
household saves $350 in energy savings in just the first year.
Urban farming strides forward with new greenhouse cooperative
If things go according to plan, Cleveland residents will
soon be eating a lot more home-grown lettuce, herbs and
spinach. As in about 5 million heads of lettuce and 300,000
pounds of herbs annually, grown in one of the economically
depressed neighborhoods surrounding the University Circle
area.
The newest addition to the Evergreen family of workerowned
co-ops is Green City Growers Cooperative, which
plans to break ground this March on a five-acre hydroponic
(meaning the crop is grown without soil) greenhouse
operation, on 11-acres that will be one of the nation’s largest
urban food production greenhouses. The co-op hopes to be
growing its first crop by November 2011.
In addition to the greenhouse, the $18 million project will
include a 16,000-square-foot packing house. The greenhouse
will have four separate climate zones, giving it the capacity to
change its crop mix, depending on customer demand.
The project will include a 1.5 megawatt wind turbine that
will provide about 40 percent of the operation’s annual power
needs. Rainwater will be reclaimed from the roof, and dual
layers of energy curtains on the roof and sidewalls will
reduce its energy needs. Crops have been chosen that can be
grown in colder temperatures than other hydroponic
greenhouse vegetables, again lowering the energy demand.
As with the other Evergreen co-ops, the underlying goal of
this business is job creation and wealth-building opportunity
for the co-op members, but it will achieve this by providing
healthy, locally-produced food for city dwellers.
Longer shelf-life
The co-op will grow varieties of specialty lettuce, not
iceberg lettuce, and thus will not compete with area farmers.
The crops grown by the co-op will instead reduce the amount
of lettuce typically trucked in from 2,000 miles away. Not only
will that reduce the carbon footprint of the food consumed,
but it will provide local buyers with produce that has an extra
seven days of shelf life.
Mary Donnell, who holds an MBA and a master’s degree in
horticultural science and has been working in the field for 20
years, is the project director (she will become the initial CEO
once the co-op is in operation). She says the greenhouse
operation will be a good fit for Cleveland, which is considered
to be a national leader in the promotion of local food
consumption and production.
Initial plans are to market the co-op’s produce to the foodservice
industry, area grocery stores and some of the major
institutions in the University Circle area. The co-op will have
35 to 40 worker-owners, who will be hired from University
Circle neighborhoods.
Some of the initial funds for the project came from a HUD
grant and loan package, which targets the remediation of
brownfield sites. When interviewed in late October, Donnell
noted the final pieces of the financing picture were falling
into place. If commercial-scale urban farming and food
production continue to be a trend, Donnell recommends
modifications be made to USDA programs so that the USDA
can offer the same help to urban farmers as it does to rural
farmers.
