1. The Co-operative Development Institute
Northeast Co-operative Development Center founded in 1994 by co-op leaders.
A 501c3 Non-Profit Organization.
Working across all sectors and industries in New England and New York.
Technical assistance, training & education.
Assembling the resources necessary to develop successful co-operative businesses.
Before we get into the content of today’s workshop, We’d also like to say a few words about CDI.
CDI is a 501(c)3 non-profit community economic development organization.
We work across co-op sectors, for example with food co-ops, farmer co-ops and worker co-ops engaged in all aspects of the economy.
We draw from a talented pool of in-house and external consultants to provide technical assistance, training, education and facilitation to support the successful development of start-up and existing democratically owned and governed businesses.
To do this work we bring together resources from a wide variety of sources including existing co-ops, development organizations, foundations and federal, state and local entities.
CDI: SAAC Presentation, 20th April 2008

2. CDI’s Mission
… is to build a cooperative economy through the creation and development of successful cooperative enterprises and networks in diverse communities in Massachusetts, New Hampshire, Vermont, Connecticut, Maine, Rhode Island and New York.
And while we focus our work in the Northeast, we also recognize that the co-operative economy is interconnected on a regional, national and global level. In keeping with this goal, we collaborate with other co-op developers to strengthen the wider co-operative community.
CDI: SAAC Presentation, 20th April 2008

3. What makes it a Cooperative?
“A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned democratically controlled enterprise.”
Democratic ownership and control are the two key elements of cooperatives.
CDI: SAAC Presentation, 20th April 2008

4. Cooperative Principles
Voluntary & Open Membership
Democratic Member Control
Member Economic Participation
Autonomy & Independence
Education, Training & Information
Cooperation Among Co-operatives
Concern for Community
This definition is supported by a set of principles that guide co-operatives as they put their values into practice. These principles are:
Voluntary and Open Membership – Co-operatives are voluntary organizations open to all persons able to use their services and willing to accept the responsibility of membership without gender, social, racial, political or religious discrimination.
Democratic Member Control — Co-operatives are democratic organizations controlled by their members who actively participate in setting their policies and making decisions.
Member Economic Participation — Members contribute equitably to and control the capital of their co-operative.
Autonomy and Independence — Co-operatives are autonomous, self-help organizations controlled by their members. If co-operatives enter into agreements with other organizations – for example – raising capital from external sources – they do it in such a way as to ensure democratic control by the members and maintain their co-operative independence.
Education, Training and Information — Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives.
Co-operation Among Co-operatives — To serve their members most effectively and to strengthen the co-operative movement, co-operatives work with other co-operatives.
Concern for Community — In addition to focusing on the needs of their members, co-operatives work for the sustainable development of their communities.
It is the co-operative values and principles that help remind people who create, govern and manage co-operatives why they do what they do.
CDI: SAAC Presentation, 20th April 2008

5. Who gets the benefit? Executive/Managers Customers Employees investors
These are the four places where equity can be distributed in a business.
IN a sole proprietorship, profit surplus is returned to private owners, usually the CEO of the company.
In a public corporation, surplus is distributed to investor shareholders.
In a cooperative, surplus is either distributed to employee worker-owners or in a consumer co-op, they are distributed to the consumer member-owners.
You can use the same map to locate not only who profits from surplus, but who makes decisions about the business.
CDI: SAAC Presentation, 20th April 2008

6. Matt’s story:
I was interested in the combination of community living and also the importance of democratic ownership.
Co-ops balance control (cooperative decision-making) with ownership (cooperatively shared economic benefit)
CDI: SAAC Presentation, 20th April 2008

7. I worked with a group so purchase a single-family, 11-bedroom house.
When we finished I began to look for a way to participate in co-op development on a larger scale where it would have a greater impact.
I learned about CDI and the ROC USA model
CDI: SAAC Presentation, 20th April 2008

8. Resident-Owned Communities (ROCs)
Members Vote on:
The budget
The Bylaws
The Community Rules
The Election of the board
The Board Votes on:
Policies
Contracts for:
-Maintenance
-Staff, lawyer, accountant
-Capital Improvements
The members run it democratically.
The board does most of the day to day business, but they are accountable to the membership, who votes on the biggest decisions for the organization.
CDI: SAAC Presentation, 20th April 2008

9. ROC USA and CDI
We partner with residents to purchase their land cooperatively
We engage in a traditional market-purchase of the community.
We contract to provide
assistance for the life of
the loan.
This model of cooperative ownership for manufactured hosuing communtiies began in NH. They’ve co-operatized 109 parks and have been so successful over the last 30+ years, that they created a national organization to replicate the model in other places
Traditionally in a manufactured housing community, residents own their homes, but rent the land from a landlord.
We work with residents to purchase their parks. ROC USA Provides the financing, which is tied to a techincal assistance contract with CDI.
So both the technical assistance piece and also the financing are part of the process of conversion.
CDI: SAAC Presentation, 20th April 2008

10. CDI has converted 16 communities with 1,400+ units of housing.
Technical assistance is funded through the conversion process. Unlike a startup, the purcahse of an existing business tends to allow for an additional percentage to be financed for a technical assistance contract
CDI: SAAC Presentation, 20th April 2008

11. Business Ownership Solutions
BOS works with business owners to think through whether conversion to a cooperative could meet their needs, and with employees or community members to execute the co-op conversion.
Who’s the BOS!?!?

12. Why BOS? 97% of Maine businesses are small independents
Nearly half of those business owners expect to retire within a decade
Fewer than half of those who expect to retire within 5 years have a succession plan for their business

13. Why BOS?
88% of current family business owners believe someone in the family will continue to run the business when they retire, but…
Only about 30% survive into the second generation, and only12% survive into the third generation
Businesses sold to an outside investor have about a chance of success

14. Why BOS?
Well planned employee buyouts succeed about 80% of the time.

15. Why Worker Co-ops?
Top 10 percent of Americans take more than half of all income earned in this country and own 75 percent of the nation’s wealth. Last year, income of the top 1 percent rose by 11.2 percent, while the income of the bottom 99% declined by 0.4 percent. Over the past 20 years, the top 1 percent's incomes surged nearly 60 percent, while the incomes of the bottom 99 percent grew just 5.8 percent.

16. In Other Words…
The top 25 hedge fund managers make TWICE as much as all kindergarten teachers in America combined. The $26.7 billion in bonuses handed out to Wall St. bank executives is enough to more than double the pay of every single minimum wage worker in America. Handful of Walton Family members own more wealth than the bottom 40% of all Americans combined.

17. Raising Wages is good and important, but… Democratizing the ownership of wealth will accomplish much more!

18. (Very) Basic Worker Co-op Structure

21. Organizing a Cooperative Steering Committee For Considering a Business Conversion
The role of the Steering Committee is to coordinate the learning process for all employees as they develop and consider a transition from private to employee ownership.

22. Island Employee Cooperative Deer Isle, Maine

23. Beginning the Conversion Consideration Process
Step 1: Organize an All-Employee Meeting to introduce the idea Step 2: Employees sign a Commitment of Interest, choose Steering Committee Step 3: Organize the Worker Cooperative Steering Committee

24. During the Conversion Consideration Process
Step 4: Worker Co-ops 201 Step 5: SWOT Analysis, Planning, Articles and Bylaws, Un-official “Valuation” Step 6: Present to employees for feedback Step 7: Negotiate terms for buying the business

25. After the Conversion Consideration Process
Step 8: Employees vote to incorporate, adopt by-laws and agreements
Step 9: Finalize Cooperative Plans
Step 10: Finalize Cooperative Conversion Financing
Step 11: Training and technical support
Step 12: Business knowledge transferred effectively

26. Some Challenges Access to capital Cost of member and public education
Investment in democratic process
Co-ops are only as good as their members ask them to be.
When looking at the co-op model, it is important to recognize the potential challenges of the model. Many of these challenges, when effectively addressed, may end up being turned into strengths.
For example, co-ops have limited access to capital. But this also means that control resides with the members rather outside investors. The business can’t be sold off or moved unless that is what the members want.
Educating members and the public about what make a co-op different costs time and money. But the pay-off is in greater loyalty from members and customers.
Democracy can take time. But once decisions are made, there tends to be much stronger commitment to carrying them out in a successful manner.
In all of this it is important to recognize that members participation is key to the long term success of any co-op. Co-operatives only serve their members to the degree that members stay engaged.
CDI: SAAC Presentation, 20th April 2008

27. Some Advantages
Exist to meet their members’ needs. Focus is on service not financial return.
Local control keeps the business in the community.
Money is recirculated in the community.
Build skills and infrastructure in local communities.
Consumers like co-ops.
From these examples you can see that co-ops have distinct advantages. In fact, co-ops have a better success rate than conventional businesses, and in general have a better longevity — often existing for decades, serving and strengthening their communities while other businesses may come and go. I believe this is because:
Co-ops are focused on service to members as opposed to generating profits.
People tend to identify with and support co-ops because they are rooted in the local community.
Co-ops recirculate resources in the community rather than syphoning profits off to external investors.
Co-ops build local skills in leadership, participation and business.
And finally it is important to recognize that consumers like co-ops. Studies have shown that, presented with a choice, consumers trust co-ops and prefer to buy their products. In order for co-ops to take advantage of this, of course, they must communicate to consumers that they are co-operatives and why that makes them different.
CDI: SAAC Presentation, 20th April 2008

28. Policies to Grow the Cooperative Economy
Fund an Employee Ownership Center or Cooperative Development Center
Pre-Development Grants
Loan Guarantees
Tax Incentives
Resident Notification for Park Sales
Update Incorporation Laws

29. Cooperative Development Institute
Matt Meyer, Housing Program Organizer
New England Resident Owned Communities
Rob Brown, Program Director
Business Ownership Solutions