September 7, 2013Steve Dubb, Research Director, The Democracy

Collaborativesgdubb@yahoo.com

www.community-wealth.org

Community Wealth Building Creating the New Economy

Rocky Mountain Employee Ownership Center conferenceDenver, Colorado

Building the New EconomyRestoring Ecological Balance

“To avoid the tragedy of leaving a ruined world to our children and grandchildren, we humans must reduce our aggregate consumption to bring it into balance with Earth’s biosphere and simultaneously act to heal and nurture Earth's regenerative systems.”

Source: New Economy Working Group

Building the New EconomyRestoring Equitable Distribution

“A growing body of research evidence suggests that societies that share wealth and work equitably among all their members enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments.”

Source: New Economy Working Group

Building the New EconomyRestoring Democratic Community“Living democracy is true popular sovereignty—government of the people, by the people, for the people ... Most concretely, it is a daily practice of civic engagement through which popular sovereignty finds expression as part of the essential fabric of community life.”

Source: New Economy Working Group

Making the New Economy Real:How do you do it?

Three key principles• Decentralization (subsidiarity)• Democratic planning (especially at regional and local levels)• Democratization of Wealth (pre-distribution)

(Community Wealth Building)

Bottom line: Rebuilding community is critical to restoring the planet & people, but you can’t restore community unless community becomes a meaningful economic basis for ordinary people.

Democratization of WealthCommunity Wealth Building

• promotes common ownership of productive assets

• anchors capital and jobs locally• stops the leakage of dollars from communities• supports individual and family wealth building• generates revenues to finance public services• leverages anchor institutions for community

benefit• contributes to local economic stability

Continuum of Wealth-Building StrategiesBROADENING OWNERSHIP OVER ASSETS AND CAPITAL

Family Wealth Building

Shared EquityCommunity/Worker

OwnershipPublic Ownership or

Investment

–Individual Development Accounts

–Microenterprise

–Family Self-Sufficiency Program

–“Baby Bonds” & child savings accounts

–Earned Income Tax Credit volunteer assistance programs

–Alternatives to predatory lending

–Nonprofit financial education programs

–Community Land Trusts

–Limited Equity Housing Cooperatives

–Deed restriction (inclusionary zoning)

–Mixed ownership (Market Creek)

–Program-Related Investments

–CDC/CDFI equity investments or joint ventures

–Community benefits agreements

–Anchor institutions (eds, meds, churches, museums, libraries)

–ESOPs or worker cooperatives

–Consumer, producer, or purchasing co-ops

–Credit unions

–Community corporations

–CDC or CDFI direct ownership

–Social enterprises

–Commons-based enterprises (e.g., Wikipedia, Creative Commons licenses)

–Municipal enterprise

–State & local venture investments

–Public pension fund ETIs (economically targeted investments)

–Public leases: land & transit development

–Stock warrants in exchange for granting tax breaks (fair exchange)

–Trustee ownership (e.g., Alaska Permanent Fund)

www.Community-Wealth.org

A Growing Movement

ESOPs: Members, Millions CDFIs: Assets, Billions

An Integrated Community Wealth Approach

Key Components Putting the Pieces Together

• Create culture of wealth building and ownership at the individual level

• Create community owned enterprises that provide living wage jobs and anchor business in low-income communities

• Link community businesses with anchor procurement needs

Individualwealth

building

Communityownership

Anchor Institutions

What is an Anchor Institution?• “Sticky capital” that doesn’t get up and leave• Typically among the largest employers in most major metropolitan areas• Local economic engines: employ large numbers of people; purchase large amounts of goods & services• Vested interest in surrounding communities• Increasingly concerned with sustainability• Typically public or non-profit “social mission”)• Largely untapped potential

12

Ways to Leverage Anchor Institutions

• Revitalized neighborhoods

• Increased local hiring, livable wages

• Affordable housing

• New retail development

• Small business expansion

• Increased nonprofit capacity

• Use of endowments• Employment policies• Local purchasing• Real estate investments• Technical assistance• Business incubation• Non-profit support work

$1 trillion a year in purchasing power, 5% of all employeesReal estate, endowment assets

Sources of Leverage

Research & technical expertise

Available Means Potential Benefits

Henry Ford Health System (Detroit)

• Transparent Sourcing Policy: contracts of $20K or more must go out to public bid, making more contracts accessible to MBEs and WBEs

• Set purchasing target: $100M purchasing goal from MBEs and WBEs; reached $86M; purchasing relationships with 660 minority-owned suppliers

• Source Detroit: partners with other anchor institutions to drive portion of $1.6B in purchasing locally; $16.5M (about 1%) transferred to date

What is a social enterprise? Nonprofit-owned business.

Business itself is often a for-profit (i.e., a for-profit subsidiary of a nonprofit organization.

Business has a “double bottom-line”—must contribute to the “mission” of the nonprofit while earning a profit, or at least reducing program costs.

Pioneer Human Services - Seattle (WA)

• Nonprofit founded in 1962 to serve clients – ex-offenders and drug abusers

• Initially nearly 100% grant funded

• Today employs 700 people, most from their client base, in network of their own for-profit businesses (hotel, catering, manufacturing)

• $55 million revenue; almost no grant funding

• Anchored in the community

What is a CDC? Community development corporations are locally

based non-profits that promote investment in low and moderate income communities.

Over 51% of board are community residents. Founded as part of civil rights movement, goal is

to allow low-income residents to exert economic control over their communities.

From practically no CDCs 40 years ago, there are thousands today (2005 survey: 4,600).

New Community Corporation of Newark (NJ)

• Founded in 1968 by Monsignor William Linder

• Employs 1,300• Community-based

business ownership• Developed shopping

center that houses community-owned business & services

• Assets exceed $500M• Income recycled to

support day-care, after-school programs, health services, Youth Automotive Training Center

What is an ESOP?• Tax-advantaged retirement plans for

employees.• Invest primarily or exclusively in the stock of

the employing company.• Can borrow money.• May own anywhere from a tiny minority share

to 100% of the company.• Are highly regulated “qualified employee

pension plans.”

New Belgium Brewery 456 employee-owners (as

of Dec. 2012), nation’s 3rd largest craft brewer

Started ESOP in 2000; became 100% employee-owned in 2012

More than $180M in annual sales

Employee turnover estimated at 3%

What is a cooperative?• Four key types: consumer, producer, worker, and

purchasing.

• All based on 1844 “Rochdale” idea of limited return to capital and “one member, one vote.”

• Largest sectors in the United States are credit unions (90 million members) and electrical co-ops (40 million members). About 30% of total U.S. agriculture production is marketed by farmer cooperatives.

• Many familiar businesses are co-ops: e.g., Ace Hardware, Nationwide, Associated Press (AP).

• Key U.S. growth sectors today are purchasing co-ops (five-fold growth since mid-1990s), food co-ops (double-digit annual growth), and worker co-ops.

30,000 U.S. Cooperatives30,000 U.S. Cooperatives73,000 Places of Business

Assets$ 3 Trillion

Revenues$ 654 Billion

Economic Impact Economic Impact of U.S. Co-ops:of U.S. Co-ops:

Wages & Benefits$ 75 Billion

2 Million Jobs 857,000 direct

Namasté Solar (CO)

103 “team” members; one-half are owners

4 to 1 maximum salary ratio

One owner, one vote #1 market share in CO 2,000+ systems installed $15 million in revenue

Example: the context of Cleveland, Ohio

Community Wealth Building Strategy

Business Ideas You Might Encounter• Shuttle service to reduce driving• Environmentally friendly industrial-scale laundry service • Environmentally friendly energy & facility upgrade business• Green friendly practices in food service (recycled cutlery,etc.)• Business that will recycle non-hazardous medical wastes• Solar panel installation on rooftops• LED lighting • Locally grown organic produce• Green roof material growing• Tree farm• Mattress recycling• Document scanning• Organic waste facility• Inventory management• Stormwater infrastructure maintenance • Housekeeping service with non-toxic cleaning products

EvergreenCooperativeDevelopmen

t Fund

(LLC subsidiary of ECC)CDFI

EvergreenCooperative Corporation

(ECC) Non Profit)

Cooperative Businesses

Committees:Audit & Finance

GovernanceStrategic Planning

Investment

Executive

EvergreenReal Estate

Corp.(for Profit)

EvergreenBusinessServices

(for Profit)

GUC InitiativeTransit-Oriented

DevelopmentEducationHousing

Community Engagement

ECCBoard of

Directors, 15 members,

multi-stakeholder

Accounting IT TA

CDE(for Profit)

Structured

Fund(non -Profit)

HumanResources

EVERGREEN COOPERATIVE STRUCTURE

(for Profit)

Building Community Support• Identify trusted partners in the community

(churches, etc.)• Work with local residents to identify their

concerns (door-to-door interviews, neighborhood circles, etc.) to forge a shared sense of ownership and responsibility between grassroots and institutional stakeholders.

• Identify, develop, and support local leadership within local residents, groups and community organizations (coaching, study circles, etc.)

• Support the development of local community media and information sharing

Key Elements to Adapt to Other Cities• Project champion: Provide seed capital, raise

capital, hire consultants, and “lead the team”• Business Development: Recruit democratic

management, oversee business planning, and provide technical assistance

• Community loan fund incubator: Host loan fund

• Workforce development capacity: Screen, recruit and provide customized training to workers

• Local political buy-in: City assistance to obtain approvals and state & federal funding

• Anchor backing: Commit to buy from community-owned business that meet quality standards

Recap: Key Principles forBuilding Community Wealth

• Start with values• Develop productive assets• Grow enterprises • Lead with demand• Strengthen support networks• Anchor ownership in community• Keep wealth local

For more informationSteve Dubb, sgdubb@yahoo.com