Community Wealth Building and the
Principles behind the “Cleveland Model”
Boston, Massachusetts
June 29, 2012
Steve Dubb, Research Director
sgdubb@yahoo.com
The Democracy Collaborative, University of Maryland
www.community-wealth.org
About the Democracy Collaborative
• Established in 2000 to advance a new understanding of
democracy for the 21st century and to promote innovations
in community development that enhance democratic life.
• Conduct research, training, policy development, and
community-focused work designed to promote an assetbased paradigm and increase support for the field.
• Maintain community-wealth.org information portal.
• Current flagship project: Evergreen Cooperative
Initiative in Cleveland, Ohio, a comprehensive wealth
building effort in six low-income neighborhoods.
What is Community Wealth Building?
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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 Strategies
BROADENING OWNERSHIP OVER ASSETS AND
CAPITAL
Family Wealth
Building
–Individual Development
Accounts
Shared Equity
–Community Land Trusts
–Microenterprise
–Limited Equity Housing
Cooperatives
–Family Self-Sufficiency
Program
–Deed restriction
(inclusionary zoning)
–“Baby Bonds” & child
savings accounts
–Mixed ownership (Market
Creek)
–Earned Income Tax
Credit volunteer
assistance programs
–Alternatives to predatory
lending
–Nonprofit financial
education programs
 The Democracy Collaborative
–Program-Related
Investments
–CDC/CDFI equity
investments or joint
ventures
–Community benefits
agreements
Community/Worker
Ownership
–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)
Public Ownership or
Investment
–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
What is an IDA?

Special savings account; savings are matched
for the poor, up to a cap.

May have multiple sources of matching
deposits.

Includes financial education component.

May be started as early as birth; but current
federal programs are much more restrictive.

May be used for homes, education, and
business capital.
What is a social enterprise?
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Nonprofit-owned business.
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Business itself is often a for-profit (i.e., a forprofit subsidiary of a nonprofit organization.
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Business has a “double bottom-line”—must
contribute to the “mission” of the nonprofit
while earning a profit, or at least reducing
program costs.
What is a CDC?
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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 now about 4,600 today.
What is a CDFI?
• Community development financial institutions include
credit unions, loan funds, banks, and venture capital
firms that finance development in low-income
communities.
• Many CDFIs were founded as part of civil rights
movement to combat red-lining.
• Mainly, but not exclusively, non-profit.
• In 30 years, number of CDFIs has increased from
under 100 to over 1,000. CDFI asset base has
climbed from $2 billion in 1999 to over $40 billion
today.
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.”
What is a community land trust?
• Non-profit in operation. Board typically consists of one-third
residents, one-third non-resident community members, and
one-third government officials.
• Most have “shared equity” – residents have 99-year lease
but land is held by trust, with gain in value split—for
instance, residents may get 25% of the equity gain while
trust gets the other 75%.
• Limits on individual equity gains ensure affordability for
future residents, making housing “permanently affordable.”
• Extremely low foreclosure rates
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 (doubledigit annual growth), and worker co-ops.
What is public enterprise?
• Direct enterprises are businesses owned & operated
by government. Leading municipal types include public
power companies, cable/broadband companies, and
methane-recovery businesses.
• Asset leveraging strategies that use land holdings to
generate lease revenue to finance city services or
support transit-oriented development.
• Public-private partnerships such as city-owned
convention center hotels are another form
• investment strategies such as state and local venture
funds and economically targeted investments by
pension funds.
An Integrated Community Wealth Approach
Key Components
Individual
wealth
building
Community
ownership
Anchor
Institutions
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
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 engine: employs large
numbers of people; purchase large amounts of
goods & services
• Vested interest in surrounding communities
• Typically non-profit: has public mission
• Largely untapped potential
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Ways to Leverage Anchor Institutions
Sources of Leverage
$1 trillion a
year in
purchasing
power, 5% of
all employees
Real estate,
endowment
assets
Research &
technical
expertise
Available Means
• Use of
endowments
• Employment
policies
• Local
purchasing
• Real estate
investments
• Technical
assistance
• Business
incubation
• Non-profit
support work
Potential Benefits
• Revitalized
neighborhoods
• Increased local
hiring, livable wages
• Affordable housing
• New retail
development
• Small business
expansion
• Increased nonprofit
capacity
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Examples
University of Pennsylvania (Philadelphia)
Tripled local purchasing from $20.1M in 1996 to $70M by 2005 (now
exceeds $95M), while helping reduce local area crime rates by 40%
and spurring $370M in private investment
Henry Ford Hospital (Detroit)
• Incentivized local hiring (7% of exec bonuses linked to these goals).
• Pays local vendors a month in advance to provide working capital.
• "Live Local, Buy Local, Hire Local" initiative
Sinai Health System (Chicago)
• Renovated Hollenbach Sausage Factory brownfield site ($7M project).
12K sq ft. building now houses Center for Families and Neighbors.
Catholic Healthcare West (San Francisco)
• Community Investment Program provides low-interest loans: Since
1992, $49 million lent out to 88 different nonprofit organizations.
Community Wealth Building in Cleveland
Understanding the Context
PROPERTY AT RISK
OUR STRATEGY
1.
Focus growing portion of $3B in anchor
institution purchasing locally
2.
Create new for-profit, worker-owned
businesses (percent of profits recycled in
revolving loan fund to seed more businesses).
3.
GREEN
4.
Link to expanding sectors of the economy
(e.g., health, energy, food, waste & green technologies)
5.
Ensure financing and management
to move to scale
Getting Started
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Begin a Conversation: Bring together about 50
“thought leaders” from diverse organizations —
business, unions, co-ops, ESOPs, labor, religious,
university, hospitals, community groups — along with
city and county officials to have a conversation
Develop a Strategic Plan: No quick way to do this —
over 100 interviews of “decision makers” both at
anchor institutions & in the community. And be
prepared to listen to the results!
Assemble a Team: Recruit leaders in business
planning & employee ownership, community finance,
workforce development, community land trusts, etc.
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Green Businesses Suggested by
Anchor Institution Interviews
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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 separate out non-hazardous medical wastes
away for recycling
Solar panel installation on rooftops
Recycling service that meets privacy standards so that confidential
paper can be recycled
Deconstruction (reuse of materials for building construction)
Locally grown organic produce that could be made available for
sale in hospital & university cafeterias & restaurants
Ecologically friendly landscaping business
Tree farm
Housekeeping service with non-toxic cleaning products
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Launched in 2009-2012
1. Evergreen Cooperative Laundry (ECL)
2. Ohio Cooperative Solar (OCS)
3. Green City Growers Cooperative (GCGC)
Secondary Cooperatives
1. Evergreen Business Services (EBS)
Planning & Development
Three to Four Next Generation Businesses in Pipeline (launch 2 per year); goal in
five years: 10 business, 500 employee-owners
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Customers: hospitals, nursing homes &
hotels
Ultimate goal: 10-12 Million Pounds Per
Year ($4-5 million in annual sales)
Employment Goal: 50 at full capacity,
presently 21
Greenest Commercial Laundry in NEO
Ohio
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Financing for Evergreen
Cooperative Laundry
Senior debt:
• First Merit (local commercial bank)
750,000
• Shorebank
750,000
• City of Cleveland
1,500,000
“Equity”
(sub-debt through Evergreen Coop Development Fund)
• New Market Tax Credits (~26% of $5M allocation)
1,300,000
• Cleveland Foundation (Evergreen Fund)
750,000
Working capital:
• City of Cleveland (EDA/Dept. of Commerce)
200,000
• Common Wealth Revolving Loan Fund
250,000
Total
5,500,000
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2010-11: Six installations ~ 500 kWh;
more than 250 homes weatherized to
date
Employment at present: 22
Current sales: $800K (annual)
long-term goals: 3MW solar capacity
installed, $2.5M in sales a year, 75
worker-owners
110 kW – Engineered
89th/ Euclid Ave @ the Cleveland Clinic
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1.
$10 Million -BROWNFIELD & ECONOMIC DEVELOPEMENT AWARD (STATE BEDI)
$10 Million Award - $2 M in grant & $8 Million in Loan - Committed
2.
$18 Million New Market Tax Credits (NMTC) (Committed by PNC)
3.
Evergreen Cooperative Development Fund - $1 Million (Committed)
Employment goal: 35-40
40K SF
DISTRIBUTION
CENTER
3.25 ACRE
GREENHOUSE
25
GOALS
• Create new jobs for neighborhood residents in an employment
desert (goal: 500 jobs in 5 years)
• Anchor capital so it doesn’t get up and leave; Redirect the
purchasing stream of area institutions so that they bring needed
resources into low-income communities
• Stabilize the low-income (area median income is $18,500)
neighborhoods in East Cleveland neighborhoods ("Greater
University Circle).
• Promote asset accumulation and build individual & community
wealth ($65K/8 years)
• Have a favorable environmental impact
• Stop $$ from leaking out of NE Ohio
• Develop a replicable model for national impact
Unique Features of the Evergreen Model
• Community Reinvestment: Active attempt to leverage
the purchasing stream of large institutional buyers to
foster reinvestment in disinvested communities
• Benefiting communities under-represented in
worker co-ops: about 90 percent of our worker-owners
are African American and roughly 50 percent of workerowners are ex-offenders
• Explicit place-based strategy: Not just a business
strategy; goal is to rebuild neighborhoods
• Network of businesses: Borrowing from Mondragón,
goal is to build a mutually supporting network of
businesses. 10% of profits returned to common fund.
• Green: Businesses created are all designed to be
“greenest in class”
EVERGREEN COOPERATIVE STRUCTURE
GUC Initiative
Transit-Oriented Development
Education
Housing
Engagement
Evergreen
Cooperative
Development
Fund
Evergreen
Cooperative
Corporation
(ECC)
Non Profit)
ECC
Board of
Directors, 15
members,
multistakeholder
CDFI
(for Profit)
Structured
Fund
(non -Profit)
Executive
Cooperative Businesses
(LLC subsidiary of
ECC)
CDE
Committees:
Audit & Finance
Governance
Strategic Planning
Investment
Evergreen
Business
Services
Evergreen
Real Estate
Corp.
(for Profit)
(for Profit)
(for Profit,)
Accounting
IT
TA
Human
Resources
Key Elements to Adapting Model 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 train workers (customized to business needs)
• Local political buy-in: City assistance to obtain
approvals and state & federal funding
• Anchor backing: Commit to buy from communityowned business that meet quality standards
General Lessons
• Identify and develop assets.
• Develop community approaches leading to
regional impact.
• Use inclusive approach to decision making.
Listening and follow-up are key.
• Build leadership. Work to develop vision even
when the resources seem unavailable.
• Be prepared to adjust your vision to build a
broader coalition. Know what you don’t know.
Partnerships are key to getting things done.
What Evergreen’s
Worker-Owners Say
“Because this is an employee-owned business, it’s all up to us if we
want the company to grow and succeed. This is not just an eighthour job – this is our business.”
– Keith Parkham
“I never thought I could become an owner of a major corporation.
Maybe through Evergreen things that I always thought would be out
of reach for me might become possible. Owning your own job is a
beautiful thing.”
– Medrick Addison
Thank you. Questions?
Steve Dubb
Research Director
The Democracy Collaborative
sgdubb@yahoo.com
www.community-wealth.org