In 2014, CDI worked with big and small cooperatives throughout the Northeast, as well as across a wide range of sectors: housing, worker, consumer, producer, and more. But perhaps some of our biggest achievements came not from starting new cooperatives, but from helping to transition existing communities and businesses into cooperative institutions. As the cooperative movement has been thrust into the limelight in discussions about building a new economy, much of the emphasis has been focused on starting new cooperatives. However, we at CDI feel that it’s equally important to assist in transitioning existing businesses and institutions into cooperative endeavors. There are millions of people – workers, home-owners, consumers – that would benefit greatly from cooperation. While starting new things is exciting, we can’t leave behind everyone who already has a job, a house, a grocery store, or a farm. To truly build a new economy, we need to transition existing institutions into the cooperative model.
And this year, that’s exactly what CDI did. Below is a highlight of two of our largest achievements.
Edgeway and Twin Coach Estates
One of CDI’s biggest successes came this Spring on May 29th, when two manufactured housing communities transitioned into resident-owned communities on the very same day! The two new co-ops are Edgeway Homeowner’s Association, which converted with 52 homes, and Twin Coach Estates Homeowners Association, which converted with 64 homes. The residents of Edgeway purchased their community for $685,000 and Twin Coach for $1,095,000. An anniversary isn’t the only things these co-ops have in common–they also share a border and water infrastructure. The manufactured housing communities of Edgeway and Twin Coach are respectively located in the neighboring towns of Middleborough and Lakeville. And now, with their conversions, Edgeway and Twin Coach are happy to call themselves cooperative neighbors.
Both Edgeway and Twin Coach turned to the cooperative model in order to overcome major issues in their respective communities. In Edgeway, residents were driven to the idea of purchasing their community and converting to co-op ownership in large part due to deteriorating conditions. Over the years, the health of Edgeway’s infrastructure had been ignored, and ramifications of this included brown, unsanitary water coming out of faucets and into bathtubs. When residents took over Edgeway via democratic control, they made fixing these issues a top priority. Households in Twin Coach were facing different, but comparable, issues–primarily having to do with unfair rent practices that had some residents paying far more than others. Using democratic governance, the residents chose to equalize their rents.
Residents of Edgeway and Twin Coach toast their success and to their futureThe neighboring communities were able to make successful purchases because of the commitment of their resident-led boards of directors and other volunteers. The boards were assisted through this process by CDI’s NEROC team. NEROC provided organizational development in the form of training for board members, by providing templates and materials to lay the foundation of the businesses and by coaching the boards through the pre-purchase process. NEROC also provides loan-servicing for the communities and worked with the lender, ROC USA Capital, to develop financing pro-formas. Over the course of many meetings with the all-volunteer committees, the NEROC team helped Twin Coach and Edgeway develop affordable first-year budgets, determine the new rents, produce new corporate documents and determine construction schedules for the immediate repairs needed to get the residents the infrastructure they need.
These transitions couldn’t have happened without the desire of the residents to own their futures and without the selfless efforts of volunteers willing to step up and take on a leadership role. NEROC is proud to welcome Twin Coach and Edgeway to a growing community of ROCs reaping the benefits of cooperative ownership across New England and the US.
In the months since Edgeway and Twin Coach acquired their communities, they’ve continued their spirit of cooperation by working together to bring in town water for both communities. Ending the use of a single shared well is going to fix the issues of dirty water for Edgeway, improve the pressure in the pipes for Twin Coach, and provide both ROCs with functioning hydrants. This massive construction project is being supported by technical assistance from NEROC.
Island Employee Cooperative
In June, CDI helped to convert three businesses in the towns of Stonington and Deer Isle, Maine into a single worker owned cooperative–in fact, the largest worker cooperative in the state of Maine!
When the owners of Burnt Cove Market, V&S Variety and Pharmacy, and The Galley began to consider retirement, they initially thought of selling their business to outside owners. However, that was a concerning prospect–for the community, the owners, and the employees alike. Potential buyers would likely come from outside the community and would not maintain the same level of jobs and services. And due to the recession as well as the size of the small island communities, other employment options were limited. Already, the three businesses combined were one of the island’s largest employers.
So, with support from the former owners, and ongoing assistance from CDI and the Independent Retailers Shared Services Cooperative, the employees of the three businesses organized with the intention to buy out the stores, converting them to be under the ownership of one entity–a worker-owned cooperative, run by the employees themselves.
In a year-long effort, CDI and IRSSC provided extensive training and assistance to the employees to devise the shareholder, corporate, management and governance structures, writing the bylaws and navigating the regulatory issues involved, developing a detailed business plan, negotiating with the former owners and the lenders to raise the necessary capital, and other transaction related tasks. We also assisted the former owner in taking advantage of a major tax benefit, the IRS 1042 Rollover, which defers the capital gains tax owed by the seller when the business is sold to employees.
Now that they own their jobs, IEC president Alan White said in a press release, “This is a once in a lifetime opportunity. Many of us have worked in these stores for decades and never imagined this possibility. We know we have a lot to learn and a lot of work to do to be successful, but success means we will really achieve the American dream – economic security and building wealth through ownership, both for our families and our community.”
“People across the country have been trying to figure out the best way to assist business owners who want to consider conversion to employee ownership, either as a growth strategy or as a retirement strategy,” added Rob Brown, Director of CDI’s Business Ownership Solutions program. “In many ways this deal provides the model, and we look forward to working with the IEC into the future to ensure their success.”
Since June, workers have been democratically governing the business with continued support from CDI and the IRSSC, have begun planning how to invest more in health insurance and other benefits (which is unusual for retail workers), and will soon share in the company’s profits that they generate. Today, these bold worker-owners are providing the community with a wide range of necessary services and goods–groceries, hardware, prescription drugs, craft supplies, pharmacy items, and more. And IEC’s achievements continue to grow with CDI’s help, as we identified and successfully applied for a Maine Community College system grant to hold classes at the co-op’s stores to help the worker-owners cultivate their business-running skills.