Keeping profits local with cooperatives tailored around local anchors: Cleveland, Evergreen and Preston models

Preston has struggled with austerity and entrenched inequality.
 Preston has struggled with austerity and entrenched inequality. Photograph: Christopher Thomond for the Guardian

Ted Howard looks out on a group of people drinking tea from styrofoam cups at Preston town hall on a Monday afternoon in March. The social entrepreneur and author from Cleveland, Ohio, is the special guest at the city’s monthly social forum. “What’s happening in this community is historic – it blows my mind,” he tells the city councillors and local business owners. “We’re working out how to build an inclusive economy.”

Howard’s infectious enthusiasm has made him the de facto spokesperson for “community wealth building”, a way of tackling inequality by ensuring the economic development of a place is shared more equally among its residents.

To do this, Howard harnessed the co-operative model, in which an enterprise is jointly owned and operated by members for their mutual benefit. In Cleveland, he helped set up worker co-operatives to supply local institutions – such as hospitals, councils and universities – in order to keep profit localised. Redirecting local spending for community wealth through the use of worker co-operatives has now become known as “the Cleveland model” – and cities around the world suffering the negative effects of globalisation are looking to it to help them recover.

This grassroots economic development approach originated in the Basque region of Spain, where the Mondragon Corporation, a federation of worker co-operatives that now employs more than 74,000 people in finance, retail and other sectors, was set up in 1956, based around the ideals of social responsibility and participation.

Howard and his organisation, the Democracy Collaborative, applied the idea in Cleveland by establishing the worker-owned Evergreen Cooperatives in 2008, in collaboration with the city government and the Cleveland Foundation, the world’s first community foundation, which dates from 1914. An industrial-scale laundry and energy business were set up as co-operatives to serve the biggest spenders in the city. Green City Growers, a co-operative urban farm, followed in 2012.

When Evergreen Cooperatives began, Cleveland badly needed change. Its population had shrunk by more than 58% since 1950 due to the decline of manufacturing jobs in the city. In 2007, Cleveland’s poverty rate was among the worst in the US27% of residents lived in poverty, a much higher proportion than the US national average of 12.5%.

While Cleveland voted for Hillary Clinton in last year’s election, 70% of Ohiovoters chose Donald Trump, who appealed to the disaffection of workers feeling the impact of deindustrialisation.

Cleveland Ohio
Pinterest
 Cleveland’s population had shrunk by over 58% since 1950 with the decline of manufacturing jobs. Photograph: Timothy A Clary/AFP/Getty Images

Many US and UK cities are waking up to the power of service-based anchors as local employers and earners as manufacturing jobs move overseas. In the US, universities spend $400bn (£320bn) every year and have total endowments of over $350bn. Nonprofit hospitals have annual revenues of more than $500bn. Redirecting that money locally could have a profound effect, the Democracy Collaborative argues.

In Cleveland, the Evergreen laundry and energy company are now profitable and the urban farm is getting there. They collectively employ around 150 people, many with barriers to employment such as criminal convictions or low education. The plan is to increase the number of employees to at least 1,000.

The laundry was established in Glenville, one of the poorest parts of Cleveland, where adult unemployment was around 40% in 2010 and higher still for those who had been in prison. Evergreen was about more than just giving these people jobs. “A job is not enough. For people to stay out of poverty they need to be able to acquire assets,” Howard explains.

Around half of Evergreen workers own a stake in their company. They are eligible for pension payments, profit sharing and even help buying a home.

Claudia Oates, who works in sales and marketing for the laundry, tells the story of one worker-owner of the laundry and his wife, who works at the greenhouse, who got a home under the Evergreen housing programme. “The people here are good, they just need a second chance,” she says.

The co-op laundry in Cleveland.
Pinterest
 The co-operative laundry run by Evergreen in Cleveland. Photograph: Evergreen Co-operatives

It was different when she started at Evergreen in 2011. “At that time, they were losing customers,” Oates remembers. But the laundry turned a corner with contracts from major institutions such as University Hospitals, and was in the black by the second quarter of 2014.

“Before, we were owners in name, but now we are learning how to really be worker-owners, with quarterly statements, profit-sharing and looking at how to reinvest our money,” Oates says.

Other US cities are learning from Cleveland about how to make co-operatives competitive as they implement their own iterations of the model. The mayor of Rochester, New York, commissioned the Democracy Collaborative to look into whether the model could work there. In Denver, Colorado, nonprofit funding has gone towards setting up worker-owned co-operatives for veterans and low-income families to grow food.

Council leader Peter Rankin believed Preston could also benefit from these ideas. “We have a government that states this country is doing well economically – but we know as people in the community that’s not true,” he says. Preston voted leave in the EU referendum, like every other district in Lancashire. It sent a clear signal that a new approach is desired. “For too long we said social policy is separate from economic policy,” Rankin adds. “The inclusive economy’s time has come.”

Preston council committed to a co-operative initiative for economic development in 2011, but the following year invited Howard to talk about the Cleveland model, as inspiration for how the UK city could match the co-operative approach with a way of building localised wealth.

Howard had never heard of Preston before he was invited to visit in 2012. At the time, the city was in the depths of austerity and suffering from entrenched inequality, with a life expectancy of 66 in some areas and 82 in others. One in three schoolchildren lived in poverty. On top of this, the council has had its hands tied by severe budget cuts, and its community engagement team has been cut from 30 people to around 10.

“The system wasn’t working,” says Matthew Brown, Preston cabinet member for social justice, inclusion and policy – and the driving force behind many of the recent transformations at the council. “Something had to change.”

Pinterest

So in 2013, the council employed a thinktank, the Centre for Local Economic Strategies (CLES), to help identify 12 large institutions anchored to Preston, including the city and the county council, the university, the police and the hospital. It looked at redirecting the £1.2bn total annual spending power of these anchors to local businesses. Preston city council has since spent an additional £4m locally, from 14% of its budget in 2012 to 28% in 2016.

Preston, like any city, has its own particular challenges that mean a straight transplant of the Cleveland model is impossible. So CLES adapted it. Rather than creating co-operatives from scratch, Neil McInroy, CLES chief executive, says they sought existing business that could win contracts, such as a £600,000 printing contract tendered by the constabulary and a £1.6m council food budget, which was broken into lots and awarded to farmers in the region.

After Brexit, it may become even easier for public institutions to pick local suppliers over international ones, without the European procurement law that requires contracts to be tendered widely. But other centralised services, such as the police and NHS, will still be tied to national systems for procurement.

Then there’s funding. Cleveland’s Evergreen Co-operative Laundry was set up with $5.8m in part from the city council and the Cleveland Foundation. Setting up co-ops could be more difficult in the UK, which has weaker city governments, less availability of philanthropic capital and the looming shadow of austerity.

Peter Rankin is aware of these limitations. The council is looking at setting up a local bank to provide loans to small businesses and becoming a municipal energy provider. Rankin sees the developments so far as a part of a wider programme of getting wealth to remain local that includes attracting outside investment from corporations that may take their profits elsewhere.

In 2016 Preston was voted the best city in north-west England in which to live and work.
Pinterest
 In 2016 Preston was voted the best city in north-west England in which to live and work. Photograph: Christopher Thomond for the Guardian

Julian Manley, a research fellow at the University of Central Lancashire, is in the process of establishing the Preston Co-operative Network. He is working on a curriculum that educates undergraduates about co-operatives and connects them to Northern Lights, the university business hub, where they can get support setting up their own. “We have growing interest from the university in supporting this network through educating students to have skills to fill gaps,” Manley says.

The Preston Co-operative Network already includes Link, the UK’s first educational psychologists’ co-operative and the beginnings of a local food co-op. Kay Johnson, director of the Lancashire and Region Dietary and Education Resource, is piloting an open food network to connect growers directly with local people in disadvantaged areas, where there is often little access to fresh produce.

“The co-op model means that as the the project scales we can create jobs at the hubs,” Johnson says. She has joined forces with Neil Hickson, who runs a community farm in nearby Burscough. “People in cities are the hardest ones to reach,” Hickson says. “For us, taking a vegetable box to central Preston might not be worth it, but if there was a food hub it might be worthwhile – not profitable, but economically viable.”

By creating an education system that promotes co-operatives and networks to support them, Preston, like Cleveland, is aiming for systemic change. While they realise this may take decades, there are already some signs it is paying off. Preston had the joint-second biggest improvement in its position on the multiple deprivation index between 2010 and 2015. In 2016 it was voted the best city in north-west England to live and work. The changes are profound enough that the shadow chancellor, John McDonnell, has used Preston as an example of how Labour councils can cope with hefty budget cuts.

The day after the social forum in Preston, Howard, Brown and Manley speak at a roundtable hosted by Jonathan Reynolds, the shadow cities minister, at the Houses of Parliament, to try to develop thinking about how co-ops and anchor institutions can work together.

“There’s a real need in local government to understand what the benefits of investment are,” says Meg Hillier, MP for Hackney South and Shoreditch, at the event. “The danger is that it gets easier for procurement officials to deal with big companies.”

McInroy says Preston will be seen as an early adopter as other councils catch on. CLES has already worked with Manchester city council to increase its direct spend to the local economy from 51.5% in 2008-09 to 73.6% in 2015-16. It has now started work with Birmingham city council.

Howard sees Preston as the most comprehensive, holistic application of the Cleveland model yet. “They’re creating an ecosystem of change that will be the engine for a new, fairer economy.” From his community farm in Burscough, Hickson agrees. “I feel like I’m involved in a new movement that’s building,” he says.

**

Smart Cities

hiladelphia is launching itself into the smart cities space, but right now leaders are most intent on devising a roadmap to effectively navigate through emerging smart technology and policies.

It’s a unique approach, considering many municipalities add smart projects piecemeal as they see fit without an overall structure or guidelines. The City of Brotherly Love is also placing a strong focus on the community and meeting the needs of residents and business owners, as opposed to simply pushing government agendas or prioritizing technologists’ ideas.

Last month, SmartCityPHL had its first community engagement workshop, held by the Office of Innovation & Technology (OIT) — which launched the initiative last year and serves as its oversight body. The city was one of the five winners of a Smart Cities Council Challenge Grant earlier this year, and the council helped to organize Philadelphia’s inaugural readiness workshop. The city has partnered with PricewaterhouseCoopers for assistance with drawing up the roadmap based on the information it gathers from the workshops and other forms of outreach.

Although OIT serves as the cohesive element, it’s working to bring all of the city’s departments together to collaborate on the greater smart city effort. It’s also reaching out to other prime stakeholders in the community, as well as the citizens themselves. OIT hopes to have the first iteration of its strategic plan drafted by the end of Q1 2018.

Smart Cities Dive spoke with Ellen Hwang, Program Manager for Innovation Management, who handles Philadelphia’s smart city initiatives. She and Chief Innovation Officer Charles Brennan have been instrumental in spearheading the SmartCityPHL initiative. Hwang offered perspective on what’s being done to maintain an inclusive process and what the initiative hopes to achieve.

The following interview has been edited for brevity.

SMART CITIES DIVE: What have you learned from the early phases of launching the SmartCityPHL initiative?

HWANG:  We conceived the SmartCityPHL initiative last year with the new administration, under Mayor Kenney. We noticed that there were a lot of assets we are talking about — whether it’s streetlight poles or the different networks that are already built into our city underground … We were trying to basically piece all these different things together and realized there was such a need for better collaboration.

We have folks in our water department who are going to be deploying advanced metering infrastructure to better manage the water usage for residential properties. We also have folks in our Office of Sustainability who are trying to bring on an automated building management system. These are all different things that are infrastructure related, they’re all sitting in different departments, but they’re all impacting the same communities and our larger city of Philadelphia.

As we’ve been talking about smart cities, looking at these different assets and putting our project together, we almost need to take a step back and really take a look at the bigger picture. What’s happening in our city? Where are there redundancies happening? And how can we make sure that all different partners across the city — both inside and outside the government — are working together to understand the different projects that are going on. Also where can you partner and collaborate on these initiatives?

There are shared goals and outcomes and assets that we need to coordinate on a much higher level. When you talk about smart cities there’s a lot about data — data integration, data analytics — that comes with it. How do we do that better and faster? How do we share that information with each other better?

Over the last year, we’ve been making sure first and foremost that our colleagues in the city are on board with what we’re doing. We’re still building and strengthening those relationships across city departments, and we are establishing an internal working group to make sure that city government projects are going to be better coordinated moving forward.

Our vision behind our initiative is to coordinate and collaborate and build an ecosystem around what we’re calling a smart city. It was really important for us to acknowledge that a smart city in itself is a vision for a lot of cities, but we didn’t want to specify Philadelphia’s vision as a government and then impose that on our larger community. We have been very intentional in wanting to bring different folks along as we’ve been conceiving and thinking about [this] … who normally aren’t at the table in these conversations and really need to be.

What takeaways do you have from your first workshop, especially relating to your larger goal of including the community?

HWANG: I think that some of the things that were highlighted at the event were a real need to coordinate amongst both internal and external groups across Philadelphia. This was a really great way to get that conversation started.

The digital inclusion and digital divide conversations are really, really important to us. We’re really talking about equity and inclusion as we’re conceiving these larger infrastructure projects.

“We know we have a litter problem and we have a public safety problem, and we took those topics of public safety and litter as entry points to talk about smart cities.”

Ellen Hwang, Program Manager for Innovation Management, City of Philadelphia

One thing I want to emphasize about this event is we completely acknowledge that there is much more work that we need to do in terms of engagement. There is much more work to uncover and understand the nuances that each neighborhood has, in terms of what types of access equity do they need, in terms of bringing technology that’s going to support their community goals.

We want to bring in community development corporations who are focused on hyperlocal economic initiatives. … When we were first talking to them it took a few conversations just on the topic of what a smart city is and why does it matter when there are neighborhoods where we’re talking about basic literacy and getting basic access to computers and the internet and broadband.

We know we have a litter problem and we have a public safety problem, and we took those topics of public safety and litter as entry points to talk about smart cities. When you talk about smart cities it’s not just necessarily about these fancy applications and sensors everywhere. That’s definitely part of the conversation, but we are also trying to tackle big problems.

There are folks in the community that really had a gap in the knowledge of what technologists and engineers are talking about in the smart cities space. We realized that what would be the most important thing for us to begin this larger engagement strategy is to use this event as a way to bring the technologists and engineers to the table, but also bring folks in the community who aren’t normally in these conversations.

We want to be able to share some of the baseline challenges we are trying to solve, some of the real needs of the community. And also bring in folks from city government to say here are some of the priorities that we care about.

We had some people from our GIS team who are building our data enterprise system. We had some folks from our commerce department who partnered with our community development corporations. We also had some folks who are close to public safety initiatives. By having them share the challenges with technologists in the room, our hope for the event was to bridge that gap. In Philly we want to make sure that we’re focused on the challenges that we’re trying to solve and thinking about the technology that could support parts of achieving those goals.

When you presented some of your goals at the workshop did it seem like they were in line with the community’s expectations?

HWANG: I think there was a little bit of concern because I think people came into it thinking we were going to be presenting a strategic plan. Actually, this was the first step in our strategic planning. It was to get everyone together so everyone knows what’s going on from the beginning. We want to continue connecting over the course of the process of developing our plan.

We picked a very broad range of topics: public health, public safety, government efficiencies, internal business processes, and then we also hit on different things like social services and access to services in city government. … Now what we need to do is hone in on specific areas where there’s a lot more areas of convergence or shared priorities and goals.

What’s unique to our approach is we’re not looking at a smart city as smart water, smart buildings, smart energy. We’re trying to say that we see all these different groups thinking about smart and advanced technologies, but they’re all talking about it very separately. How do we get them all together at the same table and work through priority areas that are actually shared amongst these different groups?

You’ve mentioned a focus on neighborhoods instead of only on city-wide smart initiatives. Explain that.

HWANG: I think it’s a lot for us to take a bite out of and chew on because we are such a large city. But we are also a city of neighborhoods, and we acknowledge that every neighborhood on many levels — socioeconomically, education attainment, demographically speaking — they’re so different in many ways. We’re very cognizant of that and we want to be very mindful of that.

Each neighborhood might have different priorities. Such as, within public safety what’s more important to them: surveillance? Or is parking and idling or traffic congestion more of a problem? For another community it may be that stormwater management is a mess and we really need to be thinking about that.

We’re bringing people from all different sectors — our community members, as well as our research institutions, the startup and entrepreneur community and of course our corporate community. [They] are completely on board and looking at how to give back and bring along our marginalized communities so investment isn’t just in downtown, but it’s really happening throughout our neighborhoods outside of center city.

There are a lot of strategic plans already in place [such as Philadelphia 2035 and Vision Zero] and we want to make sure we’re putting those really at the forefront of the work we’ve already done. And we’re engaging the community, understanding some of their different priority areas. If we’re going to pilot anything and work on any one specific priority area, how does that align together?

There’s a lot of document review we’re doing at the moment. And thinking about each of our neighborhoods and making sure whatever we decide to implement, we’re keeping each neighborhood in mind so we’re not bringing in technology that’s irrelevant to a certain community. That will help us in terms of investments, in terms of budget and funding.

It’s important to make sure we’re thinking about our tech plan from an agile perspective, making sure we are considering things that are already in place and not just completely renewing with different ideas that are going to be redundant. That’s why it’s so important for us to bring everybody along from the beginning.

We’re excited about trying to approach our strategic planning process in this way. We know it’s a heavy lift and it’s a long-term process, but in addition we also see a lot of promise and opportunity in Philly.

Recommended Reading: