Transcript The Value of Co-Ops in Minnesota Communities

Co-ops and Minnesota Communities
I - Minnesota Cooperatives in the National
Context
II - Co-ops and Local Economies
III - Cooperative Culture: Perception of Coops in MN Communities
IV - Alternative Co-op Structures in
Minnesota
I - Minnesota Cooperatives in
the National Context
National Impact Report
In 2009, the USDA launched a
Congressionally funded study of
cooperatives across the country
It identified more than 29,000 cooperative
businesses in the United States
Member-owned businesses generate
more than $654 billion in revenue annually
They also provide $75 billion in wages for
more than 2 million workers
And In Minnesota
 The Midwest features the
highest concentration of coops in the country
 3.4 million cooperative
memberships
 Statewide, cooperatives
generate nearly $11 billion
annually, approximately
80,000 jobs and $146M in
state and local taxes
National Impact Report
The report suggests that cooperative
business is not merely viable, but highly
successful, even in the business climate of
a national recession
While individual cooperatives may be
small (or large), their cumulative economic
impact on communities is considerable
II - Co-ops and Local
Economies
The Multiplier Effect
Non-cooperative businesses may provide
products and jobs that stay in the
community, but revenue is more likely to
be spent in other communities (think of
executives, international investors, etc)
Co-ops contribute to what is called the
local multiplier effect
The Multiplier Effect
 Here’s an example: M. spends $1,000 at a
cooperative grocery store in Duluth in a year.
Rather than $500 going to salaries and supplies
and $500 being sent to pay owners in New York,
all $1,000 is disbursed to cooperative members
(employees, patrons, suppliers, etc.)
 These Minnesotans all choose to buy products
from stores in their town, many of them
cooperatives
The Multiplier Effect
 M’s $1,000 of goods produced $1,000 of revenue,
which immediately was used to produce another
$1,000 of goods and $1,000 of revenue. Through
the local multiplier effect, the community of Duluth
enjoys $2,000 of goods and $2,000 of revenue from
an initial sum of $1,000. From the perspective of the
community, money seems to multiply as it cycles
through local businesses
 Cooperative business enacts the multiplier effect by
keeping money within a community
“Study Shows Cooperatives Vital
To Rural Economic Growth”
 A government report released in 2004 says that
cooperatives are more likely than corporations to
have positive economic impact on their
community
The report, measuring the Economic Impact of
Cooperatives in Minnesota, is a public-private
partnership between the Minnesota Association of
Cooperatives (now known as Cooperative Network),
the USDA/Rural Development, the Minnesota
Secretary of State and Minnesota State Colleges and
Universities (MnSCU)-Mankato
“Study Shows Cooperatives Vital
To Rural Economic Growth”
 Why? The report explains:
 Cooperatives are member-owned, with benefits to local patrons
more likely to stay within the community. Other businesses,
such as corporations, are more likely to have any benefits in the
form of dividends distributed mainly outside the community, and
local ownership is often missing
 It concludes, “The cooperative form of business
is an excellent tool in promoting rural economic
growth as well as local leadership development”
Discussion
 How does the structure of cooperative business
encourage the positive economic impact
described in this report?
 What role might co-ops play in our community?
III. Popular Perceptions
 St Norbert’s Co-op Attitudes survey
 According to a 2007 telephone survey of 400 residents of
Minnesota and Wisconsin, the first words people think of
when they hear the term cooperative or co-op is
 (1) Owned by people for the common good/shareholders - 43%
 (2) Farming/foods - 18%
 (3) Lower prices/competitive/quality - 13%
 (4) Local/community based and owned - 9%
 (5) Business/dividends/profit sharing - 8%
 (6) Gas/electric/phone - 4%
 (7) Other - 3%
 (8) Credit unions/banks - 2%
 How are popular perceptions important to a business?
IV. Alternative Co-op
Structures
New Type of Co-op Created in 2003
 In 2003, a new state law was passed that created a new type
of co-op that allows for outside investors to be members of a
co-op
 This law, Minnesota Statutes Chapter 308B, provides
significant tools for patron members seeking outside equity
capital for cooperative creation, modernization or expansion
 The law authorizes non-patron investment in return for limited
voting rights in the cooperative
 308B co-ops preserve the historical cooperative focus on
distribution of profits to patrons based on patronage,
governance not based on investment, and capital investment
subordinate to patron control, but modify their application from
the models of a hundred years ago
Overview of 308B Co-ops, Continued
 Co-ops and outside investors can form a new
308B, receive tax advantages of LLC, while
remaining a cooperative - ensuring owner-user
voice.
 Ex: two electric co-ops can join with a noncooperative for joint right-of-way maintenance,
security services, etc.
 As of 2009, about 40 of these new co-ops have
been created since 2003
Some of the Many Diverse 308B Start-Ups
Founded in
2003-2008
Bushmills Ethanol
Co-op Metrics
Builders One
Innovative Health Solutions
Iceberg Technology
Avalanche Corporate Technology
Forest Management Systems
Plantavit
Premier Distribution Cooperative
Three Rivers Market
Organic Farmers Agency for Relationship Marketing
Integrated Media Cooperative
Independent Natural Food Retailers Association
Agricultural Labor Cooperative of America
UFC Grain Share Systems
Some of the Many Diverse 308B Start-Ups
(continued)
Founded in
2008-2009
Rehab Funding Cooperative, St. Paul
The Nokoma, Minneapolis
Belle Plaine Ag. Services
Common Properties Management Cooperative,
Minneapolis
The Hub Bike Co-op, Minneapolis
Cooperative Consulting and Development Services,
St. Paul
NCGA Development Cooperative, St. Paul
SCH Purchasing Cooperative, St. Paul
GSC Financial Co-op, St. Paul
308B Co-ops Are Good for Rural and
Community Development
These new types of co-ops support local
economic growth and development. The
law passed in 2003 is a means to access
capital to help fund expansion or to startup a new co-op business
308B Testimonials from Co-op Founders
 “My husband and I were excited to invest in the
new Bushmills Ethanol co-op because it gives
the mainstreet non-producer investor like us the
opportunity to invest in a local project that has a
high chance of success.” Ranae Rahn, Former
Project Coordinator, Bushmills Ethanol
 “The ability to have non-patron classes has
given us the flexibility to include 10% non-patron
investor members in our co-op.” Jay Hansen, CEO
of Avalanche Technology
Generalities about new 308B co-ops
About 1/3 of 308B co-ops registered in
MN operate in other states
Most 308B co-ops don’t have outside
investor members and are currently
operating as traditional co-ops
Several have dissolved or project was
abandoned
For more information
 To find out more about cooperatives in
Minnesota, particularly those located in your
community, please visit the Cooperative Network
 This material is made possible by the CHS
Foundation.