Co-ops and Minnesota Communities

1. Co-ops and Minnesota Communities

2. I - Minnesota Cooperatives in the National Context • II - Co-ops and Local Economies • III - Cooperative Culture: Perception of Co-ops in MN Communities • IV - Alternative Co-op Structures in Minnesota

3. I - Minnesota Cooperatives in the National Context

4. 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

5. And In Minnesota • The Midwest features the highest concentration of co-ops 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

6. 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

7. II - Co-ops and Local Economies

8. 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

9. 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

10. 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

11. “Study Shows Cooperatives VitalTo 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

12. “Study Shows Cooperatives VitalTo 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”

13. 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?

14. 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?

15. IV. Alternative Co-op Structures

16. 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

17. 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 non-cooperative for joint right-of-way maintenance, security services, etc. • As of 2009, about 40 of these new co-ops have been created since 2003

18. Some of the Many Diverse 308B Start-Ups 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 Founded in 2003-2008

19. Some of the Many Diverse 308B Start-Ups(continued) 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 Founded in 2008-2009

20. 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 start-up a new co-op business

21. 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

22. 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

23. 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.