An Introduction to the Cooperative Business Model

1. An Introduction to the Cooperative Business Model Co-op Campaign Academies 2018 Executive Director Janice Brown www.montanacouncil.coop

2. What is a Cooperative Business? • A type of corporation chartered under MCA Title 35 Chapters 15-18 • A business owned and controlled by the very people who use its services • Earnings are allocated annually to member-owners based on their total purchases of co-op products/services • Profits are taxed once – either as corporate income or as distributed income to the member-owners

3. Basic Principles/Practices User-Benefits: Member-owners have access to goods and services not otherwise available and at best possible price point. They share in business earnings. User-Owned: – Members jointly own assets and have an obligation to finance and patronize the business. User-Controlled: Members elect governing boards and have an equitable voice: one member, one vote. All cooperatives also follow seven internationally recognized principles that guide their business conduct including cooperating with other co-ops and investing in education as well as their communities.

4. Cooperative Types & Functions May be: consumer-owned, worker-owned; or owned by independent entities – farms, stores & hotels– that seek efficiencies through group purchasing or shared services May be: local & centralized or federated (operating as a “co-op of co-ops” such as CHS, Inc.) May have one or more functions: • To collectively market agricultural products • To purchase in bulk for better wholesale prices • To provide an essential service or product in the absence of sufficient ROI for others to enter market

5. MT Co-op Legal Structures • Cooperative Association (for profit) • Agricultural Association (for profit) • Cooperative Agricultural Marketing Association (not-for-profit) • Cooperative Utilities - Electric and telecommunications (not-for-profit) In other states, cooperatives are most commonly formed as nonprofit corporations with exempted stock

6. More than 160 Montana Co-ops • 51 credit unions • 25 rural electric co-ops • Eight telecommunications co-ops • Due to consolidation, there are now fewer than 30 farm supply co-ops • Increasing number of ag co-ops for aggregation, distribution & marketing • Regional co-ops like NW Farm Credit • Growing variety of consumer, worker housing and investment cooperatives

7. Montana’s Credit Unions Working to promote and enhance a thriving credit union community • The 501(c)6 Montana Credit Union League advocates and protects credit union interests • League Service Group – for-profit arm provides business services to credit unions • Montana Credit Unions for Community Development – 501(c)3 for charitable giving • Montana Credit Union Group Benefit Trust – health insurance and wellness programs • 51 members in 10 chapters across the state

8. Montana Electric Cooperatives’ Association (MECA) Not-for-profit statewide trade association based in Great Falls • 25 consumer-owned, locally-controlled electric distribution co-ops; not-for-profit • Three generation & transmission co-ops • Serves more than 400,000 Montanans across all 56 counties • Collectively, Montana co-ops own and operate 56,000+ miles of power lines • Publisher of Rural Montana with state’s largest magazine circulation of 120,000

9. Montana Council of Cooperatives Working to unite, promote and strengthen cooperative businesses across Montana The Council helps 81 member cooperatives: • Connect & Engage • Learn & Grow • Assess Their Impact • Tell Their Story Publishes biennial Economic Impact Study and supports development of new co-ops

10. Technical Assistance by Region 10 CRDCs help to promote co-ops

11. Montana LILA = Food Deserts Montana has 13 low-income Census tracts (at least 20% of households at poverty level) where at least 500 people or 1/3 of population live more than 20 miles from the nearest supermarket or large grocery. Most lie in farm- dependent areas

12. When the last grocery closes…. …rural cooperatives can continue to provide services in response to a market failure or when privately-held operations simply cannot survive. “Fresh Start” Grocery Co-op Geraldine Population 261

13. Neihart Store Cooperative • The conversion from private to co-op ownership has taken nearly two years to complete • Market survey identified $126,000 in investment potential and support from seasonal residents • Some 128 subscribers and $65K in equity raised Neihart Store Cooperative Neihart, MT Population 51

14. Crucible Worker Cooperative Custom design and fabrication studio that uses metal and wood in creative applications. The four owners each hold one share of common stock in the co-op enterprise and also are its employees. Belgrade-based business www.crucible.coop

15. Housing Co-op Soon to Launch Hamilton, MT Population 4,348 Co-op to own 51 cottages, gardens and infrastructure Riverside Crossing Adult Cottage Cooperative in the Bitterroot Valley expects to break ground in March 2018

16. Montana Cooperative Impact Project Helping the next generation understand the economic importance of local co-ops Fall 2017 - Eastern Montana pilot week Early April 2018: Flathead/Lincoln counties May 1-5: Bitterroot Valley Week of May 7: Northeast Montana counties Week of May 14: Park/Meagher/Sweet Grass Funded by a $25,000 CHS Foundation Education Grant