The sharing economy offers enormous potential to create jobs. Sharing leverages a wide variety of resources and lowers barriers to starting small businesses. Cities can lower the cost of starting businesses by supporting innovations like shared workspaces, shared commercial kitchens, community-financed start-ups, community-owned commercial centers, and spaces for “pop-up” businesses. Cities can also lower permitting barriers for home-based micro-enterprises.
Sharing is also at the heart of the employment model that is designed to keep wealth and jobs in the community: cooperatives. In the age of global economics, where even money spent locally can quickly slip from local communities, fostering cooperative enterprise creates local jobs that are rooted securely in the community. Just as important, cooperative jobs are likely to be good jobs that value dignity, creativity, democracy, and fair pay. These qualities are among the reasons co-ops are widely acknowledged as being more viable, more resilient, and healthier for their communities than conventional businesses. Supporting the growth of cooperatively owned enterprises may be one of the most important things that a city can do to support stable, fair paying, local job creation.
On the surface, cooperatives may look like conventional businesses, but co- operatives stand apart from traditional enterprise on two major counts:
- Accountability to Members, not to Absentee Shareholders: A cooperative’s Board of Directors is elected – on a one-member, one-vote basis – by the members of that cooperative, who are typically either the workers or customers (or both) of the business. Unlike conventional businesses that gravitate toward deci- sions that benefit absentee shareholders, cooperatives are nearly guaranteed to make decisions that serve the interests of local workers and customers.
- Profits are Shared on the Basis of Patronage, not Capital Ownership: Unlike traditional businesses, which distribute profits to shareholders on the basis of the relative size of shareholders’ capital ownership, cooperatives distribute profits to members on the basis of each member’s contribution to the cooperative’s work or business – also known as “patronage.” In a worker cooperative, patronage is measured by the value of work contributed by the member or by the number of hours worked. In a consumer cooperative, patronage is measured by the value or quantity of purchases made by the customers. In this way, wealth spreads within the community instead of leaking to shareholders outside of the community.
HOW CAN A CITY HARNESS THE SHARING ECONOMY IN ORDER TO CREATE JOBS AND DEVELOP ENTERPRISE?
1. EXPAND ALLOWABLE HOME OCCUPATIONS TO INCLUDE SHARING ECONOMY ENTERPRISE
We recommend that cities expand allowable home occupations to include “nano-enterprises” characteristic of the sharing economy, or define such “nano-enterprises” as accessory uses of residences.
The sharing economy has enabled an explosion of home-based “nano-enterprises,” which are income generating activities made possible by communities and technologies that connect people to provide for each other in new ways – allowing one person to rent household goods to another, to rent a room to a traveler, to rent a car to a neighbor, to charge for the use of a parking space, or to exchange goods and services at the neighborhood level. Unfortunately, many zoning codes are designed to separate home life from commercial life, making it illegal for many people to benefit from the sharing economy and generate income at home.
We recommend that cities begin to survey the many ways in which residents are able to supplement their incomes in the sharing economy101 and adopt policies that ensure that the zoning code either allows the activity as an accessory use of a residence, or that business licenses and zoning approval will be granted when such activities are at a scale unlikely to impact the intended quality of the neighborhood. See the Food and Housing sections of this publication for examples of ways that cities have granted citizens the ability to operate small-scale home businesses in the sharing economy.
2. REDUCE PERMITTING BARRIERS TO ENTERPRISES THAT CREATE LOCALLY CONTROLLED JOBS AND WEALTH
We recommend that cities reduce permitting barriers and fees, and prioritize conditional use permitting for shared workspaces, cooperatives, community-owned businesses, and other projects that create locally controlled jobs and local wealth.
Cities can create locally controlled jobs and local wealth retention by lowering permitting fees and granting priority business licenses and zoning approval to projects that a) demonstrate that they will create opportunities for a large number of start-up enterprises, b) are cooperatively owned, or c) will be predominantly owned by a broad range of local community members. Any business that is owned by a broad range of local community members – either through a cooperative model or through local crowdfunding and direct public offerings – guarantees that the profits of the business will spread throughout the city and re-circulate locally. Shared workspaces, kitchens, and machine shops enrich a city by giving residents low-cost access to space and equipment for prototyping new products or services, short-term projects, or ongoing day-to-day work.
San Diego, CA – Market Creek Plaza is a model for community-owned commercial spaces. On the surface, Market Creek Plaza may look like most shopping malls; yet, the primary shareholders of the mall are a local non-profit and individual members of the local community. When the mall was developed, 50,000 shares were offered to local community members at $10 per share.102 It is not clear whether the city of San Diego took into account community-ownership when granting approvals for this development; however, we recommend that cities prioritize permitting for similar community-owned and locally crowdfunded developments.
3. USE IDLE COMMERCIAL SPACES FOR COMMUNITY BENEFIT
We recommend that cities facilitate the temporary use of empty commercial spaces by offering incentives for temporary leases and by penalizing property owners and banks for allowing spaces to remain vacant.
Lowering barriers to temporary uses allows small and start-up businesses to test their products and services without assuming the large financial burden of a long-term lease.
Newcastle, Australia – A community group has helped breathe new life into this Australian city’s downtown, which had been left largely vacant after big employers left town. The group negotiates flexible arrangements between property owners with vacant spaces and community members and artists who have ideas for these spaces, but no financial resources to rent them in a formal sense. The result has fostered economic opportunity, creativity, and collaboration for the city’s businesses, artists, entrepreneurs, and property owners.103 We recommend that city governments take on similar intermediary roles in negotiating and incentivizing such leases.
Richmond, CA – In 2008, the City Council passed the Foreclosure Fine Ordinance, which fines banks $1,000 a day for vacant properties with code violations. The law, which aims to reduce the blight from foreclosed properties, also brought in about $780,000 for the city last fiscal year.104 Similarly, we recommend that cities impose fines on banks or other property owners that allow commercial spaces to sit empty. By creating a disincentive for waste, cities thereby create an incentive for property owners to share their spaces with community groups or small enterprises.
4. ASSIST COOPERATIVES THROUGH CITY ECONOMIC DEVELOPMENT DEPARTMENTS
We recommend that cities equip economic development departments with the knowledge and resources to support cooperatives and other community enterprises.
Like all new businesses, cooperatives and community enterprises need considerable technical assistance before they begin, particularly during their infancy. Unfortunately, most economic and small business development departments are largely uninformed about cooperatives and can offer little assistance.
City staff should be able to identify the appropriate type of cooperative model (worker, producer, or consumer cooperatives) for various enterprise concepts, and then be prepared to provide advice about structure and assistance in identifying and securing funding. At a minimum, staff should be prepared to connect aspiring entrepreneurs to outside organizations that provide technical assistance to new co-ops.105 In addition, economic development departments can be particularly helpful with “conversions,” the process by which retiring small business owners can pass their businesses on to employees.
Cleveland, Ohio – The Evergreen Cooperatives in Cleveland’s low-income neighborhoods are models in urban wealth building. They provide services to anchor institutions, like local hospitals and universities, and include a green industrial laundry, a solar installation firm, and the largest urban greenhouse in the US. The Mayor’s Office connected the Cleveland Foundation and other Evergreen partners to Cleveland’s Department of Economic Development for help finding innovative sources of funding. The city’s Sustainability Office helped identify energy incentives like Solar Tax Credits. The support of these departments was key to accessing the financing necessary to launch Evergreen.
Richmond, California – In 2011, the City of Richmond hired a consultant to create, support and expand worker cooperatives. Inspired by a visit to the large and successful Spanish network of Mondrago?n cooperatives (which similarly inspired the Evergreen Cooperatives), Richmond’s Mayor decided that a small-scale version of that network could create meaningful economic opportunity in her city, which suffers from high unemployment.106 The consultant, a co-founder of the worker cooperative Arizmendi Bakery Lakeshore,107 has worked with Richmond residents to form a health food co-op, an electric bicycle co-op, and a hydroponically grown organic food co-op.
Madison, Wisconsin – In June 2012, the City of Madison’s Office of Business Resources partnered with the University of Wisconsin’s Center for Cooperatives to host the Madison Cooperative Business Conference. The conference focused on business conversions to employee ownership, co-op best practices, and a census of local cooperatives. It drew economic development professionals, entrepreneurs, and members of existing cooperatives.108
5. MAKE GRANTS TO INCUBATE NEW COOPERATIVES
We recommend that cities work with existing non-profits that have the knowledge of and connection to communities where cooperatives are likely to be successful.
By partnering with private foundations or by granting public funds for cooperative workforce development, cities can capitalize on the knowledge and expertise of organizations well situated to incubate new cooperatives, particularly when they have a track record of working in economically marginalized neighborhoods.
New York, NY – For several years, the Center for Family Life (CFL), a non-profit social service organization, had been incubating new worker cooperatives in its largely immigrant Sunset Park, Brooklyn neighborhood.109 In 2012, the New York City Council awarded CFL a $147,000 grant to train two additional non-profits in other New York City neighborhoods to become co-op incubators themselves.110
6. PROVIDE FINANCIAL AND IN-KIND RESOURCES TO COOPERATIVES
We recommend that cities provide grants, loans, and in-kind support to cooperatives, and facilitate or act as intermediaries to secure other financing opportunities for cooperatives.
Cities can support the financing of cooperatives in a variety of ways, by: 1) giving grants, 2) providing loans, 3) utilizing federal funds from Community Development Block Grants and economic recovery funding to support cooperatives, 4) creating loan guaranty programs, 5) supporting the development of revolving loan funds,111 6) acting as an intermediary between cooperatives and lending institutions, and 7) offering city-owned land to cooperatives.
Cleveland, OH – The city of Cleveland was instrumental in assisting the Evergreen Cooperatives to secure financing to develop its ambitious network of worker-owned cooperatives. The Evergreen Cooperatives provide goods and services to local anchor institutions like hospitals and universities. They relied on a series of investments from private foundations to get off the ground. Cleveland’s Economic Development Department acted as an intermediary for lending institutions securing New Markets Tax Credits, and the city also dedicated its own funds through the Federal Section 108 Loan Guarantee Program.112 Cleveland also played a major role in providing and securing land that became the Green City Growers, a 3.25-acre hydroponic greenhouse and worker cooperative that is part of the Evergreen Cooperatives network.
San Francisco, CA – In 2012, the city and County of San Francisco’s Office of Economic and Workforce Development provided People Organized to Demand Environmental and Economic Rights (¡PODER!), a non-profit organization, a $76,000 grant to invest in its co-op development project in the low-income Latino neighborhoods of South Mission and Excelsior.113
Richmond, CA – After reading a press account of the city’s commitment to fostering worker cooperatives, a member of the public made an anonymous $50,000 donation to establish the Richmond Worker Cooperative Revolving Loan Fund. The city established an independent non-profit to administer the fund in collaboration with the city’s economic development department.114 The purpose of the fund is to increase support for a growing network of Richmond-based cooperatives through a regenerating pool of funding.115
7. PROCURE GOODS AND SERVICES FROM COOPERATIVES
We recommend that cities prioritize worker cooperatives whenever the city contracts with private businesses for procurement of goods and services.
Where cooperatives exist, we recommend that cities – and city institutions like schools, public hospitals, and public housing – make an effort to prioritize procurement agreements with cooperative businesses in an effort to support local jobs. Such preferences can be formalized in procurement ordinances and policies.
New York, NY – Since 1985, Cooperative Home Care Associates has provided home care services to chronically ill, disabled, and elderly New Yorkers while creating good jobs in a sector known for its low wages, instability, and lack of career mobility.116 The cooperative employs nearly 2,000 workers, about half of whom are worker-owners, and the cooperative has contracts to provide services to several New York City agencies. Workers earn wages about 10 to 20 percent higher than the market rate, have 401(k) plans, and are unionized.117
8. INTEGRATE COOPERATIVE EDUCATION INTO PUBLIC EDUCATION PROGRAMS
We recommend that cities integrate topics related to cooperative enterprise into local high schools, vocational schools, and other public education programs.
The advantages of successful cooperatives are significant for workers and communities, but cooperative principles and structures are not always intuitive to U.S. workers accustomed to hierarchical business structures. Thus, schools can play a valuable role in supporting cooperatives.
NY, New York – The Bronx Compass High School is partnering with Green Worker Cooperatives to bring a version of the organization’s Co-op Academy to high school students. Students in the cooperative development class develop and present ideas for cooperative businesses to the school community, which can choose to incubate the cooperative.118
100 In Quebec, the survival rate for new cooperatives after five years is 62 percent, as compared with 35 percent for all businesses. Even after ten years, cooperatives show more resilience, with a survival rate of 44 percent compared with 20 for all businesses. “Survival Rate of Co-Operatives in Que?bec,” Ministry of Economic Development, Innovation, and Export in Que?bec (2008), ccednet-rcdec.ca/files/ccednet/pdfs/2008-Quebec_Co-op_Survival_Re…
. There is also evidence that co-ops – food co-ops in particular – contribute to a stronger local economy. They do so by supporting other local businesses (“for every dollar spent at a food co-op, $0.38 is reinvested in the local economy compared to $0.24 at conventional grocers”) and providing higher wages (“[c]o-op employees earn an average of nearly $1.00 more per hour than conventional grocery workers when bonuses and profit sharing are taken into account.”) “Healthy Foods, Healthy Communities: Measuring the Social and Economic Impact of Food Co-Ops,” National Cooperative Grocers Association (2012),www.ncga.coop/
101 See the Economist’s March 9, 2013 cover story “The Rise of the Sharing Economy,” summarizing ways in which technology has created an enormous market for peer-to-peer rentals.
105 Organizations engaged in cooperative development in the United States include the California Center for Cooperative Development, Cooperative Development Institute, Northwest Cooperative Development Center, Cooperation Texas, the Democracy at Work Network (DAWN), Green Worker Co- operatives’ Co-op Academy, Women’s Action to Gain Economies Equality (WAGES), the Green Collar Communities Clinic (GC3), TeamWorks, Cooperative Homecare Associates, the Center for Family Life, and the Cooperative Development Foundation.
106 Mondrago?n is a system of more than 260 cooperative enterprises located in Basque country, Spain, employing approximately 85,000 people and generating annual revenue of nearly $20 billion. Zuckerman, Dave, “USW and Mongragon Unveil Union Co-op,” Community Wealth (13 Apr. 2012), http:// www.community-wealth.org/content/usw-and-mondragon-unveil-union-co-op;
For a critical analy- sis of Mondrago?n’s strengths and limitations in the contemporary global economy, see Marszalek, Bernard, “The Meaning of Mondragon,” Counterpunch (13-15 Jul. 2012), www.counterpunch
107 The Arizmendi Association of Cooperatives is itself a cooperative made up of seven member businesses: six cooperative bakeries and a development and support collective. Members share a common mission; share ongoing accounting; legal, educational and other support services; and support the development of new member cooperatives through the Association: www.arizmendi.coop/
110 The Urban Justice Center, which provides legal support to cooperatives, also shared in this grant.
111 “CDFA Spotlight: Revolving Loan Funds (RLFs),”Council of Development Financing Agencies,
113 C. Sciammas, Personal Interview, 7 Mar. 2013. See also: www.podersf.org
117 For an informative history of the Cooperative Home Care Associates, see “A Brief History of Cooperative Home Care Associates,” American Worker Cooperative (8 March 2011), www.american
118 “First Ever Co-op Academy for Kids,” Green Worker Cooperatives (4 March 2012), www