David Riley

@rilzd

In three neighborhoods on the east side of Rochester, nearly half of the residents subsist on food stamps, and 40 percent of households are scraping by with incomes below the poverty line.

Good luck finding a job in these parts of the city, where fewer than one in 10 residents is employed in the neighborhood where he or she lives. More than half of residents who do have jobs are forced to commute to the suburbs.

Creating sustainable, living-wage jobs in parts of the city like these is a top concern for local leaders as they work to unravel deeply concentrated pockets of poverty that threaten to undermine the region's economy and quality of life as a whole.

► MORE: Co-op tips from Cleveland to Rochester

Rochester's leaders are looking well beyond New York state's borders for ideas. And led by Mayor Lovely Warren, they've seized upon a model about 250 miles to the west, in Cleveland, Ohio.

There, city leaders, philanthropists and major employers have pooled their money and efforts to launch worker cooperatives in some of Cleveland's poorest neighborhoods. At these businesses, employees can become partial owners — and when the company profits, these workers share in the rewards.

Mayor: Worker co-ops can curb poverty

Rochester's leaders are poised to take major steps this year toward launching a local co-op network — a task estimated to cost $1.3 million over the next three years — starting in the neighborhoods of Beechwood, EMMA and Marketview Heights. The jobs plan is one of the most concrete ideas to emerge since the Rochester-Monroe Anti-Poverty Initiative launched over a year ago, though many details are yet to be decided.

With this in mind, the Democrat and Chronicle dispatched a team to Cleveland last month for a close-up examination of what co-ops have actually accomplished there, how they operate and what lessons they can offer Rochester — pro or con.

During our visit, we met co-op workers who said that being partial business owners transformed their lives and helped them to become homeowners or even better citizens. But we also visited co-ops that struggled significantly in their early years, and we asked their leaders whether the tens of millions of public and private dollars invested in their business model is worth the roughly 110 jobs they sustain today.

The people in charge of Cleveland's Evergreen Cooperatives said their co-ops are now stable. They said that when their approach is brought to a larger scale, it can help to strengthen a city's economy for low- and moderate-income workers.

However, they also acknowledged roadblocks and challenges they have encountered, and they offered tips that Rochester's leaders would do well to consider.

“First and foremost, these businesses have to be looked at as what they are, which are small, for-profit enterprises,” said John McMicken, CEO of Evergreen Cooperatives. “They need that business attention. They need that subject matter expertise.”

Here in Rochester, community activists who have supported the expansion of worker co-ops said they have significant concerns about how the city is pursuing the idea. They worry that the city is not doing enough to educate residents about how co-ops work — that the ultimate goal is not individual profit, but working for a common good. They said the city also could do more to empower citizens to decide what types of businesses come to their neighborhoods and how they operate.

“A co-op is a democratically run organization,” said Drew Langdon, a cooperative organizer and a member of the Green Party of Monroe County. “You have to be involving people.”

Different cities, similar problems

Cleveland didn’t invent worker co-ops — they’ve been around the U.S. for generations. There are several already in Rochester, including Abundance Food Co-op and Small World Bakery.

Evergreen was inspired by a co-op movement in Mondragón, Spain, which started small in 1956. But by 2014, it had grown into a corporation with more than 74,000 employees.

Abundance food market has roots dating back to 1968

Unlike many other co-op organizations, Evergreen started as a collaboration among philanthropists, public officials and big institutions such as hospitals and universities. Rochester's leaders see promise in that model here, too, after initial interest from local foundations and economic powerhouses such as the University of Rochester and Rochester Regional Health Systems.

In Cleveland, the co-op concept emerged as city leaders confronted a problem: Little of the wealth flowing through the gleaming hospitals, educational facilities and art museums in Cleveland’s Greater University Circle area was trickling down to the distressed neighborhoods nearby. The combined median household income in six adjacent residential areas was less than $18,500.

Sound familiar? Incomes are just as low in parts of Rochester, and there are blocks in the city where well more than half of households live below the poverty line, according to U.S. Census data.

Cleveland's leaders worried that this kind of poverty and blight might drive away potential students and professionals. The Cleveland Foundation — think of the Rochester Area Community Foundation, but more than twice as old, with an endowment nine times as large — convened talks with city government and major hospital systems about cleaning up these neglected areas.

They soon arrived at a larger goal, said Cleveland Foundation president and CEO Ronn Richard.

"We realized, if we can all work together, what else can we do?" he said. "What can we do to actually revitalize the neighborhoods?"

That's a key question for Rochester and Monroe County leaders, too. In Cleveland, co-ops were one answer among many — an attempt not just to create jobs, but to build wealth in disenfranchised areas.

The Cleveland model

Evergreen launched in 2008. Here are the basics of its model, much of which Rochester plans to emulate:

Rather than using traditional business incentives to try to lure companies to distressed areas, build new neighborhood-based enterprises.

Hire mainly from the neighborhood, including ex-convicts who might otherwise struggle to find work.

Pay more than minimum wage and provide health care.

Allow employees who stick around, generally for at least a year, to earn shares of equity.

Perhaps most importantly, plan businesses that can tap the purchasing power of major institutions like hospitals and universities.

And when the co-ops profit? Share the proceeds.

"We want it to be a long-term position,” McMicken said.

Tracy Nichols, economic development director for the city of Cleveland, had watched too many companies pack up and leave city neighborhoods as soon as public incentives dried up. She liked the idea that co-op workers would get a say in where their companies did business, she said.

“I said, 'This sounds like a great idea to make sure that the jobs really stay in our low-income communities,' ” Nichols said during an interview at Cleveland City Hall.

Bankrolled through a combination of foundation, private and public money, the first co-op launched in 2009 — Evergreen Cooperative Laundry. It was soon followed by Evergreen Energy Solutions, an energy efficiency business that installs solar panels and retrofits lights with LEDs.

The third and most visible co-op, a massive 3.25-acre greenhouse called Green City Growers, opened in 2013. Laurie Cook, who goes by "Spike," oversees employees there who transplant lettuce, basil and other seedlings into a sea of hydroponic beds that could fill 3½ football fields.

Cook, who has a prison record, said she found an opportunity for a new life at the greenhouse.

“I didn’t think there was a chance for me, and this place gave me a chance," she said.

Rochester takes notice

A busload of city leaders and other movers and shakers from Rochester visited Evergreen Cooperatives last year.

Their interest is driven in part by the stories of people such as Christopher Brown, a supervisor at the laundry business, where employees wash, dry, iron, fold and transport about 6.5 million pounds of linens per year.

Brown said he used to be a criminal — a drug dealer who helped feed the decay of the neighborhood where he grew up. Now he's a homeowner, a taxpayer and part-owner of the laundry there.

“This is like gold, man,” he said last month, speaking over the constant hum of industrial washers and dryers. “This gave me a shot at home ownership and a shot at just being a good guy, you know? Sometimes I look back and it was bleak, man. It was dark. This was like a ray of sunshine I needed to push me into being a better person.”

In Rochester, Green Party members have been talking about co-ops for some time, and Warren began exploring the concept during her first year in office in 2014.

Then last year, the city paid a consultant, The Democracy Collaborative, about $100,000 to study if the idea could work here. The organization’s president, Ted Howard, was one of the main architects of Cleveland’s co-op initiative.

The group's initial report said there's a lot working in favor of co-ops here: Support from both citizens and public officials, and initial signs of support from local hospitals and universities, which spend an estimated $1.7 billion a year on goods and services that co-ops might be able to provide locally.

United Way group sets principles for fighting poverty

Also helpful: Intense interest and activity around fighting poverty, the report said.

City Council recently agreed to pay The Democracy Collaborative another $150,000 this year to start fleshing out more concrete plans.

“We’re moving full-steam ahead,” Warren said recently.

Rochester co-ops will start small

While the city wants to avoid unnecessary competition with existing businesses, Warren said that no decisions have been made yet about what kinds of co-ops might come here.

“I don’t want to dictate which business starts when,” Warren said. “It’s market-driven, and it’s what our anchor institutions will support.”

That said, the mayor wants the first co-op up and running by 2017.

Anti-poverty initiative targets three neighborhoods

The plan is part of a larger experiment by Warren’s administration to try to reduce the poverty rate in a target area of the city in a single year. The city is eyeing Beechwood, EMMA and Marketview Heights, where the anti-poverty initiative also plans to launch projects this year.

There are neighborhoods with much more severe poverty, and at least some residents have questioned why the city isn't focusing on an area that's far worse off — particularly after it already pumped millions of dollars into these neighborhoods through an anti-blight program called the Focused Investment Strategy.

Warren's office said the city chose these three because it views them as effectively at a tipping point — distressed, but with factors working in their favor, too — where a concentrated effort, building on past investments, could make a difference.

The target area includes blocks marked by boarded-up homes and vacant lots, but also assets such as the Rochester Public Market, the Ryan Community Center and active neighborhood groups such as the Beechwood Neighborhood Coalition.

The city plans to start small with the co-op initiative and other anti-poverty programs in this area, learn from successes and failures, and then expand to other areas.

Work on co-ops this year will include developing business plans, trying to raise capital from a mix of public and private sources and forming a nonprofit holding company that eventually will become a parent organization to oversee and support the co-ops.

But is all this worth it?

Some Rochester leaders returned from last year's bus trip to Cleveland wondering if the co-op network had created enough jobs, considering the investment.

That's partly why city officials are looking at co-ops that will be cheaper to launch and, they hope, could become self-sufficient soon after start-up.

“We want sustainable, profitable businesses that stand alone without additional city investment," said Henry Fitts, director of the city's Office of Innovation and Strategic Initiatives, which is spearheading Warren's co-op initiative.

In Cleveland, the laundry and energy business are now profitable, and the greenhouse should break even this year, McMicken said. But he also acknowledged that there may be easier ways for Rochester to start creating co-op jobs than building another $16 million greenhouse.

Few know about anti-poverty initiative, poll says

"The sales trend has been very positive now for the last six months,” McMicken said. “But if someone said, ‘What do you think, should we start a hydroponic greenhouse?’ I might say maybe hold off, and prove your model with something else first before then venturing off into this direction.”

Jessica Bonnano, director of strategy and operations at The Democracy Collaborative, noted that much of the philanthropic money invested in Evergreen will be repaid into a revolving loan fund. That same pool of money will go on to create more jobs over the next 10 or 20 years, she said.

And Nichols, Cleveland’s finance director, said there are less tangible savings to the community when a family is lifted out of the social service system and can pay taxes instead.

McMicken stressed that Evergreen's work isn't done. While it's been focused on stabilizing its existing co-ops, it ultimately hopes to expand, with more co-ops in each neighborhood, he said.

“Then I think you could comfortably sit back and say that the investment was worth the amount of lives that it impacted and changed,” McMicken said.

Richard, from the Cleveland Foundation, said he hopes to see 5,000 co-op workers by the time he retires 10 years from now.

Finding the right balance

Advocates who like the co-op model still worry that Rochester officials are missing the bigger picture.

The Democracy Collaborative held several community meetings and interviewed residents and interested parties during its feasibility study here. But Bonnie Cannan, co-chairwoman of the Monroe County Green Party, said the city still is essentially hoping to transform neighborhoods by parachuting co-ops into them without the longer, more difficult work of educating residents about them and letting them guide the decisions.

Alex White, who spoke about co-ops as a Green Party candidate for mayor in 2013, is also worried about the city's business approach. He said the city may be too focused on creating a few large co-ops instead of many smaller ones that might become sustainable faster and help more people.

Hoping that a few co-ops work out, he said, might be setting up the initiative to fail.

Fitts said Rochester’s program will be based heavily on market data and careful research. And the community isn't done having its say, he said.

“The end users, the end employees of this strategy, need to be involved in the planning process and to have real decision-making power,” Fitts said.

DRILEY@Gannett.com

Key findings

City leaders want to set up worker cooperatives (businesses where employees can become part-owners and share the profits) in three neighborhoods: Beechwood, EMMA and Marketview Heights.

Rochester’s plans are based partly on Evergreen Cooperatives, a co-op network in Cleveland. Launched in 2008, it employs about 110 people at a laundry, a greenhouse and an energy efficiency business, all in high-poverty neighborhoods.

A Democrat and Chronicle team traveled to Cleveland and interviewed Evergreen employees who said the co-ops allowed them to become homeowners and build wealth. But some of the businesses have also faced challenges, struggling to become profitable.

Early estimates put costs at $1.3 million over the next three years to start a local co-op network; the city would look to help businesses with start-up costs only. The city will look for state and philanthropic sources to help fund the initiative.

Community activists have concerns about the city's approach, including whether it is doing enough to involve citizens.

What types of co-ops might work in Rochester?

While more research is needed, a preliminary report from The Democracy Collaborative, a nonprofit hired by the city, suggests three main ideas for local co-ops:

A local food processing facility that might supply hospitals, universities and small colleges and look to partner with an organization like Foodlink. It's not clear how many jobs this might produce.

A van pool or shuttle service that would help city residents get to jobs in the suburbs. This business might look to partner with Regional Transit Service, trade unions or large employers. The consultant said this service could employ three to five drivers initially and add routes as it grows.

A light construction company focused on energy efficiency projects and “green” construction projects, such as LED retrofits and weatherization. A similar co-op in Cleveland created about 40 jobs over five years.

The report listed other ideas that would require more exploration, including cooperatives for independent child care providers or community health workers.

What would worker co-ops cost?

An early estimate pegs start-up costs for three possible co-ops in Rochester at $1.3 million over three years. The city also has paid a consultant, The Democracy Collaborative, about $100,000 and expects to pay about $150,000 more to help develop co-op plans.

For a cost comparison, we looked to Cleveland's co-ops, but a detailed breakdown of Evergreen Cooperative's finances was not available. Still, it's clear that both private and public money were critical, and that the Cleveland co-ops were more costly to launch:

Locally, the city of Rochester expects to contribute to start-up costs for co-ops, but it also hopes to secure state funding through the Upstate Revitalization Initiative, as well as philanthropic money. The Rochester Area Community Foundation has expressed interest in the project, but it hasn't made any firm commitments.

About the journalists

David Riley is the Democrat and Chronicle's civic engagement reporter, focusing on local government, politics and citizen action. His beat includes reporting on efforts to combat poverty in Rochester and Monroe County. A Hudson Valley native, Riley spent nearly a decade reporting on everything from school board races to state government in the Boston area. He joined the Democrat and Chronicle in late 2013.

Carlos Ortiz arrived in Rochester 24 years ago from Madrid, Spain, where he assisted fashion and commercial photographers and freelanced for advertising agencies. He also spent five years at Eastman Kodak photographing products, models and celebrities. Ortiz joined the Democrat and Chronicle in November 1999 and became a full-time staff photographer in March 2000.