MADISON, Wis. (2/22/12)--Several credit unions have put the idea of cooperatives helping other cooperatives into direct action by helping finance start-up food cooperatives--reportedly one of the fastest-growing cooperative sectors in the U.S.
Hoosier Hills FCU in Bedford, Ind., started meeting in fall of 2006 with a group of citizens at the Lost River Community Co-op in south-central Indiana. The co-op was formed as a vehicle to run a couple of farmers markets--one in Orleans and one in French Lick--Doug Pittman, Hoosier Hills senior commercial lender for Orange County, told News Now.
However, the co-op wanted to take things a step further and consequently opened a retail co-op food store --Lost River Market & Deli--in Paoli on May 27, 2008.
The $361 million asset Hoosier Hills provided a loan in 2008 to the co-op to help start the business with money for its facility, equipment and inventory.
"We were the primary lenders but also participated with North Country Cooperative Development Fund in Minneapolis to make the loan," Pittman said. "The co-op also had help from Blooming Foods--a food co-op in Indiana, which provided advice. So it was a neat situation for everyone, all these co-ops, helping each other," he added.
Also, people in the community helped through a member loan program in which co-op members pledged funds, much like promissory notes, Pittman added.
Did the co-op have special needs and challenges?
"Yes, because food co-ops starting in a rural area--not a metropolitan area--are a tough nut to crack," Pittman explained. "They take up challenges that chains and large franchises don't. Co-ops don't have a high level of national support from corporations.
"They see a need in the community and decide to do something about it. They are the ones that will solve those challenges," he concluded.
On the East Coast, a second credit union is working cooperatively with a co-op. Several members of Park View FCU in Harrisonburg, Va., were part of an initial group, or task force, that tested the idea of a food co-op in the area, so the credit union automatically had a relationship with the task force from the beginning, John Beiler, Park View CEO, told News Now.
As momentum for the project picked up steam, the group filed papers to begin a co-op and opened accounts with Park View. The task force selected a location for the co-op but needed money for the "build-out" of the store and improvements to it. The task force went to Park View, but "we were up against our member business lending cap," Beiler said.
The task force then went to banks but couldn't secure satisfactory options. The group returned to Park View and the $100 million asset credit union gave Friendly City Food Co-op terms for guaranteed government loans. The co-op task force members didn't like the terms of the government loans, so they decided to raise the money themselves, Beiler explained.
"One individual said he would put up one-third of the necessary funding for the co-op if members put up the other two thirds," Beiler said. "After he issued the challenge, about 40 members put in the money in the form of loans to get it off the ground to help with the build-out of the store. Some members have five-year terms and some have 10-year terms. The co-op has Park View service those member loans on its behalf. So the credit union is not the loaner, just the servicer," he added.
The co-op opened in Harrisonburg in May. It took five years from the formation of the initial task force for the co-op to open its doors, Beiler said.
Each member of the co-op pays a $200 membership fee. Any member of Friendly City Food Co-op can be a member of Park View FCU.
The credit union put an ATM in the co-op store, which helps to cross-promote service between Friendly City and Park View. The credit union also offers loan specials to co-op members, Beiler said.
Friendly City Co-op is a grocery store that specializes in locally grown food, leaning toward organic, he explained. "They have a cooler where you can get a sandwich, salad, coffee and soft drinks and then sit indoors or outdoors, with seating for 20 people.
"I think credit unions can learn a lot from the structure of a more typical co-op because members truly own a food co-op--they have a stock certificate," Belier said. "I am a member of Friendly City Co-op and want it to succeed personally. I paid the $200 membership fee. So I have a personal stake in it. My money is a risk."
The food co-op faces a challenge similar to what credit unions confront--helping people understand what they are, Beiler said.
"Our role at the credit union is to help the public recognize what the co-op is," he added. "We have to promote its uniqueness and what the value proposition is. For example, the food co-op is open to the public, not just members."
A third credit union works with a food cooperative in New Orleans. About one year ago, ASI FCU was contacted by a real estate developer named Pres Kabacoff, who is well-known locally. He had a vision--in the aftermath of Hurricane Katrina--of a place designed for spiritual, physical and mental well-being.
Kabacoff was looking for a building for all, but especially for people of limited means, Sarah Taylor, ASI senior vice president, told News Now. The anchor tenant of the building--located in New Orleans' Ninth Ward, which was hard hit by flooding from Katrina--was going to be New Orleans Food Co-op, but the financing was falling through, Kabacoff told ASI at the time.
So, ASI FCU used $500,000 from a $3 million Healthy Food Financing Initiative (HFFI) from the Treasury's Community Development Financial Institution Fund for the New Orleans Food Co-op. "We were committed to the project no matter what, but the HFFI funding really helped out a lot," Taylor said.
On Aug. 29, the healing center opened and the food co-op and the rest of the tenants in the 60,000 square-foot three-story building--a former furniture warehouse--conducted a soft opening, with a grand opening a couple of months later in October. The co-op occupies about one-third of the space on the first floor.
In addition to the anchor of the New Orleans Food Co-op, the building contains affordable healing arts with acupuncture and massage; an athletic club; "Sweet Home New Orleans," which helps struggling musicians; an arts bazaar of local artisans; an athletic club; a restaurant with Turkish food and a juice bar; a performance theatre; a travel agency; tenants devoted to green energy; and five or six other smaller tenants.
Last fall, ASI opened a micro-branch (350 square feet) of the credit union in the building because people asked for it, Taylor said.
"The New Orleans Food Co-op is helping people with limited income purchase groceries at discounted prices or get them free by volunteering to work at the co-op," Taylor said. "The co-op also accepts state of Louisiana food stamps.
"This is the first food co-op in New Orleans, with most of the products locally grown, and a lot of them are organic," she added.