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Referral Response: Supporting Worker Cooperatives INFORMATION CALENDAR May 31, 2022
procurement and contracting, and providing additional loan funds and technical assistance resources for businesses to convert to worker cooperatives, is the most effective strategy to support cooperative conversion in Berkeley at this time.
In January of 2019, OED retained Project Equity, a nonprofit organization that is dedicated to advancing worker cooperatives, to provide technical aid to businesses looking to transition to a worker-ownership model. Project Equity has taken a multi- phased approach to supporting Berkeley businesses interested in the worker cooperative ownership model. In researching the desire for cooperative conversion in Berkeley, Project Equity identified that 1,200 of Berkeley’s businesses may need succession planning over the next 15 years. Currently, 23 businesses in Berkeley have explored succession planning in consultation with Project Equity. Of those 23 businesses, 4 firms (17%) have or are currently transitioning to worker ownership. A summary of Project Equity’s work to date is included as Attachment 1.
CURRENT SITUATION AND ITS EFFECTS
This report responds to referral # PRJ-001-3072 that originally appeared on the agenda of the January 12, 2016 Council meeting (continued to February 9, 2016) and was sponsored by then Councilmember (now Mayor) Arreguin. The referral, Supporting Worker Cooperatives and Referral to City Manager to Develop a Worker Cooperative Ordinance, adopted a Resolution to support worker cooperatives, and referred to the City Manager to develop a Worker Cooperative Ordinance, that was to include:
1. Revising the City’s existing Buy Local contracting preference3 and adding a worker cooperative preference; 2. Revising the business license permit application to include cooperatives; 3. Incentivizing existing businesses to convert to cooperatives; 4. Creating business tax and land use incentives, and 5. Developing educational materials.
Progress to date:
1. Revising the existing Buy Local contracting preference and adding a worker cooperative preference
To better support worker cooperatives with a lack of access to capital, a Worker Cooperative Preference in Procurement and Contracting was implemented by the City’s Finance Department and Berkeley’s local vendor preference program has been revised and expanded. Starting January 1, 2022, the City provides a 5% bidding preference for goods up to $100,000, for non-professional services up to $250,000 and up to five additional points for scoring professional services Requests for Qualifications (RFQ) responses. This preference is available to all Berkeley vendors, including worker cooperatives that submit bids to provide goods, equipment, and non-professional services to the City.
3 City of Berkeley, Local Vendor Preferences, 2022.
Referral Response: Supporting Worker Cooperatives INFORMATION CALENDAR May 31, 2022
2. Revising the business permit application to include cooperatives Staff has responded to this by revising the business license permit application to allow any new business applicant to register as a worker cooperative.4
3. Incentivizing existing businesses to convert to cooperatives Two factors have been shown to increase successful conversion to cooperatives in Berkeley - increased technical assistance and improved access to capital.
OED currently provides technical assistance and support to all types of businesses and organizations, including worker owned cooperatives. As a direct result of this referral, first, OED worked to increase staff capacity and knowledge of issues that specifically impact worker owned cooperatives in order to provide helpful, targeted technical assistance to those curious about cooperative conversion. Second, Project Equity, a non-profit cooperative conversion consultant retained by OED, conducted a business retention data study in the city that provided a better understanding of which Berkeley businesses are at risk of closure and may be candidates for conversion to worker ownership. The team then performed broad outreach and direct engagement to educate business owners about the worker cooperative model. Through OED’s partnership and contract with Project Equity, the team was able to subsidize the cost of working with (up to) four Berkeley businesses to transition to worker ownership, including the development of a feasibility study and transition plan for each client. To date, this work has produced impressive results; for example, The Local Butcher Shop participated in the Project Equity program and publicly announced their transition to a worker owned cooperative in October of 2021.5 This allowed the business to continue and offered the chance for loyal employees to become worker-owners.
Technical Assistance
Project Equity also assists with "Individual Action Planning'' for business owners, which may include the development of a business plan, securing financing, hiring employees, understanding business taxes, organizational development, marketing, and customer analysis. Project Equity offered their suite of services to prospective clients, through door-to-door outreach (prior to COVID-19), mailings, and email blasts, social media ads, and targeted ads in Berkeleyside, online local media. In the first half of 2021, the Project Equity-led Berkeleyside display campaign had 488,944 visual impressions and 644 ‘click-throughs’ indicating elevated interest among readers.
Access to Capital
OED administers the federally-funded Revolving Loan Fund (RLF) and worked with the city’s Loan Administration Board to revise the RLF’s lending criteria to make the fund 4 City of Berkeley, New Business License Application, revised January 1, 2022. 5 Berkeleyside, The Local Butcher founders are turning over the successful shop to their workers, October 21, 2021.
Referral Response: Supporting Worker Cooperatives INFORMATION CALENDAR May 31, 2022
more accessible to worker cooperatives. The RLF now better supports worker cooperatives by; (1) enabling the use of loan capital for conversion to worker ownership, and (2) allowing a group of principals to produce 10% of the loan collateral equity for an existing cooperative (or a business converting to a cooperative) or 20% for a startup cooperative. The change to the RLF Administrative Plan included the creation or retention of worker-owned jobs as selection criteria and added a new goal of the RLF to allocate a minimum of 10% of the loan portfolio to worker cooperatives or businesses converting to worker ownership. These changes help support worker cooperatives’ access to RLF funding by removing the requirement a personal guarantee for the loan application process, thereby lifting a large barrier to capital for worker cooperatives.
4. Creating a business tax and land use incentives
Based on feedback from clients, stakeholders and new businesses, one of the most effective approaches to incentivize support for worker owned cooperatives involves assisting businesses in navigating the permitting process. For existing businesses interested in conversion to worker owned cooperatives, ongoing technical support from organizations like Project Equity and their technical partner, the Sustainable Economies Law Center, will continue to be effective. At this time, staff doesn’t recommend modifications to the business license tax structure or land use incentives as a strategy to support worker owned cooperatives. Instead, staff recommends the continuation of robust technical assistance programs both in house (led by OED’s business services team) and with outside consultants, including Project Equity and their partners, to best help cooperative businesses navigate the permitting process successfully.
5. Develop educational materials
In addition to the targeted outreach and engagement, Project Equity prepared a communications plan, outreach and educational materials for economic development professionals and regulators, and led trainings for City staff on the worker cooperative model. The Sustainable Economies Law Center (SELC), subcontracted through Project Equity, provided legal assistance and lease negotiation expertise for existing cooperative business owners. SELC created videos and printed educational materials to support businesses with legal assistance for cooperative conversion, through the Resilient Communities Legal Café program.6
Throughout the pandemic, the team held regular ‘Legal Cafes’ and online webinars for Berkeley business owners interested in transitioning to worker owned cooperatives.
Legal Cafés offer direct legal support to individuals and groups who are working to create new solutions or succession plans and have legal questions about worker cooperatives. Particular attention was paid to succession planning for business owners who are wishing to retire and may want to sell their business to their employees. 6 Sustainable Economies Law Center (SELC), Legal Café Program Schedule, 2022.
Referral Response: Supporting Worker Cooperatives INFORMATION CALENDAR May 31, 2022
BACKGROUND
Worker cooperatives are demonstrated to be valuable assets for local economies and communities. Owned and run by employees, these businesses typically provide higher wages, benefits, professional development, job security, and upward mobility for low to moderate income people.7 When businesses are owned by workers, they are also demonstrated to increase local reinvestment and have demonstrable positive impact on business retention.8 Based on the report completed by Project Equity and presented at the LUHED Policy Committee’s Small Business Listening Session of April 21, 2022 continued technical assistance programs are recommended to better assist in supporting worker cooperatives in Berkeley (Attachment 1). 9
ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACTS
There are no identified environmental costs or opportunities associated with the subject of this report.
POSSIBLE FUTURE ACTION
Staff recommends that the most effective tool to incentivizing cooperative conversions is to continue to provide high quality technical assistance directly to Berkeley’s business owners. To the end, staff will work to use existing resources to augment the technical support and educational programing provided by Project Equity and their partners. In the near future, staff is planning to leverage remaining federal American Rescue Plan Act (ARPA) funding designated to support pandemic impacted small businesses with an augmented contract with Project Equity for technical assistance. Possible additional future actions may also include developing a more tailored local worker cooperative preference in the City’s standard procurement and contracting practices.
FISCAL IMPACTS OF POSSIBLE FUTURE ACTION
Staff will continue to implement the programs described above with existing resources.
CONTACT PERSON
Kieron Slaughter, Office of Economic Development, (510) 981-2490.
Attachment:
1. Land Use Housing and Economic Development (LUHED) Policy Committee, Small Business Listening Session Presentation, Business Succession Planning: Providing Technical Assistance for Worker Cooperative Conversions, April 21, 2022. 7 Fast Company, More U.S. businesses are becoming worker co-ops: Here’s why, May 21, 2018. 8 Democracy at Work, Creating Better Jobs and a Fairer Economy with Worker Cooperatives, 2014. 9 City of Berkeley, Land Use Housing and Economic Development Policy Committee Agenda & Minutes, Item 3, April 21, 2022.
© 2022 PROJECT EQUITY
Berkeley as a national model
for business retention
through employee ownership
Project Equity presentation to City of Berkeley
Land Use, Housing & Economic Development Committee
April 21, 2022
© 2022 PROJECT EQUITY 2
Agenda
Employee ownership and its benefits
Overview of Project Equity’s engagement with City
How our process works & accomplishments
Recommendations & discussion of how to continue the
momentum
© 2022 PROJECT EQUITY 3
What is employee
ownership? A proven business
structure in which a
broad base of
employees owns the
business where they
work
© 2022 PROJECT EQUITY 4
Benefits of employee ownership
Benefits to
businesses
● Higher productivity
and growth
● Lower employee
turnover
● Improved longevity,
lasting legacy
Benefits to
workers
● Better pay and
benefits
● Assets and business
ownership
● Voice in key
decisions
Benefits to
communities
● Increased local
spending
● Heightened civic
engagement
● Community wealth
building
© 2022 PROJECT EQUITY 5
2018-19
● One-year contract
● Small business support package
● Data analysis & awareness raising
● National press highlighting
Berkeley’s investment
Overview (more detail on slides to come)
2020-22
● Two-year contract
● Included subcontract to the
Sustainable Economies Law Center
for educational events and
materials and legal work
● Continued demand for employee
ownership technical assistance
● 5 Berkeley businesses completed
or on track to transition to
employee ownership
© 2022 PROJECT EQUITY 6
Succession
planning is
needed to retain
Berkeley’s
independently-
owned businesses
© 2022 PROJECT EQUITY 7
One-on-one consultations and technical
assistance to Berkeley businesses on
employee ownership
Accomplishments
© 2022 PROJECT EQUITY 8
Accommodation and food services
● Restaurant diner
● Butcher shop
● Artisanal chocolate retail business
● Cafe and classical record shop
Other services
● Window cleaning and gutter-washing business
● Plumbing and heating business
● Inspection and material testing service business
Manufacturing
● Pasta making business
● Ghee-making business
● Organic nut butter manufacturing business*
● Laboratory glassware manufacturing business
● Modular office privacy booth manufacturing
business
Accomplishments
Arts, entertainment and recreation
● Gallery and framing business
● Yoga, dance, and movement service business
Professional services
● Architect and contracting business
● Law firm
● Social and environmentally conscious business consulting ● Landscape architecture firm
● Technology services company
● Translation, interpretation, and transcription service business Retail and wholesale trade
● Windchime retail business
● Garden center and nursery
● Guitar retail and repair business
● Men’s clothing and shoe retailer
● Urban farm and biodiesel station
One-on-one consultations and technical assistance to Berkeley businesses on employee ownership
© 2022 PROJECT EQUITY 9
“When it came time for us to think
about succession, the thought of
finding someone to buy us out—given
our distinct manufacturing niche—
seemed improbable.”
Adams & Chittenden
Scientific Glass
Adams & Chittenden Scientific Glass manufactures
laboratory glassware and glass tools for scientific and industrial uses. The business began in Berkeley, CA in 1993.
© 2022 PROJECT EQUITY 10
“Selling to the employees and
sustaining the legacy—without having
to change our employee structure,
change any farmers or ranchers, and
continue to keep our community
serviced with well-sourced meat—
was a no-brainer.”
- Monica Rocchino, former owner
The Local Butcher Shop
The Local Butcher opened in Berkeley, CA in 2011 and provides seasonal, locally-sourced, sustainably-raised, fresh meat from trained chefs and butchers.
© 2022 PROJECT EQUITY
Project Equity’s Transition Process
STEP 3
TRANSITION
How will the sale be
structured, and the
employee-owned
business function?
STEP 2
FEASIBILITY
Is employee
ownership a solution
for you and your
business?
CLOSING
THE SALE
Are all the
i’s dotted
and the t’s
crossed?
STEP 4
THRIVE
How do the employee-
owned business and its
owners flourish?
STEP 1
EXPLORATION
Are you curious to
learn how employee
ownership can fit
your needs?
11 3-4 months
8 Berkeley
businesses
9-15 months
5 Berkeley
businesses
2 years
5 Berkeley
businesses
Free conslutations
Nearly 30 businesses
across many sectors
© 2022 PROJECT EQUITY 12
Accomplishments
Employee ownership transitions
Re-opened as
Oceanview Diner
Announcing soon
Local garden center in
North Berkeley
Completing soon
© 2022 PROJECT EQUITY 13
Accomplishments
● Employee ownership 101 for Berkeley small
business owners | January 2022
● Employee ownership 101 for Berkeley small
business owners | December 2021
● Employee Ownership Strategy: Unlocking the
benefits for you and your employees |
February 2021
● Berkeley Business Retention Information
Session | September 2019
● Berkeley Business Success Forum | June 2019
Webinars & educational events
© 2022 PROJECT EQUITY 14
Accomplishments
Webinars & educational events
● Online legal cafes
○ February 2022
○ November 2021
○ February 2021
○ May 2020
● Webinars
○ Subchapter T & how money Flows through a cooperative - March 2021 ○ Raising Cooperative Capital - February 2021
○ Teach-in: California Entity Formation Options - Jan 2021 ○ Coop Entity Formation for Entrepreneurs - April 2020
● Videos
○ Subchapter T & How Money Flows Through a Cooperative
○ Introduction to Cooperative Governance and Management ● Legal representation to worker cooperative clients
© 2022 PROJECT EQUITY 15
Accomplishments
Berkeley local & national press as model for innovation
© 2022 PROJECT EQUITY
16 We want your feedback on how we can help ensure this work continues. Here are our recommendations:
✓ Continued engagement with Project Equity for
education and technical assistance (2 years, $50,000
total)
✓ Project Equity continues as on-call advisor to
businesses in Berkeley that want to transition
✓ We also develop and help implement strategies to
institutionalize / embed employee ownership within City services (let’s hear some ideas on this –next slide!)
How do we build on this momentum?
© 2022 PROJECT EQUITY
17 ● Measure business retention risk and business retention on an ongoing basis?
● Enable the OED team to find out within 3 clicks of a mouse if a specific business is 20+ years old?
● Ensure that all business-facing City employees know how and when to bring up business succession and employee
ownership and who to refer them to speak with?
● Support Berkeley businesses on an ongoing basis to
explore, assess, and execute an employee ownership
succession?
DISCUSSION
How might we …..
© 2022 PROJECT EQUITY
Questions & discussion
© 2020 Multiplier, on behalf of our program, Project Equity
Thank you!
Alison Lingane
Co-founder
[email protected]
510-684-6665
project-equity.org
© 2022 MULTIPLIER, ON BEHALF OF OUR PROGRAM, PROJECT EQUITY
Office of the City Manager
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099 E-Mail: [email protected] Website: http://www.CityofBerkeley.info/Manager
INFORMATION CALENDAR
MAY 31, 2022
To: Honorable Mayor and Members of the City Council
From: Dee Williams-Ridley, City Manager
Submitted by: Alene Pearson, Acting Director, Planning and Development Department Subject: On-Call Energy Efficiency Services Contracts through On-Bill Financing
INTRODUCTION
The City is entering into contracts with two energy service providers for on-call services to improve energy efficiency, advance electrification and reduce emissions at municipal facilities, using the Pacific Gas and Electric (PG&E) On-bill Financing (OBF) program.
All expenses under these contracts are paid upfront by PG&E, to be repaid by the City through installments on the monthly municipal utility bills to PG&E.
CURRENT SITUATION AND ITS EFFECTS
In order to assess energy efficiency and electrification upgrades at multiple municipal facilities, staff issued a Request for Proposals and selected EverWatt Lighting and Enovity, Inc., two Trade-Pro qualified energy service providers, with previous experience with OBF at other public agencies. Contracting with these energy efficiency service providers for on-call services will accelerate the number of facilities that can be assessed for municipal energy upgrades financed through the OBF program.
Through the On-Bill Financing Program, PG&E will finance all labor and equipment with no-interest loans ranging between $5,000 and $250,000 per municipal project, to be repaid on the City’s PG&E bills through energy cost savings. Eligible projects must demonstrate modeled savings with a payback of ten years or less and will not require any upfront cost to the City. PG&E verifies the energy savings before authorizing the loan and the monthly loan amount is equal to the projected monthly energy cost savings.
Service providers will evaluate efficiency and electrification opportunities at municipal facilities and determine what measures would result in sufficient savings to qualify for financing. Upgrades to lighting and controls, replacement of gas heating/cooling (HVAC) and water heating systems with high-efficiency electric heat pumps, improved insulation, energy management systems and other energy saving measures will be considered. Once the scope of work and loan amount are determined by the energy service providers, the City and PG&E will enter into a loan agreement for each facility.
41
On-Call Energy Services for Energy Efficiency On-Bill Financing INFORMATION CALENDAR May 31, 2022
The On-Call Energy Efficiency Services contracts for On-Bill Financing projects help advance the City’s Strategic Plan Priority Project to develop a Municipal Building Energy Policy. This supports the Strategic Plan goals to:
help create state-of-the-art, well-maintained infrastructure, amenities, and facilities;
provide an efficient and financially-health City government by saving money on energy costs;
create a resilient, safe, connected, and prepared City by reducing load on the electric grid, and reducing municipal fossil fuel use and greenhouse gas emissions; and,
be a global leader in addressing climate change, and protecting the environment.
BACKGROUND
The City of Berkeley has used PG&E’s On-Bill Financing program to finance efficiency projects at the Public Safety Building (approximately $250,000) and the Spring Animal Shelter (approximately $20,000). These projects resulted in upgrades to state-of-the art energy efficient lighting and lighting controls. PG&E paid the contractor directly for all materials and labor. Once the loans are repaid, the energy bills will decrease accordingly.
This program is supported by public purpose funds paid for by all gas and electricity customers, required by the California Public Utilities Commission to advance energy efficiency.
ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACTS
Every approved project will guarantee a reduction in energy use and related emissions.
When feasible, equipment that uses natural gas will be replaced with all-electric equipment. Since the City purchases 100% renewable electricity, building electrification supports the elimination of fossil fuels from existing municipal buildings.
POSSIBLE FUTURE ACTION
These projects will support the transition to municipal buildings to clean electricity. Staff will continue to look for opportunities to integrate this work with other capital improvements such as T1 projects, where energy systems are impacted.
FISCAL IMPACTS OF POSSIBLE FUTURE ACTION
PG&E will finance all upfront costs, which are repaid on monthly bills and covered through savings from increased energy efficiency. There are no additional funds needed from the City. These projects will be coordinated using exiting staff resources.
CONTACT PERSON
Alene Pearson, Acting Director, Planning and Development Department, 510-981-7489 Billi Romain, Manager, Office of Energy & Sustainable Development, 510-981-7432
Communications
All communications submitted to the City Council are
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City Clerk Department
2180 Milvia Street
Berkeley, CA 94704
(510) 981-6900
Records Online
https://records.cityofberkeley.info/
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