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Building On Minnesota Roots: A Cooperative Response to Hard Times

June 24, 2008 By Lee Egerstrom, Economic Development Fellow

With the U.S. and Minnesota economies in a tailspin, standing still means falling farther behind. Recognizing that the status quo won't do, more and more Minnesotans are rolling up their sleeves and rediscovering what has always been a source of Minnesota strength - cooperation.

In turn, Minnesota is rediscovering economic development tools that are 150 years old.

This renewed interest in cooperatives is in keeping with Minnesota's frontier history of the past century. Minnesota has consistently led the nation in the number of cooperative businesses incorporated and operating in the state, said Amy Fredregill, vice president of the Minnesota Association of Cooperatives. The number of such businesses hovers above 1,000 as mergers and consolidations offset the number of startups most years, she said. 

Nonetheless, interest in starting cooperatives is again gaining momentum as people turn to pooling resources and starting co-ops to strengthen local economies and preserve quality of life in communities.

The impact of "globalization," or international markets, is one stimulus for the new co-op interest, said Kevin Edberg, a former Minnesota Department of Agriculture official who is now executive director of the regional Cooperative Development Services consultancy office in St. Paul. Another important stimulus is preservation of a local economy or local quality of life, often tied to "depopulation" of a community, he added.  
Those motivations are evident in one of the newest cooperatives registered in the state. The people of Morris learned last July that the owner of the city's single-screen movie theater was getting ready to sell. It would no longer be a theater. That would mean moviegoers from the Morris area would need to drive an hour away to Alexandria or Willmar to see first-run movies.

"It turns out there are a lot of us who like our movies," said Dave Aronson, co-op treasurer and an administrator at the University of Minnesota - Morris. He was among community residents who called a meeting on a Saturday. "We made an offer (for the building) on Monday."

It wasn't easy to move that fast, recalls Tina Didreckson, a Morris artist who now serves as manager of Morris Theater Cooperative. A limited liability company (LLC) was initially formed to buy the building and it then converted to a member-owned cooperative, selling shares to theater consumers for $250 a piece.

The co-op took possession of the theater on Oct. 1 last year.

It has about 450 members now but is still in a first year membership drive, for which all Minnesota residents are eligible to join, in its attempt to strengthen the co-op's financial base and prepare for renovations of the charming, old-style community theater. That makes it larger than some co-ops in the state, say co-op development specialists.

Among the smallest is a Houston grocery, or food co-op, that was formed to save the last grocery store in that southeastern Minnesota city, said Edberg. Residents of a half-dozen small cities in Minnesota are exploring similar effortsand doing feasibility studies, he added.

While the Morris theater group formed using consumer co-op models common to food co-ops, other Minnesotans are turning to other models to meet new needs and wants, he added. For instance, there is expanding interest in forming employee-owned worker cooperatives to take over businesses where owners want to retire. Edberg said this involves industries throughout the state but especially in rural communities.

Another expanding area for cooperation brings together artists who are forming producer cooperatives similar to the marketing and processing co-ops operated by farmers. Successful examples of this model can be found in Rochester and Grand Marais, Edberg noted, and his group is now working with artists and community officials to do the same in a northwest metro suburb. "It would help revitalize the downtown shopping area and it would be the marketing co-op that the artists need."       

Business models abound for making cooperatives a useful tool for economic development. That will become more evident on Thursday when the University of Wisconsin Center for Cooperatives and National Cooperative Business Association issue a comprehensive study on the economic impact of cooperatives.

The most recent such look at co-op economic impact in Minnesota was a paper published by the U.S. Department of Agriculture in 2003, written by Joe Folsom, Iowa state director of the U.S. Small Business Administration (SBA). Folsom, who was then employed with USDA's Rural Development agency in St. Paul, found 1,026 co-ops providing nearly $18 billion annually to the Minnesota economy.

Those numbers are certain to swell, given the farmer-owned ethanol plants and growth by existing cooperatives that occurred since the Folsom report five years ago.

Following this reasoning, Minnesota 2020 will revisit Minnesota's cooperative heritage during the coming year and examine ways cooperative business structures can serve various communities going forward.

In doing so, Minnesota 2020 recognizes that state resources to aid communities and entrepreneurs have diminished in response to the weak economy and state fiscal policy. What's more, nonprofit groups and foundations at work in the state are under added strain as they fill voids and meet human and economic needs. A century of cooperation, however, does arm Minnesotans with economic development tools to build a better tomorrow.  

Louis Doering, vice president of Spire Federal Credit Union based in Falcon Heights and a board member of the National Cooperative Business Association, is among co-op leaders who believe Minnesotans should seize the moment and explore cooperative tools to strengthen state and local economies.

"We've endured the Enron saga. We've been through the hedge fund saga, and what that did to our industries. We're struggling with the mortgage meltdown saga," Doering said. "It should be clear that greed doesn't work over time.
"The time is right for a cooperative renaissance," he said.



Photo credit: Stephen Conn, creative commons

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