Anchor Collaboratives: Lessons from Peer Cities
Case studies written with research help from Theodora Okiro, MPA
As the Economy League looks forward to the public launch of Philadelphia Anchors for Growth and Equity (PAGE), we are excited for PAGE to join the ranks of thriving anchor collaboratives around the country. Several US cities have implemented anchor collaborative stragies, effectively adapting them to each city's combination of unique local assets, economic challenges, and diverse range of institutions in order to increase institutional local purchasing. The following case studies guided the development of PAGE, providing critical lessons to our staff on the topics of capacity building, technology use and business creation.
Baltimore Integration Partnership, Baltimore, MD. Kurt Sommer, Director of Baltimore Integration Partnership (BIP), will be the Keynote Speaker at the Philadelphia Anchors for Growth and Equity Launch on November 28th. BIP has been effective in catalyzing the growth and building capacity of small, minority-owned enterprises in Baltimore in order to help them take advantage of anchor opportunities.
Chicago Anchors for a Strong Economy, Chicago, IL. Chicago Anchors for a Strong Economy (CASE) pioneered the development of an extensive screening tool as a way of identifying and matchmaking local anchors with diverse businesses in Chicago.
Evergreen Cooperatives, Cleveland, OH. Evergreen Cooperatives provides an exciting model of how hospitals can catalyze the creation of cooperative businesses and ways that a backbone organization can fund and manage a portfolio of diverse cooperatives.
Addressing Poverty and Racial Inequities through Anchor Engagement
Baltimore Integration Partnership, Baltimore, MD
Baltimore Integration Partnership uses workforce development, anchor engagement, policy advocacy and capital investment to tackle Baltimore's deep seated poverty and racial disparities.
Baltimore Integration Partners (BIP) was established in response to the unrest resulting from the death of Freddie Gray in police custody. Its seed funding was provided by The Integration Initiative (TII) of Living Cities, a collaborative of 18 foundations and financial institutions focused on developing new urban practices that help low-income individuals. BIP’s Governance Board, which consists of local political, institutional and business leaders, wanted to address Baltimore’s deep racial inequities by increasing economic inclusion. To accomplish this goal, Baltimore received a three-year Living Cities commitment of $2.75 million in grants, $3 million in flexible debt financing, and $12 million in commercial debt (in the form of a syndicated loan from Living Cities’ member financial institutions).
BIP relies on three strategies to enhance inclusion: workforce development, anchor engagement and capital investment. Due to a partnership with the major Community Development Financial Institution (CDFI), The Reinvestment Fund, BIP can leverage significant amounts of capital resources to support capital projects in the community. In the first three years of its work, BIP financed thirteen projects, which included a health center, a school, and 120 new units of housing. BIP further leverages this funding by encouraging the new ventures to hire local residents. In addition to capital investment, BIP uses grant funds to develop workforce training programs, and creates partnerships with local nonprofits to improve the types of training available. On the demand side, BIP also works with its anchor partners to identify opportunities for work, as well as local procurement. Critically, all of BIP’s work is rigorously evaluated, so that each project can be used as a ‘learning lab.’ Successes are used to promote systemic change, via policy change and the local and state levels. For example, BIP successfully lobbied for a 0.5% set-aside in Maryland’s federal transportation budget, dedicated specifically to workforce training.
BIP has recently pivoted to a BIP 2.0 strategy, implementing a 'Buy, Hire, Build' approach, which encourages anchor institutions to buy local, train and hire Baltimore residents and ensure that their real estate investments provide the maximum benefit for the surrounding community. BIP's impact has been document in its most recent report, Collectively We Rise: The Case for Economic Inclusion.
Like Baltimore, Philadelphia struggles with poverty and racial inequities. Understanding and adapting BIP's multifaceted, comprehensive approach to anchor engagement provides a roadmap for PAGE to ensure that its work is truly making the maximum impact on poverty.
Harnessing the Power of Technology to Match Supply and Demand
Chicago Anchors for a Strong Economy, Chicago, IL
Chicago Anchors for a Strong Economy developed a state-of-the-art matchmaking platform in order to effectively connect local, diverse entrepreneurs to local anchor institutions.
Chicago Anchors for a Strong Economy (CASE) launched in 2013 as a subsidiary of an existing economic development organization (World Business Chicago). Rahm Emmanuel headed the launch as way to help Chicago reach its economic potential and diversify its economy. Seed funding was provided by Polk Bros. Foundation, while the organization continues to be sustained by annual membership contributions of $50,000 per institution. The participating membership consists of universities, medical institutions, a local utility and various local government entities.
Since Chicago is a large industrial city, a larger portion of goods were already purchased locally there than in Philadelphia. Instead, CASE focuses on increasing access for small businesses and WMBEs. CASE began its mission with three key areas of focus: Anchor Mission, Local Purchasing and Local Hiring. However, the team found that a three-area focus spread organizational resources too thin, resulting an a reorganization and refocusing on local purchasing in mid-2018.
CASE has developed a sophisticated approach to increasing local procurement. First, the majority of businesses is referred to CASE through community partnerships or anchor members, with just a few approaching the organization directly. They are then screened using a diagnostic tool. The diagnostic uses financial statements, industry benchmarks, and in-person interviews to ensure that businesses possess the requisite capacity. After a business has been assessed, it is either added to CASE’s database or referred to an appropriate capacity-building program. At the same time, CASE staff conducts monthly calls with anchors to create a calendar of opportunities to be distributed to the businesses in the database.
Thus far the approach has been successful. According to their most recent report, CASE assisted 236 new businesses, created 180 new jobs and $50.6 million in revenue.
CASE’s journey offers many lessons for Philadelphia. On the one hand, CASE's innovative approach to matchmaking provides a model for Philadelphia of a successful approach to screening and identifying Philadelphia businesses with capacity. On the other hand, its reorganization is an important reminder that continual evolution in response to stakeholder feedback is inevitable and healthy. CASE has pivoted several times during its four years in existence, with each evolution allowing it to create ever greater value for its members and for Chicago.
Meeting Hospital Demand and Building Worker Power through Cooperative Enterprises
Evergreen Cooperatives, Cleveland, OH
Evergreen Cooperatives provides an exciting model of how hospitals can catalyze the creation of cooperative businesses and ways that a backbone organization can fund and manage a portfolio of diverse cooperatives.
In 2009, The Democracy Collaborative, a community wealth building organization, partnered with the Cleveland Foundation, the Ohio Employee Ownership Center, the City of Cleveland and the city’s major hospitals and universities to address poverty in disinvested neighborhoods of Cleveland known as the Greater University Circle. The Evergreen Cooperative Initiative (Evergreen) started as two worker-owned companies, Evergreen Cooperative Laundry and Evergreen Energy Solutions. The backbone organization (Evergreen Cooperative Corporation) was added later to support the businesses. Another business, Green City Growers, was added in 2012.
The funding for Evergreen’s launch was provided by a range of public and private institutions. The Evergreen Cooperative Development Fund (ECDF), the fundraising branch of the Evergreen operation, raised grants and used them to leverage additional capital. Then ECDF invested in businesses, allowing them to raise additional capital. Once the businesses were profitable, they were required to reinvest 10 percent of their pre-tax profits back into ECDF. As an example of this approach, ECDF used $750,000 from the Cleveland Foundation to invest in the Evergreen Cooperative Laundry. The laundry in turn raised $1.5 million from the Department of Housing and Urban Development and the City of Cleveland; $1.8 million from New Markets Tax Credits; $750,000 from the Cleveland foundation and $1.5 million from two private banks.
In order to coordinate the work of the cooperatives, incubate new ones, and manage relationships with local anchor institutions, the founding partners established a 501(c)3 organization called Evergreen Cooperative Corporation (Co-op). It performs three key roles. First, the Co-op provides back office support, such as pooled HR functions, and customer-facing support, such as cultivating relationships and soliciting business from anchors. Next, it can raise grant funding and attract equity, something that cooperatives are not legally able to do, as they are not allowed to attract outside investors with voting shares. Lastly, the Co-op owns stock in all companies, and is thus able to have a managing influence. For example, it has veto power over mergers and acquisitions, which helps protect the mission of the cooperative businesses.
Evergreen’s hard work is showing results. Evergreen Laundry and Evergreen Energy Solutions became profitable in 2014 (five years after founding) and were able to hold their first profit-sharing events with worker owners. Green City Growers is still working towards profitability. In 2016, the three businesses contributed $6.3 million in revenue and employed 110 local residents from target neighborhoods. In early 2018, Evergreen Laundry announced that it will take over Sodexo's 19 million pounds of laundry processing for the Cleveland Clinic, effectively tripling the size of the company. Most recently, Evergreen launched the Fund for Employee Ownership, an investment fund aimed at facilitating conversions of existing businesses into employee-owned or Employee Stock Ownership Plan models.
As the PAGE team identifies opportunities for localization where no current business exists, Cleveland could serve as a model to fill market gaps. Evergreen’s funding, management, and employee-ownership structures are sophisticated and effective. Beyond immediate employment, the act of giving employees ownership stakes, decision-making power, and high wages will have empowering effects for employees that last far into the future.