New Haven's Elm City Market

by Benjamin Levinger and Michael A. Zabek, Federal Reserve Bank of Boston New Haven’s Elm City Market Coop Expands Access to Fresh Food isparities in access to fresh, healthful food are well documented. Consumers in higher-income communities rou- tinely have more options than their lower-income counterparts. Closing that gap should by Sara C. Bronin be a priority for both health reasons and economic University of Connecticut School of Law development. That is why as part of the Healthy Food Financing Initiative, President Obama proposed more than $400 million be spent in fiscal year 2011 on financial and technical assistance to expand and create farmers markets, retail infrastructure, and food stores in underserved communities. Photographs: iStockphoto and Elm City Market Communities & Banking 15 Cooperatives The work of coop board members is Property Trust (MEPT) is investing in a Some of the federal money could go to challenging. Moving from concept to store coop in one of New England’s poorest cities: a conventional-food-market alternative: opening often takes years. After that, many New Haven. Elm City Market, created spe- community-owned food cooperatives. boards struggle to manage as complex an cifically for this project, will be located on Coops typically emerge bottom up, operation as a grocery store in a profes- the ground floor of a recently opened devel- when a group of people see such a great sional, fiscally prudent manner. Moreover, opment that represents the largest private, need in their communities for a food start-up capital must be raised not from non-Yale investment ever in New Haven. market that they start their own. Found- conventional banks (who are often wary of The project is known as 360 State Street. ing members work together to assemble the unique coop business model), but from MEPT broke ground in 2008 with its capital, gain community support, and some combination of membership invest- local partner, the integrated architecture, scout locations—often while collabo- ments, donations from individuals, and planning, and development firm Beck- rating on interim arrangements such loans from the few lending institutions will- er and Becker Associates Inc. The project as bulk-buying clubs. Coops range in ing to provide financing. includes a 32-story mixed-use tower. It has iStockphoto size, but are usually smaller than conventional supermarkets. According to the Cooperative Grocery directory, there are 42 food coops in New England (seven in Maine, 12 in Massachusetts, six in New Hampshire, one in Rhode Island, 14 in Ver- mont, two in Connecticut). Because each member receives a vote, coops are usually run very democratically. Most profits are kept in the community thanks to laws requiring that profits from member sales be distributed as “patronage dividends” Major Partners 500 residential units (10 percent afford- to members. Moreover, coops generally oper- Given that food cooperatives face many able), a 500-space parking garage, and retail ate independently and are not subject to obstacles, it may seem counterintuitive that space that includes a bicycle shop and the corporate takeovers or abrupt relocations. the $7 billion for-profit Multi-Employer Elm City Market. As of this writing, the 16 Spring 2011 development also is on its way to receiving a also funded hundreds of thousands of dollars who qualify. Throughout, the planning platinum rating in the U.S. Green Building in architecture, engineering, surveying fees, team followed strategies and advice from Council’s LEED for Neighborhood Devel- and other costs to ensure that the space was City Market in Burlington, Vermont, one opment Program. sustainably designed. of New England’s most profitable grocery Elm City Market’s high-profile location In addition to the Becker-MEPT fund- stores—conventional or coop. and brand new digs are unusual for a coop. ing, the Elm City Market received a loan Surprisingly, the only resistance that Even more unusual is the top-down gen- from the Cooperative Fund of New Eng- the coop planning team received was from esis, in which a large institutional investor land, a nonprofit community development the City of New Haven. Initially, officials had both space and start-up capital at the claimed that a coop would not satisfy the ready. The story of how the market became city’s requirements for the grocery store a critical part of a multimillion dollar green Most profits are component, and as of this writing, they building project—as both an investment kept in the have not embraced the coop concept despite opportunity and a significant community membership commitments from more than asset—is worth telling. community thanks to 300 New Haven residents. Indeed, many Becker and Becker first obtained the laws requiring that long-established institutions, from public property from the City of New Haven in a bodies to conventional banks, view coops deal that gave it half a city block in the cen- profits from member as risky ventures. But Elm City Market tral business district. The City required that sales be distributed backers are confident that, by starting with a full-service grocery store be built—“of the both strong financial footing and commu- quality and reputation of Whole Foods, as “patronage nity support, the coop will meet the city’s Trader Joe’s, Gristede’s, Fairway Market, dividends” to standards. It may even exceed them because Wild Oats, Limon Gourmet or Stew Leon- community ownership and control will ard’s Grocery or other grocery of similar members. ensure that the profits from the coop stay in quality and reputation”—within three years the hands of the members and that the coop of the first certificate of occupancy. The financial institution focusing on coops. It is responsive to community needs. consequence of failure would be to pay a also received loans ranging from $10,000 Of course, the ultimate success of Elm one-time penalty of $250,000. to $100,000 from about a dozen private City Market remains to be seen. But the proj- It would have been easier and cheaper investors. All the financing is to be repaid in ect not only could have a significant impact for the developers not to have bothered with accordance with the intricate federal tax rules on the health and wellness of New Haven a grocery store. Recognizing, however, that that govern investments in coops, including residents, but also could become a new the project’s anticipated 1,000 residents and limitations on returns. Despite the limita- model for institutional investors. Working the surrounding community would ben- tions, investors were eager to sign up, given with local partners to fast-track the project efit from convenient food access, Becker not just the demand anticipated by the mar- from the top-down, MEPT and Becker and included in the original design a fully out- ket analysis of New Haven’s “food desert” but Becker Associates have shown that it is pos- fitted market. the investment’s social dimension. sible to make a coop an integral part of a For two years, attempts to attract one As investors became more interested, so multimillion dollar private investment. of the named grocery stores failed. In fact, did New Haven’s community of advocates Not every struggling city will benefit many refused to visit. A regional chain dealing with food security and local agri- from a major development project like 360 that signed a letter of intent in late 2009 culture. The coop’s boards of directors and State Street. Not every developer will have pulled out in early 2010. Around the same advisers included local restaurateurs, repre- the desire or ability to take such a financial time, the Shaw’s grocery store—the only sentatives of Yale University and City Seed, risk—or the patience to engage the commu- full-service market near downtown New downtown businessmen, community orga- nity in building a food coop. But public and Haven—closed. Residents were left having nizers, and urban planners. Through such private entities alike should recognize that, to buy their produce from a few small con- leaders, the Elm City Market reached out especially in a tough economy in which venience stores or from farmers markets run to area farmers and ranchers who could sell conventional grocery stores are less likely to by the local nonprofit City Seed. products at the coop, with the added benefit take a gamble on a poor city, solutions like a of contributing to regional food security. create-your-own food coop may be in order. Making It Happen Like any coop board, Elm City’s board As the grocery options for future residents of members have worked with the community Sara C. Bronin is an associate professor at the the development dwindled, the project team to gain support for the project. A meeting University of Connecticut School of Law and began pursuing the coop idea in earnest. held in October 2010—attended by about one of the lead attorneys for 360 State Street. During the first half of 2010, Becker and 150 people—solidified community sup- then MEPT fully funded the hiring of three port and served as a forum for addressing Endnote consultants from the nonprofit Cooperative concerns, particularly concerns about how 1 Becker funded it first. Part of MEPT’s investment Development Services, plus a professional the coop would serve low-income mem- will be a reimbursement of Becker’s past costs and general manager who had handled the start- bers of the New Haven community. For then a takeover of remaining obligations. up of food cooperatives nationwide.1 Becker example, coop representatives explained and MEPT funded the purchase of all of the that the $200 one-time membership fee equipment needed to start the coop.

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