FEASIBILITY STUDY OF A VERTICAL FARM AS A SOCIAL ENTERPRISE IN

POMONA, CALIFORNIA

A Thesis

Presented to the

Faculty of

California State Polytechnic University, Pomona

In Partial Fulfillment

Of the Requirements for the Degree

Master of Science

In

Regenerative Studies

By

José Wilfredo Mejía

2020

SIGNATURE PAGE

THESIS: FEASIBILITY STUDY OF A VERTICAL FARM AS A SOCIAL ENTERPRISE IN POMONA, CALIFORNIA

AUTHOR: José Wilfredo Mejía

DATE SUBMITTED: Spring 2020

John T. Lyle Center for Regenerative Studies/ College of Environmental Design.

Steven Archambault, Ph. D. Thesis Committee Chair College of Agriculture Agribusiness & Food Industry ______Management/Agriculture Science

Aaron Fox, Ph.D. ______Department of Plant Science

Olukemi Sawyerr, Ph.D. Office of Academic Innovation ______Division of Academic Affairs

ii ACKNOWLEDGEMENTS

I would like to thank God first. I would like to thank my mother, Telma

Ramírez who has been the one who has helped me from the time I decided to take on this challenge. My mother taught me to face my fears and challenges with vigor. There are no words to describe how much I appreciate her and how much I love her for always being there for me when I needed her. I would also like to thank my sister, Rosaura Mejía who without hesitation helped me on a very critical time during the first year of Master’s program, she moved to Los

Angeles to babysit my sons for a whole month while I attended school, if she wouldn’t have come, I would have been forced to drop out. I would also like to thank my aunt, Sandra Castro for allowing my kids and I to live in her house when we became homeless. I like to also thank my twin sons, Marsello and

Maximiliano for always cheering me up when I needed it, for understanding my frustrations and always smiling with whatever life threw at us. I thank my brother

Kevin Bovee for his encouragement and support. I thank my committee, Dr.

Olukemi Sawyerr and Dr. Aaron Fox for sticking with me and taking the time from their busy schedules to help me in my academic endeavors. I would also like thank Jill, Karen, Debbie, Dr. Brown, Dr. La Roche, Dr. Bahr, Patricia and Dr.

Smith, they all played a vital role in the completion of this degree, whether they know it or not. Special thanks to Dr. Steven Archambault for taking on the role no one else was willing to take on, as the chairperson to my thesis committee halfway through the process, he gave me hope when I didn’t have any, thank you.

iii ABSTRACT

This case study is a proposal for an urban vertical farm as a social enterprise, in Pomona, Los Angeles County, California. The goal of the study is to create a detailed and focused plan on how to start and maintain a successful social enterprise. The approach takes the two most common types of urban agriculture and combines them into a hybrid organization. A community garden

(nonprofit) model it’s combined with a vertical farms (for-profit) model, creating a hybrid model (Kaufman, 2000). Utilizing the strength and minimizing weaknesses, it is projected to lead to the formation of an economically sustainable and socially conscious enterprise. The opportunity for innovation lies on the fact that both current models have challenges. Part of the study focuses on the reasons why to establish a social enterprise model in an urban setting. A full business plan is also provided to expand the possibilities of the model and it also includes strategies on how to target intended markets. Using case studies, a financial analysis provides information on the break-even point and the required financial goals. Financial analysis also includes the first six years balance sheet, providing necessary data to determine ROI Return on investment. It analyzes social challenges: lack of jobs, good food; affordability, availability, education and community involvement. The study is intended to be a tool for investors, entrepreneurs, city planners and residents researching the possibilities of a vertical farm as a business and/or a social benefit or a combination of the two.

The study evaluates and analyzes potential strategies proven to have worked in other studies and real-life models.

iv TABLE OF CONTENTS

Signature page..……….…………………….……………………………….………….ii

Acknowledgements.…………………………………………………………………….iii

Abstract.…………………………………………...……………………………...……..iv

List of tables……………………………………………...…….……………………...... vi

List of figures.……………………………………...…………….…………...……...... viii

Chapter 1 Introduction....……………………………….….…………………...... 1

Chapter 2 Literature review and background information...……….…….…………17

Chapter 3 Economic development challenges in Pomona...……...... …….………80

Chapter 4 Business plan.…………….………………………………………………..97

Chapter 5 Discussion and conclusion.…………………………………….………..166

References.……………….……………….…………………………….……………175

v

LIST OF TABLES

Table 1. City of Pomona Youth Characteristics……………………………….…….83

Table 2. City of Pomona Elderly Characteristics...………………………………....85

Table 3. City of Pomona Education Characteristics……………………….….…….88

Table 4. City of Pomona Employment Characteristics……………………………...89

Table 5. City of Pomona Household Characteristics………………………...... 90

Table 6. Pomona Income Characteristics…………………………………….……..91

Table 7. Plant parameters….…………………………………………….…….…....108

Table 8. Crop Growth Area……………………………………………….……...….109

Table 9. Summary of Power and Energy consumption of all subsystem……….144

Table 10. Seed costs per year of the plant………………………………………….147

Table 11. Nutrient, fish feed and water consumption and cost………….……….150

Table 12. Edible biomass yield for the VF crops (monocrop) case production....152

Table 13. Initial non-recurring cost with 20% margin………………………….…..153

Table 14. Initial cost & repayment with 20% margin analysis…………………….154

Table 15. Recurring Costs……………………………………………………...……154

Table 16. Production capacity: Sky Greens & DLR………………………….……155

Table 17. Analysis of minimum requirement……………………………………….155

Table 18. Tabulation of expenses vs. fixed price…………………………………..155

Table 19. Lettuce: Year one projected sales & cost / Data 2018 USDA………..157

Table 20. Six years projections………………………………………………...……158

Table 21. Net Present value (20 years).…………………………………………….158

vi Table 22. Annual Consumption, Production and Subsidies for 4,245 Residents.161

Table 23. Recurring costs of Small Empty Lots Vertical Farms…………………..164

vii

LIST OF FIGURES

Figure 1. Hydroponics inner workings.………………………………………………53

Figure 2. Aeroponics inner Workings.………………………………...……………..55

Figure 3. Opportunity Zone.…………………………………………………………118

Figure 4. Map of location 246 E. Center St, Pomona, CA.………………………119

Figure 5. Blueprint of Location chosen for facility.…………………………..……121

Figure 6. Vertical Farm floor distribution…………………………………………..138

Figure 7. Outer and inner structures of DLR vertical farm study………………..139

Figure 8. Rendition of Sky Greens inner workings.………………………………141

viii CHAPTER 1

Introduction

General problems

In the decades to come, conventional agricultural practices will have forced us to deal with the consequences of human beings who considered only the best interests of their own species. Conventional agriculture and farming have been the status quo for the last century, with little to no change. The changes that have been implemented have been primarily for the purpose of increasing production and reducing expenses (Lyle, 1994).

The side effects of such practices have become all too familiar: among them are problems with ecological and environmental justice, the lack of fair social development on the global scale, the dependency on fossil fuels, the lack of interest in sustainable innovations, the disregard of issues of food insecurity, and the correlation with poverty and inequality (Besthorn, 2013). Global warming, elevated frequency of cataclysmic natural disasters such as hurricanes, and the connection between the environment and economic decline are, according to

Besthorn, a result of humans’ environmental manipulation in the interest of producing more food (Besthorn, 2013). Although conventional agriculture provides food for the masses, it has severely affected humanity’s connection to one another and to nature. The concepts and practices of conventional agriculture continue to threaten the ecological carrying capacity of the planet, thus making the future of all species uncertain.

1 Although the side effects are many and they all demand immediate worldwide attention, one has become the most pressing and immediate concern for communities around the world—affecting underdeveloped, developing, and developed countries just the same. According to the United Nations Food and

Agriculture Organization (UNFAO), the greatest challenge humanity is currently facing is the insecurity of safe, adequate, timely, healthy, and affordable food

(UNFAO, 2011).

This feasibility study suggests, presents, and compares regenerative sustainable concepts and practical applications in the conventional system of food production and distribution. The study proposes a possible alternative to alleviate, improve, and raise awareness of healthy food insecurity in low-income communities in the United States. Regenerative sustainability concepts are innovative solutions to challenges such as that mentioned above. The solutions take into consideration all stakeholders in the matter and, as a result, produce a model capable of resolving the problem while maintaining balance in the environment (Lyle, 1994).

Regenerative sustainability concept

Regenerative sustainability can be defined as the improvement in human and environmental well-being (Robinson & Cole, 2014). Mang and Reed (2012) conclude that being sustainable is no longer sufficient and that it is essential to move from “business as usual” to regenerative sustainability. John Tillman Lyle, a professor in the Department of Landscape Architecture at the California State

Polytechnic University, Pomona, one of the world’s foremost authorities on

2 environmental design and regenerative systems and co-founder of the first

Center for Regenerative Studies in 1994, defines regenerative sustainability as a complex concept in which standardized linear systems are replaced by complex, cyclical flow systems (Lyle, 1994).

Lyle (1994) explains that a system is sustainable only when the perpetual demand for energy and resources is met. For that reason, these demands must be self-renewing, or, in our case, regenerative. The term “regenerative” was coined by Robert Rodale to describe the perpetual and complex cycle of organic agriculture. The cycle consists of understanding the biome, as opposed to a segment within the biome. Just as a plant’s lifecycle is 100% efficient, the regenerative systems concept addresses all the variables in a system, thereby minimizing or eliminating any inefficiency to maintain the ecological and environmental balance (Lyle, 1994).

As humans, we are still learning about complex systematic lifecycles, and we continue to extract resources via simple linear systems, as though the resources were infinite. A plant’s lifecycle, left undisturbed, exemplifies the principles of a regenerative system. By contrast, the lifecycle of conventional farming (food production) has been and continues to be an example of a degenerative simple linear system: one that exploits, pollutes, and destroys for the purpose of mass production (Dover & Talbot, 1989). For this reason, interest in researching alternatives to the conventional has flourished.

Our current standard of living has created a “consumer society,” a society in which humans continually race against one another with the common objective

3 of being better and faster while producing more (in all aspects of society). As a society, we have been indoctrinated into thinking that success is measured only by how many goods one accumulates. It is by these principles that humans are driven to push production to the environment’s breaking point, rendering these practices environmentally degenerative. As a result, the natural environment cannot keep up with the ecological cycles needed to maintain a balanced ecosystem. Examples of these are the overabundance of carbon dioxide in the atmosphere and the practice of deforestation.

Since the Industrial Revolution, humans have continually altered complex ecosystems that construct and maintain the natural environment, doing so for the sole purpose of human consumption. Humans have replaced infinitely diverse and complex cycling systems with linear and finite simple systems of extraction to consumption, without regard for the consequences of these practices on the natural and societal environments (Lyle, 1994).

Mang and Reed (2012) observe that degenerative practices that are harmful to the environment remain legal. Minimizing destructive conventional practices, although better than conventional continuation, nevertheless still damages the environment, albeit at a slower rate. “Sustainability” is probably the most commonly used term to describe a solution to a degenerative system.

Sustainability inflicts less damage on the environment than conventional practices do; but although it may repair the ill effects of past degenerative practices, results are not guaranteed. Being sustainable neither repairs nor restores incurred damage: it only sustains.

4 To be “restorative” is to go one step further than being sustainable. This sees humans altering nature as needed to repair the damage, while seeing themselves as separate from nature. Reforestation is a common practice that falls under the restorative mentality and one in which the human species exerts dominion over nature and perceives it as separate. “Reconciliatory” is the next evolutionary step: here, humans reconcile with nature, thus incorporating it into culture. This is demonstrated when structures are built with nature in mind, including passive cooling and heating designs that implement characteristics of the environment. Regenerative sustainability takes these practices a step further, allowing humans to participate creatively in nature and strive to co-evolve, so as to deal with disruptions (changes) rather than working against them.

Regenerative practices are forever evolving, as they adapt to disruptions and changes. Given that change is the only true constant in nature, regenerative practices serve its needs appropriately (Mang & Reed, 2012; Lyle, 1994).

For the planet to be repaired while supporting a fast-growing population with an inefficient linear system, the supply systems for energy and resources must be constantly self-renewing or “regenerative.” At the heart of the problem is the way business is conducted in general. Businesses usually provide the means to meet a need in the market, which commonly entails responding quickly and inexpensively, with little consideration to other stakeholders, such as the well- being of people or the planet. The regenerative sustainability system considers equally important the well-being of all stakeholders: people, planet, and profits.

The concept is also applicable to all other systems that support life (Lyle, 1994).

5 Humans have been aware of degenerative practices since the early 1970s; and since then, we have been continually facing new challenges from the consequences of the industrial age. One such challenge is the lack of healthy, affordable, and available food for low-income communities.

Details of specific problems

Among the side effects mentioned are those arising from conventional farming practices, such as food production insecurity due to the decreasing availability of crop land. Crop lands are a finite resource, but they are not treated as such; and every day, there is less space in which to grow food crops. One reason for this is climate change due to higher atmospheric temperatures. The

National Integrated Drought Information System (NIDIS) (2019) states that, in places such as California, the issue is very real, as the state recently endured the longest-running drought in history, lasting approximately eight years (2011-2019).

The drought affected more than 58% of the land in California, thus reducing usable soil in which food can be grown.

Another issue is food contamination outbreaks, which are regularly in the news (Haigh, 2018). These outbreaks have resulted in human deaths and the loss of billions of dollars. Conventional agriculture is fighting a losing battle against an ever-changing and adaptable natural environment that has been in place for millions of years (Despommier, 2010). As the population grows, so does the demand for food. The common solution to this issue has been to cut down forests and replace the trees with more agricultural land.

6 Food production is one factor that has allowed the population to grow as it has in the past (Despommier, 2010). Unfortunately, the finite nature of our resources was not acknowledged in the artificial-linear system that we inherited.

This linear, or one-way, system worked well when extraction remained minimal or until the carrying capacity of ecosystems began to show signs of degeneration and limitations (Lyle, 1994).

By 1988, most of the available land around the world had been turned into source landscapes. “Source landscapes” are natural lands from which humans have extracted natural resources for the purpose of providing materials and pathways (highways, railways and canals) to support industrial development, and in doing so, overwhelming natural sinks incapable of keeping up with waste assimilation back into nature’s ecosystemic cycle. Examples of source landscapes include farmland, oil fields, mines, production forests, watersheds, and other lands from which resources are taken. These make up 61% of the

Earth’s land area (Lyle, 1994).

In many cases, degenerative practices multiply the damage output over that extracted in resources. An illustrative example of this is fossil fuel usage.

The transformation of carbon into energy by way of combustion triples the byproduct of particle matter. As carbon (C) is burned, it combines with oxygen

(O) to form the larger molecule of carbon dioxide (CO²) (Lyle, 1994). Humans are depleting natural resources by relocating vast amounts of CO2 at a pace that prevents the natural environment from recycling it back into the global system. If we continue with “business as usual,” the system is certain to collapse.

7 The conventional method of growing food has other shortcomings that negatively affect low-income urban communities. Foods consumed in low-income communities are highly processed, commonly in the form of fast foods and canned and dehydrated non-perishables from food pantries. Highly processed foods have a longer shelf life, which maximizes business gains and minimizes the food’s nutritional value. The longer shelf life is imperative to the success of the large sellers, conventional farms almost always located far away from the point of consumption (urban areas) (Despommier, 2010).

One can argue that these highly processed foods are related to an increase in chronic diseases in places where they are consumed in large quantities. There is evidence that indicates chronic diseases have increased significantly in recent years, especially in urban areas (Abella et al., 2016).

According to the Centers for Disease Control and Prevention (CDC), obesity is the leading cause of chronic diseases such as diabetes, heart disease, lower respiratory diseases, and stroke, to mention a few. These chronic diseases are among the 10 leading causes of death in the United States (CDC, 2017).

In a recent study, the levels of insecticide residue on vegetables grown conventionally or organically were analyzed and compared. The results revealed that the levels found on a vegetable grown in a conventional manner were almost five times higher (9.7%) than those present on the organic counterpart (2.0%)

(Montiel-Leon et al., 2019). Some chemicals are made to kill most, if not all, of the living organisms that could negatively affect the intended crop. In some cases, if not for altered genetics, the crop itself would also succumb to the

8 pesticide. Genetic manipulation of biological organisms has the purpose of optimizing production practices and lowering labor costs; it is not intended to improve food’s nutritional quality, but rather aims to expedite production

(Besthorn, 2013).

The consumer is always happy to purchase inexpensive and aesthetically appealing produce, unaware that it has been harvested early to allow for lengthy transportation and has been coated with sometimes-harmful chemicals.

Additionally, some organic crops such as strawberries have been found to be of higher quality than their conventional counterparts (Reganold et al., 2010). There have been tremendous improvements in agricultural practices in the past few decades, though most have been for the purpose of increasing quantity.

However, a growing interest in urban agriculture has helped to provide healthier foods (some organically grown) to low-income communities, thereby closing the aforementioned health gap. A public interest in urban agriculture has also arisen, despite decreasing support from the federal government in the past few decades

(in comparison to the period during World Wars I and II) (Mok et al., 2014).

Several signs indicate the continued interest of the public, such as the growth in community supported agriculture endeavors (CSAs): from 2 in 1986 to

1,400 in 2010 (Martinez et al., 2010). Farmers markets have also been exhibiting an exponential rise since 1994 (Martinez et al., 2010). Community gardens have become a way of combatting food insecurity (US Census Bureau 2010). Interest in urban food production has been nurtured by enthusiastic urban farmers who care about the production of nutritionally healthy crops (often organic) and the

9 implementation of environmentally sustainable practices, taking into consideration people, the planet, and profits – and not profits alone.

Introduction of social enterprise

Many solutions and ideas have been suggested to ameliorate the damage inflicted on the natural environment and on society by conventional agricultural practices. The concept of regenerative sustainability is at the heart of these innovative solutions. Social enterprises that embrace the “triple bottom line” of people, planet, and profits embody regenerative sustainability. They are best defined as a business model that tackles social and environmental problems while maintaining a self-sustaining economic model that does not rely on charity for existence (Ramus & Vaccaro, 2017). Interest in social enterprises is increasing as the need for positive social change becomes more obvious to the public. Social enterprises have been proven to outperform profit-driven enterprises, according to Westaway, usually because of the raised conscience of consumers and their support (Westaway, 2014). An example of a social enterprise is the concept of “fair trade certification.”

Fair trade is a concept that certifies positive work environment ethics in the development of consumable goods. Its principles emphasize how important it is to consider the interest of all stakeholders involved in the business model, especially in developing countries where overexploitation of resources and humans is common (Costache, 2012). As with the social enterprise model, the standards set for certification involve three major factors: social, economic, and environment. The social factor includes farm workers’ rights and well-being; the

10 economic factor includes the business (farm and companies) positively contributing to the community of which it is a part; and the environmental factor concerns the well-being of natural resources (limiting or eliminating exploitation and contamination) (Costache, 2012).

Fair trade sets ethical standards that consumers consider as important as the quality of the product. Despite the higher prices of fair-trade goods, informed and concerned consumers understand that the benefits extend much further than economics alone. Fair trade illustrates that adding social and environmental benefits to a business model can be beneficial for the economic growth of the company (Costache, 2012). Conceptually, fair trade is a synonym for “social enterprise,” which considers the best interest of all stakeholders and not simply the economics. This is also at the foundation of the proposed business model in this case study.

The community of Pomona, California, suffers from injustices and predicaments similar to those of underdeveloped countries and underrepresented workers. It is this that led to the interest in researching an alternative to the status quo that plagues Pomona’s community.

Case study overview

Pomona has been identified by the United States Department of

Agriculture (USDA), under certain measures, as a “food desert,” an urban area in which it is difficult to buy affordable or high-quality fresh food (USDA, 2009). The aim of this case study is to draft propositions for resolving this immediate challenge. The purpose of this research is also to identify and present a socially

11 conscious business model that can facilitate education on the importance of nutrition and community involvement and provide a means for healthy, affordable, and available food for low-income residents. Relatedly, the delivery of this food should be from an economically self-sufficient organization, one that does not rely on other sources of funding. The success of such an organization could bring with it a new industry and new jobs to Pomona (Mougeot, 2000;

Westaway 2014).

The case study aims to explore, analyze, and implement the benefits of an alternative food production model in a hypothetical scenario. The study combines the strengths of vertical farming, one capable of using soil, hydroponic, or aeroponic methods to grow produce in vertically stacked layers. Vertical farms attempt to produce food in challenging environments, such as where arable land is rare or unavailable. These, along with their production capabilities and economic sustainability, are the social benefits of a community garden. The study strives to create a hybrid entity that engages the proven methods of both vertical farms and community gardens and minimizes or eliminates their respective weaknesses, exemplifying the concept of a social enterprise (Westaway, 2014) that shares the values of regenerative sustainability.

The research will argue that community gardens and vertical farms complement one another’s strengths and weaknesses and present an alternative business model for urban agriculture. Most community gardens are nonprofit organizations that serve social needs in their communities, and most vertical farms are for-profit bodies in the business of food production. The vertical

12 farming industry currently enjoys various streams of revenue from retail equipment sales, the purchase of proprietary rights (on equipment and procedures), and the production of food (Kaufman & Bailkey, 2000). Vertical farming and community gardening are common in their respective fields; but due to innovation and public acceptance, their unification is beginning to make realistic improvements in the industry (Santo et al., 2016).

Most businesses are created to make money: they recognize a need in a market and they fill it. However, community gardens often suffer economically due to inefficient cultivation practices. Nonprofit organizations often lack the income and capital to develop innovative ideas for the benefit of the community

(Santo, et al., 2016).

Most participants in a community garden donate their time, toil, and treasure to help sustain the garden, and they do so as an investment in their community. Lack of money is a constant problem that is usually addressed with creativity and resourcefulness—making do with what is available. Community gardens have proven a highly effective model in the improvement of the social capital of communities by increasing cohesion among neighbors. Especially in communities facing economic and social hardships, community gardens foster a sense of hope and camaraderie (Mok et al., 2014).

The proposal is a conceptual theory that studies existing, failed, and conceptual vertical farms and community gardens. The study proposes an alternative business model to provide healthy and affordable food for low-income communities, without the need to rely on charity alone as a means of

13 sustainability, and instead forming a self-sustaining charitable organization. The research proposes that an organization that looks out for all stakeholders and whose intentions prioritize social good has a greater probability of survival; and, as a result, its ability to help the community increases, thus continuing in a cyclical balance (University of Northampton, Bates Wells Braithwaite and E3M,

2014).

Shifting the focus from seeking financial aid (charity) to developing innovative ideas for the improvement of the community brings an entirely different social dynamic. In this marriage of the two models, the community garden has continual monetary backing for its ideas, and the vertical farm component of the organization has potentially more patronage from the surrounding and neighboring communities. According to Westaway, socially conscious companies raise awareness among possible patrons, who are thus compelled to contribute to the cause (Westaway, 2014).

Support will come in the form of a market for locally grown products, which are often more expensive but come with added value. Consumers must be made aware that their purchase is more than buying lettuce (the best product in the region utilizing vertical farming): it is about supporting a neighboring community just a few miles away. The story needs to be told to gather support for the success of the model. The basis is very similar to that of fair trade principles; the difference lies in the support given not to Third World countries thousands of miles away, but to nearby U.S. community-based organizations. It is about

14 helping and not giving handouts. The mission is to provide to a community an opportunity to contribute to the overall well-being of all.

Mutual education is a concept in which both parties learn from the other.

Vertical farm technicians learn about the needs of the community directly from consumers and indirectly from their social challenges. The community learns about nutrition while gaining social skills and empowerment, as well as technical skills in growing healthy foods. The benefits of such a concept are difficult to measure because they can be felt many years later, but they are nevertheless at the heart of the model. A select few community members will also make up an important part of a think tank, which will aim to improve the inner workings of the entire model and its relationship to the community. Members of the think tank will also benefit from education about nutrition, healthy food production, technological innovations (for food and career security), social dynamics, empowerment, and organizations.

The think tank will gather data for future endeavors, such as a niche market featuring local ethnic produce. Such produce has been introduced in mostly ethnic-oriented grocery stores, commonly located in lower-income communities, as in the case of the Latino and Asian markets in Pomona.

The vertical farm industry, if compared to conventional farming, can be considered to be in its infancy stage. It has re-emerged only in the past two decades (Despommier, 2010), and new discoveries are continually being made.

Research and development will thus go hand-in-hand with the business model.

15 Companies are constantly looking for the next new crop that can be grown with little energy input and few complications, while generating a significant return.

The data reveal that social enterprises could lead the way in future business models (Westaway, 2014). In addition to the immediate need for healthy foods in low-income communities, the unpredictability of weather continues to endanger food security for everyone by damaging agricultural land, rural homes, and ecosystems. It is unfortunate that society is quick to be reactive and slow to be proactive. The scarcity of healthy food in low-income communities is not new, but in the current circumstances, it can be considered the harbinger of things to come. The decentralization of food production, a closer proximity to the point of consumption, the social and infrastructural revitalization of communities, and the creation of job opportunities could be the beginnings of a model that follows the principles of regenerative sustainability while addressing other pressing issues.

16 CHAPTER 2

Literature review and background information

Regenerative studies have strong applications in the food and agriculture industries, and they are thus very important for motivating the inclusion of agriculture projects in urban development. There are many ways this can be done with the different vertical farming technologies currently available. The topics provide a real opportunity for businesses to find their niche; and one way this can be done is through the implementation of social enterprises as a business model.

This section highlights up-to-date literature on the regeneration in food and agriculture, from the development of the different regenerative methods to past and current techniques. It also details the history of urban agriculture from its beginnings in community gardens to vertical farming. In the vertical farming sections, it presents the different working operational models and production techniques. An industry analysis is conducted on the potential for future businesses opportunities in urban agriculture and the vertical farming industry as social enterprise. Finally, the legal structures of the different entities involved in the urban agriculture market are explored and analyzed for a better understanding of the requirements to start such a venture.

Regeneration in food and agriculture

Development and evolution

As humans, we have been manipulating Earth’s landscape to serve our needs for thousands of years – for recreation, habitat (urbanization), and food

17 (agriculture). As landscape manipulators, we replace complex ecosystems with simple, energy-infused, one-way throughput systems. Historically, there have been different perspectives on the relationship between nature and humanity; and from these, one fundamental concept has emerged that encapsulates the notion of environmental importance: the ecosystem (Lyle, 1994).

An ecosystem is comprised of the interactions between living species and nonliving materials in a given location (landscape). Both a small pond and the entire Earth are examples of ecosystems (Lyle, 1994). Understanding of the interaction between acting variables in an ecosystem – and the intercorrelation of this with other ecosystems – reveals a map of the living cycles that have evolved together, in balance, over eons. Each individual variable in an ecosystem can provide a single part of the story, but it cannot provide vital information on how the variables work together. Ecosystems are broad and extensive, with millions of years of trial and error coming together to perfect a well-balanced, sustainable environment.

Ecosystems are the originators of the closed-cycle loop system now mimicked by the regenerative practices model. They are vast, complex systems, with everchanging cause and effect relationships. In our current state of governance, one can say that ecosystems constitute the bridge between humanity and nature. Understanding the complexity of ecosystems is vital for humans’ harmonious cohabitation with nature.

Industrial agricultural systems are generally simpler than natural ecosystems in their components and interactions. Unlike ecosystems, agricultural

18 systems often comprise a single crop, covering a vast region, artificially sustained by heavy use of chemicals and energy (fertilizers and fuels). The model is congruent with the hypothesis of Eugene Odum, who states that infusions of energy can support a simple system to maintain stability (Odum,

1975). Energy expenditure has posed a serious challenge since the industrial age. Reducing energy usage has become a primary concern of regenerative systems, as energy consumption is directly related to global warming, which is caused by the burning of fossil fuels as a source of energy (Hansen, 1988).

The regenerative systems concept states that it is possible to integrate human development into the natural working order without altering essential operational integrity and its capacity to regenerate. According to Professor John

Lyle, there are six phases of ecosystem functions that represent regenerative capacities and their application to almost any circumstance (Lyle, 1994). These phases are the capacity for energy conversion (sunlight to plant life to food); the capacity of energy distribution (climate-driven nutrients/pollinators; water, wind, and animal migration); the capacity of filtration (watersheds, plants, lakes, estuaries, rocks); the assimilation capacity of waste back into the ecosystem

(animals/decomposers: bacteria, fungi, worms, healthy soils, estuaries); the capacity to store materials/resources, keeping them inactive until needed for the wellbeing of society, and not to exploit them for wealth (aquifers, large bodies of waters, minerals in rock form, nutrients in biomass, fossil fuels); and finally, the capacity to think of humanity as nature’s partner, not its master (thinking ahead as the environment changes) (Lyle, 1994).

19 The six phases align with the sustainability goals of regenerative agriculture: self-renewal capacity; producing reasonably within the capacities of the available resources; beneficial integration of humanity and nature’s ecosystems; profitability (ecological, social, economic); and extreme care of the microbiome found within the soil. A shift in thought must also occur to view agricultural land as an ecosystem and not a food factory.

Regenerative practices: methods and techniques

Regenerative agricultural methods originated with the global tradition of cultivation and indigenous agricultural practices, experimentation by academics in their respective fields (plants, soil, climate, energy), and the practical experience gathered by farmers over generations. As a result of such intercorrelations, five important directions of change were conceptualized by

John Lyle: protection and revitalization of the soil, polyculture diversity, strategic pest control, interactive role of animals, and the integration of farming systems

(Lyle, 1994).

Regenerative soil-caring techniques

The protection and revitalization of the soil is considered by some to be the foundation of a healthy natural environment. However, due to the neglect and damage already incurred, it is not enough to simply protect it; rather, repair and revitalization are required. Professor Lyle states that soil quality is essential for the sustainability of the landscape, farm, and the community (Lyle, 1994).

Healthy soil is needed to ensure sustainability, and techniques and methods to achieve this have been developed under the guidelines of alternative

20 regenerative practices. The practices are as follows: ceasing conventional tillage of arid and nutrient poor soils, practicing conservation tillage techniques, implementing random broadcast cultivation, using mulch, practicing deep cultivation, and adapting to specific locations (no “cookie cutter” approach).

Tillage was appropriate for the northern European nations where it was first implemented, as the soil was dark and nutrient-dense and it maintained heavy moisture throughout the year. Tillage is best suited for soil with at least

15% organic content. However, in locations where conditions are drier (such as most of the United States), it is devastating to the microbiome in the soil (Steiner

& Blair, 1990). Regenerative agriculture promotes either no tillage or better forms of tillage specific to the region of cultivation.

Among the tillage techniques is chisel plowing, which calls for cutting a narrow slit into the ground, in which residues of past crops are mixed with water, making it easier for the nutrients and water to reach deeper into the soil. The technique also prevents erosion and helps to rehabilitate damage soils. Another tillage technique is ridge tillage, in which ridge tops are tilled for the spring crops.

The technique allows for the seeds to remain on top and for the nutrients to fall to the valleys below, where there is less erosion and moisture is better kept. Weeds also tend to sprout in the valleys, making harvesting easier. Although the practice of minimal tillage is not truly sustainable, it helps with the restoration of the soil and eventually leads to truly regenerative agriculture (Jackson, 1980).

21 Regenerative cultivation techniques

Random broadcasting is an alternative to row cropping. This consists of spreading seeds randomly throughout a cultivation area (no tillage), and overlapping the harvests between crops such as wheat, rice, and barley. The leftover biomass from previous harvests is used to cover the growing crop, which helps with the retention of moisture, protects against pests, and replenishes the nutrients extracted by the last crop. Using the remainder of the inedible biomass works as a mulch, this layer also protects from erosion by air and wind. It protects against the sun by minimizing evaporation, thus retaining moisture for crops, and the decomposition of organic matter, which is then used for growing crops (Fukuoka, 1978).

Deep cultivation is another regenerative technique that promotes healthy soil maintenance. The technique consists of crop cultivation in raised beds, with a depth of 12 inches and a width of 3-6 feet. Inside the beds is loose soil (which allows aeration) and no chemicals. Narrow paths around and between the beds are designed for harvesting, thus minimizing physical labor for farmworkers.

According to John Jeavons, this method has production capacity output of four times that of the conventional method, and it uses 50% less water and 1% of the fuel for energy used in the traditional method (Jeavons, 1974).

Polyculture cultivation is another regenerative agriculture technique. This heavily mimics the natural ecosystem process in that it uses different plants or animals or combinations of the two to maintain production without the utilization of chemicals or fossil fuels. It promotes the interaction of elements to work in

22 concert, with one element making another sustainable. The planning can be much more complex than in a monoculture design, where interaction is replaced with chemicals. Monocultures, although praised by most farmers, contradict the check and balances systems found in nature, also known as ecosystems. It promotes the propagation of individual pest species by providing the ideal conditions for a food source.

Polycultures are designed to be beneficial for all elements involved in the process of cultivation (preparation, growing, and harvesting). Guilds are communities of species that work in concert to produce a desired product in a polyculture plan. They are often designed with an animal or plant as a base element from which all other elements can benefit and be capable of reciprocating this benefit for at least one other element. Polycultures have many advantages that can only be provided by chemicals in conventional agriculture; among these are pest control, microclimate control, nutrient delivery, preparation of soil, structural support, and the ability to process and assimilate waste material back into the cycle, with little to no support from human involvement.

A peculiar type of polyculture practiced in tropical regions is agroforestry.

This technique consists of guilds, set up in such a manner as to utilize the vertical space above the ground surface. The principle of the technique is the utilization of all available three-dimensional space, when there is a lack of two- dimensional cultivation space. Maximizing available space is thus vital for the benefits incurred by the grower. The system uses all available areas, beginning with the under the ground root crops, at ground level, plants fill in the cubic area

23 just above the ground such as leafy greens, at (mid-level) plants such as corn fill in the mid cubic area and above that the fruit trees provide shelter and fruits and at the very top are the tallest fruit trees available in the region, such as coconut trees. The middle area is often shared with vines, such as beans, which utilize structural support. This regenerative agriculture technique is best suited to tropical areas that can maintain the diversity of the different plant species with little to no irrigation (Okigbo, 1989). These practices can be said to lay the groundwork for resolving the challenges humanity is currently facing (lack of space and inefficient use of resources).

Regenerative pest management

Strategic pest control is also a component of regenerative agriculture techniques. It is astonishing that humans try to exert absolute control over other species by imposing simple artificial conditions on a natural complex ecosystem.

Under the guidelines of regenerative agriculture, pests are not eradicated. On the contrary, there is an allowance for pests within a polyculture, as animals are a necessary part of a balanced ecosystem.

The history of pests and chemicals has shown that pests cannot be completely eradicated. Pests have shown resilience against all types of chemicals—developing resistance and evolving to become stronger, with conventional agriculture then using stronger chemicals to counteract the new stronger pests. In this way, a degenerative cycle continues; and if time is any sign of learning, it should be noted that pests were here long before human chemical technology. In regenerative agriculture, if pests’ numbers reach the

24 tolerance threshold set by the farmer, contingency management plans developed by conventional farmers through trial and error are put into action in the form of integrated pest management (IPM). This includes containment and management strategies designed to bring pest numbers under the tolerance threshold, not to eradicate them. Among these strategies, the most effective techniques have been found to be diversification, genetic resistance, and the introduction and augmentation of natural enemies.

Diversification consists of allowing nature to do the management and spacing of diversified crops. Each crop often has its own pest community, and having multiple crops adjacent to one another keeps the different communities’ populations in check. Diversification usually works well with crop rotation, as this eliminates the food source for the pest, thus pests decrease or are temporarily eliminated from the area. Allowing nature to do the work also involves the utilization of “species vs species”.

Another successful pest management technique is genetic resistance, where plants are genetically modified to withstand attack from pests. The modifications often provide the means for the plant to resist insects and mites.

Although this technique is known to be successful, more research is needed to explore the implications of humans’ long-term ingestion of modified organisms.

A less intrusive method that often occurs in nature as a result of the checks and balances in ecosystems is the integration of natural enemies. A common example of this technique is the use of lady bugs to control the population of aphids usually found in vegetable farms. This is often a slower and

25 more complex technique, but it has been shown to have sustainable results

(National Research Center, 1989).

Animal integration

The re-integration into a farming system of the complete functions of an animal (e.g., cows) has more benefits than the specialization of feedlots or dairies. With specialization, the only advantage for the farm of cattle and other farm animals is meat, while the other benefits—such as cheese, milk, eggs, fat, honey, and leather—are lost. The animals become part of the recycling system, as they consume waste, which is converted into fertilizer, thus closing the cycle by returning the nutrients to the soil (Mollison, 1988).

Other examples of the utilization of animals in regenerative agricultural techniques include the use of water buffalos for plowing and threshing grain; fish for mosquito control in aquaculture; chickens and ducks for insect control and grazing; goat and sheep for grazing; rat snakes for pest control; and small lizards to control the crab population that would otherwise burrow holes into water levies, thus debilitating them and eventually causing failure (Mollison, 1988).

Aquaculture is a regenerative agriculture practice unique in its method of integration. Although the practice is thousands of years old, it has gained momentum in the Western world in the past two decades due, in part, to growing demand and decreasing sea life caused by overexploitation, contamination, and climate change (Pachiappan et al., 2015).

Aquaculture is also appealing for its potential production and waste- assimilation capacity, providing nutrients for other organisms. In comparison to

26 conventional farming, aquaculture is 20 times more productive than planting the same land area with crops. Aquaculture, much like polyculture, can produce dense populations of organisms in small spaces. This is due to its ability to design several levels of complete food chains (McLarney, 1976).

The integration of agriculture and aquaculture has proven over thousands of years to be an efficient and effective method of regenerative agriculture. The practice has been most popular in Eastern countries, such as China and

Thailand, where farmers have used pigs, ducks, and chickens as complementary components of aquaculture (as means of nutrients) (Schroeder, 1980).

An example of an integrated system is as follows. Chicken coops are placed above pig pens. The design allows the chickens’ feces to fall through the floor onto the pens for the pigs to consume, thus adding nutrients to their diets.

The same design is repeated for the pigs’ feces, which is dumped into the fishponds. Although the regenerative techniques produce less in biomass yield, they are more cost effective than pellet-feeding systems. Other more traditional techniques used by Chinese farmers over centuries—such as composting the pig’s manure before feeding it to the fish—can yield large quantities of biomass

(Schroeder, 1980).

Conventional agriculture seems to retain its methods and techniques wherever it is implemented. The system repeats its characteristics anywhere it is established (farming model), with maximum mechanization, followed by the embrace of monoculture and capping of the system by building the largest possible operation for the highest production. Regenerative agriculture differs in

27 that it embraces diversity in growing methods, size of operation, and integration to ensure a better system. Regenerative agricultural practices are adaptable, making them more desirable when the environment is less than accommodating of food production; while conventional farming, on the other hand, requires large flat lands for mechanized harvesters and tillers to perform at their best (Lyle,

1994).

As mentioned earlier, most available landscape has already been converted into industrial arable land. A transition to regenerative practices would require approximately 2-10 years, depending on the system of choice (Fukuoka,

1978; Lyle, 1994). This transition can be a deciding factor for farmers interested in making the change. In the early years of regenerative agriculture, labor can be very intensive; but it gradually lessens, as adaptation proceeds. Diversity is a principle of regenerative agriculture, and it is important to put this into practice as changes in growing practices will not necessarily arrive and it is thus important to prepare alternatives (Fukuoka, 1978).

The introduction of industrial agriculture in developing countries has caused damage to the soil and the social fabric in small farming communities.

The imposition of cookie-cutter systems that promote fossil fuels and management by chemicals as farming principles has frequently failed due to regional differences in climate, soil, organism diversity, and socioeconomic levels. Failure has often been due to a lack of consideration for the region and its resources (Altieri, 1987).

28 Regenerative agriculture is often more successful in such circumstances because its principles call for working with what is available at the location. It adapts the best suited techniques to the location and its circumstances, rather than making the location adaptable to the needs of the farm. Techniques are often integrated into a grand design that incorporates the wellbeing of all parties, including the people, places, and environment (Altieri, 1987).

The future of food production is today uncertain. Although food is plentiful and the system appears to be working well in most developed countries, there are factors in play that may call into question past and present agricultural practices. The lack of land for food production, the destruction of the current arable land by overharvesting and overapplication of chemicals (pesticides and fertilizers), the destruction of ecosystems (for farm land or as a result of chemical runoff), the direct contamination of water, and the destruction of essential species

(such as bees), as well as the overall sense of complacency among consumers, is all encouraging regenerative agriculturists to seek food production alternatives outside the conventional paradigm. Urban agriculture puts into practice most—if not all—the regenerative agriculture techniques mentioned, evolving and adapting to the everchanging environment in which it resides (Glassman, 1990;

NIDIS, 2019; Santo et al., 2016).

Urban agriculture history

Urban agriculture is not a new concept, but it is seeing growing interest.

The movement is supported primarily by commonly underrepresented lower- income communities, where the social benefits have often been most needed

29 (Besthorn, 2013). Over the years, urban agriculture has changed, adapting and improving; and there are many reasons why it continues to be used around the world.

This section provides an overview of urban agriculture, from its early beginnings and how it came to be, to its present, and through to its future possibilities. The section also explores its past and future purposes. It presents the different types of urban agriculture operational models and various plant- growing techniques, past and present. The two most common production types in urban agricultural models are community gardens and vertical farms. These are discussed here in terms of their past and present benefits and the challenges to their sustainability. Finally, research is presented on the three types of legal business entity currently used in urban agriculture.

Urban agriculture operations were not always just for the poor; and, at one time, they were strongly encouraged by the federal government. Government support was at its highest during the two World Wars (Pack, 1919; Mok et al.,

2014), when food scarcity became a serious problem for entire nations (Britain,

France, Italy, and Belgium). The United States, however, was able to remain self- sustainable and to help with the food shortages in these countries. The key factors here were conservation and reliance on urban agriculture in the form of

“war gardens” (Mok et al., 2014).

In times of crisis and economic depression, urban agriculture has been the solution of choice for the government. “War gardens” were promoted as a tool to increase food security and patriotism during WW I, with the same campaign

30 renamed “victory gardens” for WWII (Mok et al., 2014). In 1917, the National War

Garden Commission counted 3.5 million gardens, producing $350 million of food, increasing in the second year to 5.3 million gardens and $525 million (Pack,

1919; Mok et al., 2014).

The United States continued gardening during the Great Depression, with

“relief gardens.” These consisted of small- and large-scale plots that provided food, income, and a purpose for thousands of unemployed Americans (Basset,

1981; Mok et al., 2014). Gardens helped to meet the demand for food for the armed forces (Mok et al., 2014). At peak production, 20 million gardens in the

United States were producing 40% of the nation’s fresh vegetables (Basset,

1981; Mok et al., 2014). The gardens campaign came to an end due to a shift in the mindsets of the citizens—a change brought about by the government, which began to promote consumerism as a better lifestyle for families than self- sustenance. The introduction of neighborhood supermarkets brought convenience; and garden food production became unnecessary and thus, eventually, was forgotten (Press & Arnould, 2011; Mok et al., 2014).

Interest in urban agriculture, in the form of community and backyard gardens, returned in the late 1960s and early 1970s. Citizens were motivated to explore its possibilities by growing environmental awareness and a counter- culture movement against consumerism, inflation, and unemployment (Basset,

1981; Hynes & Howe, 2004; Press & Amould, 2011; Mok et al., 2014). This movement had a rebirth in the mid-2000s, due in part to the barrage of books, documentaries, and articles criticizing the industrial agriculture system and

31 promoting alternative food production methods (Follett, 2009; Press & Amould,

2011; Mok et al.,2014).

Most urban agricultural operations are considered small farms. The U.S.

Department of Agriculture (USDA) defines a small farm as one that generates less than $250,000 in gross sales (Brown & Carter, 2003). Today, urban agriculture comes in many forms: household, school, and community gardens; greenhouses on solid ground or rooftops; open-air rooftops gardens; vertical farming; shipping containers, edible walls, and landscapes (Santo et al., 2016).

Aside from these operational forms, there are also different growing methods. These include soil-based systems at ground level and in raised beds; soilless systems, such as hydroponics (constant running water to the roots), and in the form of single-layer static beds (non-running water); aeroponics (intervals of water mist to the roots); and aquaponics (fusion of hydroponics and aquaculture) (Despommier, 2010).

One operational model of urban agriculture that has recently been receiving attention is vertical farming. This adopts innovative means of producing much higher yields of foods within the same square footage as other farming practices (Lakhiar et al.,2018). According to Jeff Birkby (Birkby, 2016) from the

National Center for Appropriate Technology, a vertical farm involves growing plants stacked in layers of more than one storey, with crops growing in a controlled indoor environment.

The legal framing of an organization is as important as its mission. Urban agriculture organizations can be categorized as nonprofit or for-profit. The

32 nonprofit classification is commonly associated with community gardens, whose main purpose is social benefit. The for-profit model is commonly associated with vertical farming that seeks to meet a need in the food market (Kaufman &

Bailkey, 2000). These differences in motivation may explain why some succeed and others fail.

Most for-profit urban agriculture models currently in operation are driven by innovation, market share, and profit. Concerns with market viability rival those of humanitarian needs. The common for-profit vertical farm model involves the use of existing warehouses and empty land, converted into food-producing vertical farms (Despommier, 2010). For-profit ventures are commonly attracted to low-income communities, where there is typically less resistance to the new development. However, the for-profit organization’s intended target consumer is not usually from these low-income communities, but rather from the neighboring, more affluent communities (Kaufman & Bailkey, 2000).

The less desirable industrial areas that are home to low-income communities are often sought out by indoor vertical farms for their attractively low rents and proximity to large metropolitan areas (Besthorn, 2013). However, the missions of these companies often do not benefit the low-income communities themselves; rather, the companies are driven by the exploitation of the area’s resources, such as cheap labor, low rents, and municipal incentives in the form of tax breaks (Santo et al., 2016). With such practices, vertical farms provide products closer to the final (wealthier) consumer, while neglecting the local

33 community’s needs, thus repeating the all-too-familiar model of “taking from the poor, for the enrichment of a few” (Santo et al., 2016).

The nonprofit urban agriculture model is typically supported by the desire to make a positive social impact on those who live in underrepresented and socially challenged communities. Although nonprofits provide good food for lower-income communities, they lack the ability to serve a large number of residents, due in part to practical constraints (Poulsen et al., 2014). From inception, the focus lies on building and empowering communities in desperate social circumstances, usually to resolve an immediate concern, with little consideration for the model’s potential for growth, viability, and consistency. This lack of foresight hinders the possibilities for better and more efficient models that could be economically self-sustaining and able to diversify avenues of income, thus, in turn, helping in more ways than just community building.

There are both benefits and challenges for vertical farms and community gardens. In different manners, both aim to be successful and contribute to urban agriculture, while current challenges have led to multiple failures for both

(Besthorn, 2013). Successful urban agriculture has the potential to improve the lives of hundreds and even thousands of communities, while making millions of dollars for a few giant companies (centralization vs. decentralization). Enterprises in other industries that have similar challenges and possibilities have proven that new, socially conscious, and self-supporting enterprises can be as successful as for-profit enterprises, if not more so (Westaway, 2014). A good example of this is the for-profit—and former nonprofit—social enterprise “Embrace.”

34 As a social enterprise, Embrace was created with the purpose of reducing infant mortality in developing countries. The goal was partly achieved by the creation of a less expensive newborn incubator, “Embrace Warmer.” The innovative incubator was developed to be donated to communities that could not afford the more expensive conventional incubators. The plan was to build them with money gathered by the nonprofit’s fundraising activities. The nonprofit legal structure was chosen because it was thought that this would allow better access to philanthropic capital (Westaway, 2014).

Fundraising came to a halt when it was realized that “free money” from fundraising was not actually free, but rather required time and efforts for grant bid writing, event hosting, and running online campaigns. These and the other activities necessary to maintain the nonprofit organization took time and focus away from the real mission, which was to help newborns by producing incubators. As the product was new and untested and had not been introduced to the public, it was very difficult to raise funds, as most philanthropic investors prefer to donate to proven products or methods (Westaway, 2014).

The struggle to obtain funding for the mission led to the creation of a two separate but related entities. The for-profit entity “Embrace Innovations” funds the nonprofit by licensing the intellectual properties under a revenue-sharing agreement with a major manufacturing company. Funded by investment from social venture capitalists, the for-profit runs an R&D department and sets up distribution and sales, while the nonprofit focuses on the mission goals, including

35 newborn health, education, and monitoring and evaluation of newborn care

(Westaway, 2014).

Community gardens

According to most of the literature, community gardens can be considered a synonym of urban agriculture, as most of the information on the latter comes from research on community gardens. A community garden is an unused lot repurposed as usable land for the cultivation of edible and inedible plants (Santo et al., 2016). The repurposing is a means of promoting diverse benefits, such as public health and economic development, and of fortifying social capital.

Community gardens are commonly run by a municipality, institution, community group, or land trusts (Brown & Carter, 2003; Mok et al., 2014). As mentioned earlier, community gardens were the original model of urban agriculture, contributing to the alleviation of food scarcity during WWI and WWII.

The recent rebirth of community gardens reflects a very different objective.

Like the 1917 government, Congress in the late 1970s provided support for the practice by establishing the “Urban Gardening Program,” which made available annual grants of $150,000-250,000 (Brown & Jameton, 2000; Hynes & Howe,

2004; Mok et al., 2014). Sixteen years later, when the program had expanded from 6 to 23 cities, the USDA and the Cooperative Extension Service discontinued support for unknown reasons (Malakoff, 2004; Mok et al., 2014). It was not until 2009 that the USDA renewed its interest in community gardens and launched a new promotional initiative, “The People’s Garden” (USDA, 2010; Mok et al., 2014).

36 In 2009, according to the US Census, community gardens had become an effective method of combatting food insecurity, which is attributed to poverty (US

Census Bureau, 2010). The inability of residents to purchase food because of high prices or, even when money is available, poor accessibility due to low availability and transportation difficulties, resulted in a phenomenon that has come to be known as a “food desert.” Food deserts are defined as geographic areas in which residents have poor access to healthy and affordable food due to a lack of availability (Mok et al., 2014).

However, owing to collaboration between nonprofit organizations, government agencies, and community gardens, food production and distribution has been able to reach some of those affected, though many more continue to suffer such circumstances in U.S. urban areas (Brown & Carter, 2003; Saldivar-

Tanaka & Krasny, 2004; Johnston & Baker, 2005; Mok et al., 2014).

The benefits of community gardens

Community gardens have been used as a means for getting back in touch with nature. Human sentiments towards nature have promoted the proliferation of gardens worldwide, and especially in major U.S. cities (Santo et al., 2016).

Community gardens can teach both younger and older people how to feed themselves. Though they will not necessarily become farming entrepreneurs, they can certainly enjoy many benefits, even aside from growing their own food.

The spiritual and community advantages cannot be quantified, as these may vary from person to person, but most agree that socializing with others has psychological benefits. Knowing where our food comes from is as much part of

37 our nature, as caring for the land it produces it, the socialization with our community and the option to a good nutritious meal. The human species requires social contact, and reencountering nature via community gardens helps us to resolve or alleviate social problems, such as crime, vacant/unused lots, and community isolation (Santo et al., 2016).

Another benefit of a community garden is their eligibility for extramural funding and government support. This can come in the form of land, funding, farming supplies, technical assistance, workshops, or new zoning ordinances and building codes (Santo et al., 2016). The model gives low-income community members access to “good food” (organic fresh fruits and vegetables), which are often too expensive to purchase from non-local retailers (Hendrickson et al.,

2006). Good food availability in community gardens is only possible due to external financial support in the form of subsidies, as is the case for conventional mega-farms. Subsidies are vital to the success of the model. These are commonly in the form of government grants and free land, water, seeds, tools, and technical support (Santo et al., 2016).

Community organizing and empowerment for those who participate in community gardens transcends borders of income, race, and gender, as in the case of the female gardeners in Detroit. Following their success in gardening, a group of women shifted their interest to other challenges within their community.

Affordable housing, clean water, community policing, and decent public education were all cited as possible achievable goals. One can argue that their

38 success empowered them and gave them a sense of belonging that enabled them to see the potential for their community (Colasanti et al., 2012).

The challenges of community gardens

A downside of the community garden model is that it does not create significant employment opportunities. The intended purpose of most community gardens is to bring the community together for reasons of empowerment. In many cases, this is all that it accomplishes and it does not take anything from the garden. However, there are many more potential benefits, such as feeding the community. In addition, if the available farming space can be utilized with 10 times the efficiency, it could become a hub for technical job learning in an up- and-coming industry such as vertical farming (Daftary-Steel et al., 2015).

Community gardens create only a small number of jobs, but they are not intended to be job creators. They are small operations that rely heavily on volunteers, with potential employees looking elsewhere for opportunities. The available work in a typical community garden is limited by the size of the operation (Vitiello & Wolf-Powers, 2014). The intensity of the farming practices and production is dictated by the climatic environment. A typical farm worker is forced to migrate to other parts of the country to survive the different production seasons. For that reason, most cannot make a living from working only at a community garden, which is at the mercy of the seasons. Most community gardens are much smaller than conventional farms, thus their production capacity is also minimal in comparison. This is the result of confinement to a two-

39 dimensional working area and their being typically free of pesticides or herbicides

(Pfeiffer et al., 2014).

The gardens’ inefficiency in production, compared with newer growing practices, leaves them heavily dependent on community involvement (free labor), subsidies, and donations. Social benefits are at the core of the community gardens operational model. The available jobs are usually part-time and low wage, often held by college students, part-time volunteers, and retirees (Glover,

2004). The lack of a for-profit model can increase the community response to the garden’s needs. The participation of the community is vital to the garden’s success: it is not about how many jobs it can be create, but about the social benefits it can deliver (Daftary-Steel et al., 2015).

Another environmental factor to take into consideration when planning a community garden is careless cultivation practices. For example, a lack of soil testing and bioremediation can have negative outcomes (Deportes et al., 1995;

Senesi et al., 1999; Mok et al., 2014), as in the case of plant uptake of heavy metals, commonly from chemical contamination due to previous land usage

(empty lots where factories and assembly plants once stood) (Mok et al., 2014).

Contaminated soil has unknowingly been used in the past. Heavy metals found in the soil—plus tillage of such—can contribute to runoff. In the middle of urban areas, where complete absorption of rainwater is close to impossible (due to concrete, asphalt, and soil compacted surfaces), this can lead to contamination in the form of runoff carrying not only heavy metals, but also pesticides,

40 herbicides, and nutrients (nitrogen, phosphate, potassium) into body of waters such as lakes, rivers, estuaries, and oceans (Guitart et al., 2012).

Organic practices, although less damaging to the environment, can still cause damage as they involve the use of chemicals. Organic practices require soil mitigation and bioremediation before anything is grown in the intended plot

(USDA, 2010; Mok et al., 2014), but these practices call for time and money, which nonprofits commonly lack.

Compared to conventional agriculture, community gardens have fewer ill effects (direct and indirect) on the natural environment. However, there are nevertheless improvements to be made to these cultivation practices. Community gardens make less efficient use of resources, as they are often small operations

(Santo et al., 2016). Some gardens implement conservation practices such as drip irrigation, which minimizes water loss by controlling the amount of water used to irrigate. Although this is preferable to flood irrigation, there remains room for improvement in water conservation.

Food production capacity is also a challenge for community gardens, as they rarely produce enough to meet the community’s caloric needs. Community gardens are often constrained by the area for cultivation (size of lot) and susceptible to unforeseeable climatic and environmental conditions (Hallsworth &

Wong, 2013). For these reasons, their main purpose is not to feed the community, but to provide other social benefits, such as cultural integration and preservation, community cohesion and development, and education for young people (Alaimo et al., 2010).

41 Vertical farming

A commercial vertical farm is conceptually defined as the most efficient method of growing foods. It provides the most favorable growing conditions for a specific biological organism (crop) in an enclosed and controlled environment, as opposed to adapting an entire natural environment (ecosystem) to accommodate a single food (crop). Vertical farming is also defined as growing plants stacked in layers inside a single- or multi-storey structure, providing the precise lighting, humidity, nutrients, and temperature needed for the specific crop (Birkby, 2016).

A greenhouse that uses hydroponics or aeroponics technologies, but only two- dimensional spacing (one layer at a time) is considered a greenhouse rather than a vertical farm. A single-storey greenhouse utilizing three-dimensional spacing

(vertically stacking/layering crops) can be considered a vertical farm (Birkby,

2016).

Vertical farming is thought to be the most intense means of growing foods in urban areas. Vertical farmers do not claim a goal of replacing or competing with conventional farming. Rather, a friendly and decentralized supplemental production approach has been taken, with vertical farmers often meeting shortfalls in the supply of crops plagued by production uncertainty, such as lettuce and leafy greens. In contrast to conventional farming, vertical farming technology is considered to be in its infancy in terms of its development as a science.

However, vertical farms are viewed by many as a potential alternative to food production diversification as they can enable more efficient resource

42 management (application and conservation) than any other current farming practice (conventional or urban) (Lakhiar et al., 2018). The production of healthier, more nutritious crops using fewer (or no) chemicals comes from the concept of providing the optimal growing conditions for the intended crop versus changing and destroying an entire ecosystem to suit the needs of human consumption (Mok et al., 2014).

Another positive aspect of vertical farming is that it shrinks the gap between the food producer and the final consumer, thus reducing the major transportation costs (economic and environmental). Another possible byproduct of vertical farming implementation in urban agriculture is the minimization of the destruction of virgin land (unaltered by humans) for the purpose of conversion to agricultural land (Mok et al., 2014).

The expression “vertical farming” was coined by geologist Gilbert Ellis

Bailey in 1915 in his book of the same name (Bailey, 1915). Even at that point, the problem was foreseeable. Bailey saw the approaching food scarcity, prior to the destruction of the agricultural industry of the 1930s, which gave way to the

“dust bowl,” also known as “the dirty thirties.” Loose soil was easily eroded by winds, in part due to the depletion of nutrients from the topsoil and the neglectful management of the agricultural land.

The loss of crops led to farms going out of business and filing for bankruptcy. With the economic pressure exerted by the stock market collapse, many farmers moved into urban areas in search of new work, which created more stress for already densely populated areas where people were struggling to

43 meet their basic human needs. Bailey saw vertical farming practices as more efficient in terms of labor, space, and time. His concept was similar to that of a skyscraper: minimizing footprint and maximizing space. Intensification and doubling of production were more profitable, he argued, than spreading outward

(Bailey, 1915).

According to Besthorn (2013), the idea of vertical farming was then extended by architect Ken Yeang, who implemented “ecomimicry” in the operation, now known as “biomimicry.” The practice assumes that any system has a better chance of reaching sustainability if it mimics the characteristics and processes of natural cycles in an ecosystem. This is supported by the observation that natural ecosystem cycles have had time to develop the best possible model, having been tested and improved through trial and error over hundreds of years (Besthorn, 2013). It is not only about creating an environment in which there is recycling and energy efficiency, but rather “a complete eco- integration of all built forms with surrounding landscapes and ecosystems,” also known as a balanced ecosystem (Besthorn, 2013).

A successful vertical farm operation – supporting and supported by its local community – must therefore be a part of the environment, as opposed to a concept foreign and unknown to its surroundings. Its introduction must create the least possible negative disturbance. The relationship must be symbiotic, like that of a coral reef, and not parasitic. Coral reefs have many benefits for marine life in terms of shelter and food: the food provides nutrients for the coral reef and the fish get shelter.

44 In contrast to a balanced ecosystem – in which checks and balances have adapted over thousands of years – are invasive species. The disruption of invasive species can have a devastating effect on entire ecosystems. One example of this is the Asian carp. The Asian carp is a voracious eater that decimated complete ecosystems in the Mississippi River because it was unrestrained by predators and had unlimited access to food. The carp’s population eventually reached carrying capacity, and then collapsed, followed by a plateau and eventually becoming part of the ecosystem. The consequences of such invasion are typically irreversible, leading to complete species extinction and landscape changes (Stockstad, 2010).

Comparing invasive species to corporations’ facilities in low-income communities, it is observed that companies exploit communities nationally and internationally. Mega-corporations have decimated entire towns with their unchecked use of resources, including water, cheap labor, and land (Villarroel,

2006). The contamination of air, soil, and water are common byproducts of such practices. While, thanks to the resilience of nature, some types of contamination can be cleared in a few years, others take hundreds of years to bio-remediate.

A recent example of this affected more than 100,000 people in a single community, most of them low-income and Latino, and was caused by decades of unregulated business practices by “Exide,” a recycling battery plant located in the city of Vernon, California. The plant had been operating unregulated in the community since the early 1900s. When residents near the plant were affected by a large number of coincidental illnesses, the plant’s wrongful practices came

45 to light. It took the joint power of seven cities to get the plant closed, and the clean-up became the largest in national history (Sprague, 2016).

Exide’s business practices have had lasting ill effects on children and the elderly. However, rather than admitting wrongdoing and seeking to provide help to those affected, corporations such as Exide often utilize legal pathways to protect themselves against legal action. Eco-integration is of real importance when determining the right location for socially conscious operations. It is also important to identify a dynamic flow of work and investigate any applicable biomimicry that would be beneficial for all parties in the community, business, and natural environment. The importance of flow is greatest when dealing with waste management and the usage of local resources.

Dickson Despommier, a professor of microbiology and public and ecological health at Columbia University, became interested in the possibilities of vertical farming while teaching an environmental graduate class. Despommier

(2009) concludes that “growing out” is no longer the only option, and “growing up” is a great alternative. This is the same concept as that of skyscrapers for homes and places of work.

The utilization of high-rise buildings and advanced greenhouse and emerging technology to produce fruits and vegetables, as well as fish, poultry, and small domesticated animals has the potential to become a viable urban agriculture model (Despommier, 2009; Besthorn, 2013). Vertical farming, like any other developing industry, goes through periods of trial and error, until the best practice becomes the standard. Vertical farming is currently working through the

46 phase, with various systems being trialed in different parts of the world. These systems are detailed in the following section.

Vertical farm operational models

Vertical farms have developed for many reasons, including necessity, opportunity, intellectual challenges, and as a form of rebellion against the standard. Vertical farming operational models have sought to address the needs of the community in the best ways possible. Each operation has its strengths and weaknesses, and each is better suited to one scenario or another.

In this section, the capabilities and characteristics of each model are presented. Vertical farm operational models involve the retrofitting of existing structures (such as abandoned buildings) or new construction design, with a farm built from scratch to meet the specific needs of the operation. Alternatively, discarded or new shipping containers can be used for maritime transportation of goods for the purpose of growing crops (Kluko, 2015).

Retrofitting existing structures

Retrofitting is the process by which an abandoned and deteriorating building structure is revitalized for conversion into a vertical farm operation for growing food. Old warehouses, factories, parking lots, recycling plants, and even housing structures (apartments and offices) can be converted into vertical farms with minimal structural change. Retrofits require the most creativity, as they rely heavily on the use of available resources within the location.

A good example of this type of vertical farm model is “The Plant” in

Chicago, Illinois, located in what was previously a meatpacking facility (Birkby,

47 2016). The open floorplan was key to the efficiency of its design. As with any business, permits and licenses are required. However, as retrofitting does not include major structural changes, fewer permits are required than for the new construction model. Recycling – whether of cans or buildings – is covered by the same principles of conservation. The need to clean up the neighborhood and repurpose abandoned city structures makes the building base model retrofit a good option for cities with many derelict lots.

Another form of the retrofitting operational model is the utilization of unused spaces within productive structures, such as rooftops. This type of retrofit is fairly undefined. It is not classified fully as either retrofit or new construction.

Structures built on top of or adjacent to existing structures are examples of the possibilities for vertical farming. One vertical farm greenhouse, for instance, is a revolving carousel attached to the side of an existing parking structure in

Jackson, Wyoming. The odd shape of the land adjacent to the parking structure prevents other structures being built there, making this project a good use of the otherwise unusable land (Best, 2016).

Construction of new facilities

New building structures are another option. This is the most expensive vertical farm model type, with the cost of construction potentially reaching into the millions, but it can be considered the most efficient. Since most sustainable practices can be incorporated into the design, the building can be tailored to meet the needs of both the environment and the crops (Rothman, 2015). One example of this model is the world’s largest vertical farm, AeroFarms, in New

48 Jersey. Although not a complete full construction, enough alterations were made to the building’s original structural frame for this to be classified as a complete construction. The model uses aeroponics and LEDs for production, and it consists of non-moving crop layering (Rothman, 2015).

Another example of new construction is a standalone greenhouse, though this can also be considered a retrofit if it is revitalizing an otherwise unusable lot.

In the case of “Sky Greens” in Singapore, the model consists of revolving tower gardens, or a “hydraulic carousel,” enclosed by extra tall greenhouses. It is made of glass and plastic, with an aluminum supporting structure (Benke & Tomkins,

2017).

Shipping containers

The primary advantage of shipping containers is their portability. They are versatile and can be used in various ways to suit the needs of the business plan.

They can be sold, rented, leased, and tailored and employed for food production services. Organizations such as Cropbox and Freightfarms are in the business of building and selling these units for use in growing crops. The price of the individual units typically runs from $55,000 to $85,000, depending on the capabilities the client demands.

The unit comes ready to “plug-and-play” (Newbean Capital, Local Roots, and Proteus Environmental Technologies, 2015). The containers are automation- capable and can be monitored via the web using computers and smart devices.

(These tools can also be implemented in the other models.) One shipping

49 container does not usually require a city permit other than business licensing for operation, though every city has its own ordinance regarding urban agriculture.

The loaner system is another business model that utilizes shipping containers as a food production tool. In this model, the containers are leased and delivered to churches, schools, restaurants, parking lots, and so on. The necessary food growing technical support is provided; and when the food is ready for consumption, the customer collects the crop directly from the container.

The service lease program was created by Los Angeles entrepreneurial venture

Local Roots (https://www.localrootsfarms.com).

Local Root’s operations are based out of downtown Los Angeles, CA. Its containers are rented to businesses such as restaurants, churches, schools, and nongovernmental organizations. The monitoring of the growing process is conducted by Local Roots, and the harvest is negotiated. The containers are maintained on-site, with personnel visiting regularly for maintenance – the frequency depending on the particular crop. The Local Roots model depends on complete artificial lighting and it has an excellent insulation from the natural environment, making it ideal for locations with extreme climatic conditions.

The shipping container models are constantly adapting to new challenges, as the industry is new and ever evolving. Many operations begin in the business of growing food but meet other opportunities in the industry (such as equipment development for food production in vertical farming) and choose to leave the food production sector behind (Newbean Capital, Local Roots, and Proteus

Environmental Technologies, 2015).

50 Growing systems

Vertical farm models are gaining popularity for their fast production capabilities, consistency, and efficiency. The diversity of growing techniques within the different models allows for adaptability to different scenarios in the urban environment. Techniques involve conventional greenhouses, hydroponics, and aeroponics. There are also sub-systems of irrigation, such as drip irrigation, manual irrigations, continuous running water, standing water, and interval water mist (Zeidler et al., 2013; Al-Chalabi, 2015; Hydroponics: Secrets of Hydroponic

Gardening, 2019).

The greenhouse growing technique used in vertical farming is the oldest type, and this uses soil or an absorbent media such as rockwool, plant fibers, clay pebbles, or synthetic foam. Seeds are placed into small recipients filled with soil or absorbent media, then placed onto another holding platform to provide a row of plants. Drip and hand irrigation are the common forms of irrigation used in greenhouse models. Drip irrigation involves assigning an individual hose to each plant. In hand or manual irrigation, a person walks around and waters the plants using a hose or bucket. The primary advantage of the greenhouse model is the ability to capitalize on the surroundings. It uses the sun for photosynthesis and for heat. The enclosure protects the plants from the outside elements, including bad weather and pests (Zeidler et al., 2013; Krishnamurthy, 2014; Lakhiar et al.,

2018).

The largest vertical farm in Singapore, “Sky Greens,” provides an example of greenhouse technology (Seneviratne, 2012). Sky Greens uses soil in pots and

51 manual labor for irrigation (a person waters each plant with hose). The system is enclosed by a taller than normal greenhouse for protection and conservation.

The key innovation of this model is a unique water-driven hydraulic carousel to improve harvesting and space area optimization. The design makes harvesting easier and less dangerous for workers, as there is less liability, and the crop comes to the harvester – rather than the other way around. This expedites operations and makes dependency on energy less of a determining factor for success. The tiers complete one rotation, which takes them to the top and back down every eight hours, while using the same amount of energy as a 45-watt lightbulb (Seneviratne, 2012).

Sunlight is the only source of light used by Sky Greens, which relies on weather conditions. As a point of reference, in one year, the facilities in

Singapore receive approximately 100 fewer days of sunlight than southern

California (NOAA, 2004). The model is more efficient than those that do not have the luxury of sunlight as a resource and must depend on artificial lighting

(Seneviratne, 2012). The model can adopt other techniques that increase efficiency, such as hydroponics, which can increase water efficiency by up to

90% (Lakhiar et al., 2018).

52 Hydroponics

Hydroponics is one of the newer growing techniques. It is also one of the most commonly used irrigation systems in vertical farming. The technology was developed in the 1950s by NASA, which conducted research into resource conservation (Despommier, 2009). In the late 1990s, this topic was taken up once again by Professor Despommier, who was investigating the minimization of factors such as soil and weight to achieve the most efficient growing systems.

Hydroponics involves growing plants with nutrient solutions, free of soil, or using mediums such as coconut husk fibers and fiberglass wool as a moisture retainer. The plant roots are submerged in a moving nutrient solution, which is frequently monitored, filtered, and recirculated to ensure that the correct chemical composition is maintained. Hydroponics works with artificial lighting or natural sunlight (in greenhouses) (Birkby, 2016). The system is best where water is limited due to the environment, such as deserts and islands.

Figure 1: the inner workings of a hydroponics system Source: https://springpot.com/wp-content/uploads/2017/06/how-to-grow-plants-in-water.png

53 Aeroponics

Aeroponics is the latest in vertical farming growing systems. Much like hydroponics, aeroponics involves growing plants using a nutrient solution.

However, rather than running water, the nutrient-filled solution is misted or sprayed directly onto the roots. The misting occurs at intervals during the day, thus substantially increasing water conservation (Lakhiar et al., 2018). This system was created by NASA for use in space travel, as a means of sustainable food production in an enclosed model, where there are key considerations of inputs or outputs.

Although aeroponics is new, there is already real enthusiasm among vertical farmers, as the method has been shown to be up to 90% more efficient than hydroponics in terms of water usage – with hydroponics already rating highly for water efficiency compared to conventional irrigation. Plants grown in aeroponics also show better uptake of nutrients, making them healthier overall and giving them a shorter growth period (Lakhiar et al., 2018).

Aeroponics, much like other innovations, has a learning curve. Although very efficient and suitable for all vertical farm operational models, the system has drawbacks. There are high costs for implementation and many more moving components than in manual irrigation. Moving parts increase the possibility of breakdowns, which can come in the form of clogged pipes, leakages, power outages, and electronic and mechanical breakdowns.

54

Figure 2: the inner workings of aeroponics system Source: https://qph.fs.quoracdn.net/main-qimg-29b090a3d3765341bc0402e23296125e

The benefits of vertical farms

Vertical farms contribute to urban agriculture in several ways, and the business model has real potential to be the next big industry in the market. The model could mitigate or even resolve many of the pressing issues we are currently facing as communities and as a society. The benefits include the ability to better control the environment, which reduces need for virgin soil for the purpose of food production; freedom from chemicals; and resource efficiency and conservation (Zeidler, 2013).

The creation of new jobs in metropolitan areas could be an additional benefit of the new industry, thereby improving the social construct of the community by providing a means of economic support for families. As highlighted earlier, the capacity to adapt goes hand-in-hand with innovation. Since cities vary in geography, economy, capacity, and most importantly, culture, this business model’s ability to evolve and adapt to its surroundings makes it ideal for the ever

55 changing urban setting. This adaptability may be the best way of increasing healthy food availability for communities marginalized by their socioeconomic and/or geographical location.

A controlled environment is a better pest control system due to the enclosed, controlled, and hygienic atmosphere. This system allows for better predictability and dependability in crop production, and it removes the issue of unpredictable weather conditions. The utilization of artificial lighting provides the capacity for faster growth cycles. Lighting technology also gives independence from seasonal growing, providing a non-stop growing process (Lakhiar et al.,

2018). In relation to lettuce production, the possibility of uninterrupted production can mean up to 12 harvests per year, versus just two or three from conventional farming (Zeidler, 2013; Touliatos, 2016).

Another factor to consider is the ability to use artificial lighting; though this may be considered a double-edged sword, as it consumes substantial energy.

However, in places where the sun does not shine consistently, this model can provide an alternative. In locations such as sunny southern California, the ability to supplement light opens up the possibility of year-round crops, rendering agricultural practices independent of the seasons and unpredictable climate patterns. Although sunny locations may not need as much artificial lighting as other places, they may be susceptible to other climatic conditions, such as excessive sun, rain, or snow. In these cases, the vertical farm model can outperform conventional farming practices in terms of dependability and efficiency (Besthorn, 2013).

56 Economic advantages can result from the production of premium products that are fresh; do not employ chemicals, vacuum freezing, or transportation deterioration; and can be delivered quickly and conveniently. There is no disturbance of natural soils and therefore no destruction of natural habitats.

There is substantial water usage reduction, as in the case of aeroponics and hydroponics (Despommier, 2011). There are no seasonality issues, due to the continuous enclosed production; and environmental control can enable operations to be tailored to meet demand (Benke & Tomkins, 2017). In addition, the primary source of potential for vertical farming is its capacity for farming at high density by scaling upward and not outward.

New jobs emerge through interdisciplinary business models. In this case, jobs are created for farm workers such as harvesters, mechanics, drivers, and wholesalers retailers, as well as work in interdisciplinary fields for engineers, lawyers, biologist, ecologists, construction workers, marketers, sales representatives, electricians, politicians, environmentalists, agroecologists, architects, and many other roles that may not currently exist, but may emerge as the industry continues to develop (Lakhiar et al., 2018).

Seasonal jobs for farm workers could become a thing of the past. Year- round employment is important for families. Continual traveling is the reality for many farmworkers, but this does not need to be the only option. Job proximity could become a reality, with workers able to choose whether they want to travel for work (chasing the harvest across the country) or to stay in one place and work 10 minutes from home. The interdisciplinary aspect means stimulating other

57 industries, as different types of equipment and expertise are required to maintain the infrastructure, some on which we may not yet know (Despommier, 2009).

The ability to adapt to different urban scenarios enables the system to evolve alongside the city’s continual changes. Innovation and adaptability allow vertical farms to succeed in various scenarios: building structures; parking lots; rooftops; old factories; abandoned manufacturing facilities; underground facilities, such as vacant sections of abandoned metro lines and warehouses; empty/vacant lots (paved and unpaved); movie theaters; and office spaces.

Options are limited only by the creativity of the designer (Despommier, 2013).

Fast technological advancement is also important, and the immaturity of the industry is driving entrepreneurs to invent and push the boundaries of their imaginations. Many companies are investing in the development of the infrastructure equipment used to grow food. Competition among these developers is a major benefit to the beneficiaries, who include the food growers and the consumers. The competition also maintains checks and balances on the competitors, who scrutinize one another’s products (Lakhiar, 2018).

The challenges of vertical farms

All new businesses face challenges, and vertical farms carry a double burden: first, they must prove the concept of the industry, and second, they must show the sustainability of the individual business. Vertical farming is considered a

“disruptor” of the conventional: neither conventional farming nor community gardening, it lies somewhere in the middle. Research suggests that this new business in a new industry faces challenges of legal structuring, permits,

58 licensing, regulations, high startup costs, high energy consumption for production, size of operations, profitability, competition, and consumer acceptance (Mougeot, 2000).

Regulations, permits, and licensing must be considered first when opening a vertical farm. There are several regulatory agencies that oversee the businesses within a city. Before reaching out to these, the farm should have a clear plan for its location, zoning, organic/non-organic production, choice of crop, and where it will be sold. It may then contact the regulatory agencies at the various levels of government (federal, state, regional, and city).

The agencies at the federal level include the Internal Revenue Service

(IRS), the U.S. Department of Agriculture (USDA), the Food and Drug

Administration (FDA), the California Department of Food and Agriculture (CDFA)

(for organic certifications), the Franchise Tax Board (FTB), and the California

State Board of Equalization. The state-level agencies are the Employment

Development Department State of California (EDD), the Division of Occupational

Safety and Health (CA/OSHA), and the Secretary of State. The regional-level agencies are the South Coast Air Quality Management District (AQMD) and the

Regional Water Quality Control Board (Los Angeles). Finally, the county agencies are the Ag Commissioner/Weights & Measures, the Environmental

Health Agency, Recorders Office, tax collector, and the Economic Development

Board and Planning & Building (Surls, 2017).

One example of a regulation is Pomona (details of which can be obtained from the city’s website at https://www.ci.pomona.ca.us). The permits required for

59 zoning purposes for this type of uncommon business can be found in the urban areas section, titled, “Fruit/vegetable (crop) zoning, .221 (F) Uses permitted.”

The rules state that no building, structure, or land is to be used – and no building or structure to be designed, erected, structurally altered, or enlarged – except for the purposes of raising of crops.

An application is also required for a conditional use permit. Upon approval of this, the planning commission determines whether the proposed use is compatible with the surrounding uses and ensures that there is sufficient off- street parking, protective screening, and landscaping to retain the welfare and the existing character of the surrounding area (Ord. No. 2508, § 2; Ord. No 3219,

§ 1; Ord. No. 3713, § 4.) Sec. .209. – (City of Pomona website, 2019).

As per the code,

“All new construction, building, improvements, alterations, enlargement, or building movement undertaken after the effective date of this ordinance; and all new uses or occupancy of premises within the city shall conform with the requirements, character, and conditions as to use, height, and area laid down for each of these several zones or districts as described in the following sections of this ordinance.”

An environmental impact report (EIR) may be required if the city deems it necessary. The permits are assigned on a case-by-case basis. As this is a new type of business, it has no precedents and current regulations may not accommodate it; thus, new regulations may need to be created (City of Pomona website, 2018).

The high costs of startup and running appear significant when compared to the costs of the conventional model. However, other technologically driven industries have shown that costs should be seen relative to acceptance and

60 increases in demand. Technological advancement cannot be predicted with any certainty, but one can speculate, using past technological improvements in other industries for comparison. The price of items is well documented to be associated with population approval, and greater investigation of a product or industry usually leads to improvement, which consequently ensures the optimization of the product or service (Hilsum, 2010).

The high costs are attributed to two factors: initial costs and running costs.

The initial expense comes from the construction or retrofitting of the structures or the empty lots in the urban setting. The installation of artificial lighting and the artificially controlled environment then lead to high running costs. Unlike conventional farms, where land is vast and cheaper, the urban setting forces the vertical farmer to be more efficient, more creative, and more concerned with every aspect of the food production. The urban farmer is forced to think ahead about the repercussions of waste and the byproducts of production (Zeidler,

2013).

Conventional farming has many advantages over vertical farming. It has the capacity to grow by moving outward, with expansion into virgin natural land for the purpose of creating new agriculture land. However, it is this mentality that has created many major problems for the natural environment (Despommier,

2010).

Technological advancement can lead to cost reductions. This, for example, led to the price of a 42” flat screen television falling from $15,000 to less than $300 in under 22 years (Oldham, 1999), a reduction of 98%. This fall in

61 price made flat screen televisions more economically feasible for homes around the world. Advancements in technology and cost are driven primarily by demand for the product (Hilsum, 2010). The data show that prices of crops grown in vertical farms are falling as growing techniques improve (Benke & Tomkins,

2017), providing a strong argument for the potential of the vertical farm food production industry.

It has long been said that vertical agriculture will never replace conventional agriculture. The claim is usually made by conventional farmers, who note that farming has been largely unchanged for 100-200 years. Resistance to change is understandable and expected, but one should keep in mind that vertical farmers do not seek to replace conventional farms. Rather, their intention has always been to supplement the industry by improving on antiquated farming practices and on factors such as food proximity and distribution to final consumer, producing healthier and fresher products (Specht, 2014; Despommier,

2009).

The most appropriate size of the operation is another question to be answered. Specifically, one asks whether being very large can hinder the success of a vertical farm. Both small and large operations have failed in the past. A hydroponic farm in New York provides one example of the failure of a large operation. At one time, this farm provided 150 jobs, but it eventually closed its doors and moved to Texas, due in part to the high energy costs required to heat the establishment during the cold winter months (Broadway, 2009). In vertical farming, unlike in conventional agriculture, as production grows, so does

62 the need for equipment and energy, resulting in higher expenses. The cost of doing business does not fall or stay the same, as it does in conventional farming.

The data show that some of the failures occurred following the expansion from the pilot stage. This suggests that the model has promising results in the pilot stage, with results declining as it is scaled up (De-Ruiz, 2019). In conventional farming, the cost of doing business remains the same as production increases (to certain levels of production), thus encouraging expansion. One might conclude, therefore, that there is an ideal size for the vertical farm model. More research is needed to confirm this (Trotter, 2016).

Lack of profitability is another challenge for the concept. Many attempts have been made to develop lasting enterprises in the vertical farming industry; but the model is difficult to launch as it requires large upfront costs. The day-to- day activities can also be challenging, especially when R&D runs parallel to production, as is the case in most ventures (The Economist, 2010). Funding of for-profit ventures usually comes in the form of loans (business and personal), private investment, and Fortune 500 company investment, as is the case for the large venture AeroFarms (Rothman, 2015).

Many of the active established operations are still paying off initial loans.

This is more common for the larger operations, such as AeroFarms in New

Jersey, which raised more than $130 million between 2014 and May 2017

(Burwood-Taylor 2017). The investments came from around the world, including

Meraas (an investment company in the U.A.E.), the Ikea Group, the Momofuku

Group, Army General, Goldman Sachs and Prudential, the Cibus Fund, Alliance

63 Bernstein (global asset management firm), Wheatsheaf Investment in the UK, and GSR Venture in China (Burwood-Taylor, 2017).

Capital-driven business models rarely take into consideration neighboring communities’ needs or concerns; and if they do so, it is to capitalize on the benefits of the “green movement,” commonly described as “greenwashing.”

Greenwashing is a commonly employed marketing strategy that gives consumers the impression a product or service is ethically or environmentally superior to others (Ekstrand & Nilsson, 2011).

Competition can be good and bad; it depends only on the rules of competition. It has become common to seek to corner a market – in this case, the urban food production market – and closed source practices (lack of data sharing) push secrecy in the industry. While competition is usually good, in this case, it is arguably counterproductive for the industry, as resistance to sharing breakthroughs and developing comradery between developers and growers restrains collaborative innovation.

A lack of cooperation has prevented the promotion of the industry within government agencies, such as the USDA, where vertical farming production data are nonexistent. The secrecy around data is evident in the absence of real-world case scenarios in the literature pertaining to vertical farm innerworkings and production data (Vitiello & Wolf-Powers, 2014). The available literature on urban agriculture is primarily concerned with community gardens, which depend on collaboration between the gardens, rather than competition (Santos et al., 2016).

64 Public acceptance is another substantial challenge. There may simply be insufficient demand for food grown in California, as the literature suggests that most vertical farm ventures have been in the northeastern states of the United

States (USDA, 2010). The strong interest in crops from the northeastern region can be attributed to the lack of ideal climate in which to grow crops, which creates strong demand for imported foods from western states such as California and Arizona, where approximately 25-30% of all the vegetables and 85-90% of all leafy greens are grown in the United States (USDA, 2010).

Marketing and selling vegetables grown in vertical farms in a saturated vegetable market like that of California can be complicated or even impossible

(Daftary-Steel et al., 2015). However, the erratic weather patterns in recent years have made it more plausible. Conventional farmers in California and around the world are struggling to respond to climate change and the associated droughts and flooding, with unpredictable weather creating serious risks for farmers and the food market as a whole. Under the present climate conditions, vertical farms have become more appealing due to their independence of the natural environment and their reliability (Lakhiar et al., 2018).

The vertical farming industry has many limitations, but there are also numerous examples of successful ventures. These typically share the characteristics of two missions in one. The common business model has two purposes: profitability and social benefits. Both purposes are equally important, but in some cases they have become equally important afterward, due in part to

65 the impulse provided by the social factor, and by default bringing improvement to the business.

There are hybrid vertical farms around the country that have been successful using this model. One example is “Village Farms, Inc.,” in Buffalo, NY

(http://villagefarms.com). This entrepreneurial venture consists of an 18-acre greenhouse that sits on a 35-acre abandoned site, where a steel mill once resided. The facility was added to the existing umbrella organization of the

Jersey-based AgroPower Development Inc., which was, at one time, the largest hydroponics greenhouse operator in the United States (Kaufman & Bailkey,

2000). Although a for-profit venture, this received support from government nonprofit agencies, including the city of Buffalo (partnering it with community development institutions), the state of New York (subsidies grants), and utilities company incentives. Assistance such as this is arguably vital for the success of vertical farms in the United States at this time, and it was certainly the case for

Village Farms, Inc. (Kaufman & Bailkey, 2000). The company has continued to expand, and it currently has four mega facilities in Texas, encompassing a total area of 130 acres, with 5.7 million sq./ft of growing space. The headquarters is in

Canada, where the company has shifted from food production to cannabis, following its legalization in early 2018 (Lane, 2018). As mentioned earlier, adaptability is essential for unconventional farming practices.

Industry analysis

The farming industry is a difficult industry in which to make a profit, especially in the conventional segment. In this section, the different factors

66 pertaining to conventional farming, organic farming, and lettuce organic and non- organic are presented. These factors include speculation about the future of the job market, the section of the population most interested in the product, the supply and demand dynamic and how this is affected by the changing climate conditions, the scarcity of such products in the market, and the action being taken to meet demand.

According to the U.S. Department of Labor, the job market for farmworkers (laborers) is expected to decline at a rate of 3% per year over the next decade (2018 to 2028) due to the introduction of new agricultural equipment. In contrast, the small farms’ job market (the category under which

Vertic Garden sits) is expected to increase due to the growing acceptance of direct-to-consumer farms, add to this a rising number of small farms throughout the United States, the job market for workers can be speculated increase as well

(Bureau of Labor Statistics, 2019).

In the United States, the 40-59-year-old demographic consumes large amounts of leafy greens in the form of salads, accounting for an average of 25% of consumption, while those aged 60 and above consume the largest proportion, at 27%. Of the leafy greens that make up a salad, lettuce comprises 86%

(Sebastian et al., 2018). The data also show that higher-income households tend to consume larger quantities of lettuce than lower-income households do.

Research has found that the most popular source of lettuce for these consumers is the neighborhood store, where people tend to buy prepackaged salads

(Sebastian et al., 2018). The elderly population, known as “Baby Boomers,” aged

67 55 and older, comprise the largest U.S. demographic. With this population’s low death rate (0.0082%) and high average life expectancy (80.1 years), the leafy green market expects several decades of continued high-level consumption from this sector of the community (U.S. Census, 2010).

However, while demand continues to increase, the capacity to produce higher quantities is diminishing due to climate change and pathogen breakouts.

At present, it is unknown how production could increase without taking over more land or disrupting conventional farming practices (Despommier, 2012).

The U.S. population is approximately 330 million and increasing at a rate of 0.9% per annum. Each person consumes approximately 28.1 pounds of lettuce annually, which is equivalent to 9.3 billion pounds of lettuce across the country. Just 74% (6.9 billion pounds) of the production is in California. The research indicates that one acre is required to produce 26,000 pounds of lettuce.

To cultivate 6.9 billion pounds of lettuce (the annual U.S. assumption) thus requires approximately 263,924 acres (USDA ERS, 2012; U.S. Census, 2010).

In the United States, a combination of lettuce head, romaine, and leaf accounts for 28.1 pounds per capita of production, making it second only to potatoes. The lettuce consumed in the U.S. is grown in either California or

Arizona. California produces approximately 74%, and the rest is grown in Arizona

(USDA ERS, 2012). California’s higher capacity is due to its ability to supply year-round.

Until recently, favorable climate conditions made it ideal to grow not only lettuce but also many other types of crops in California. Other parts of the

68 country, such as Washington, with cooler climates capable of cultivating lettuce had a very difficult time meeting consumption demand due to seasonality and disease problems, including “tipburn” bolting (forming of a flower stalk), and loose heads, which are driven by undesirable temperatures. The ideal temperature range for lettuce growth is 60-65F, with low sunlight (Wein, 1997).

Nationwide growing difficulties have driven preferences for disease- resistant crops, with this endurance thus determining the popularity of particular types of lettuce in the United States, rather than nutrition or taste. Data show that

Romaine production has increased in the last 32 years, while types more susceptible to high or low temperatures and transportation endurance have declined (USDA ERS, 2012).

In conventional farming, an average of approximately 26,000 plants

(lettuce) can be grown in an acre; and farmers often plant 2-4 times per year, depending on weather conditions. Of these, typically only 75% of the crop is marketable, with a 25% loss is worked into the production equation. To grow high-quality lettuce, adequate rich soil with a higher moisture content is vital, which limits the appropriate land for cultivation (Wein, 1997). Lettuce (non- organic) is fifth for value of production in California’s crop production (USDA,

State Agriculture Overview, 2018).

According to an article in The Seattle Times, Costco, the number one retailer of organic fruits and vegetables in the United States, surpassed $4 billion in annual sales in 2016. The giant warehouse retailer is unable to sell any more organic produce, because there is simply insufficient product to meet consumer

69 demand. Attempting to meet demand, Costco lent money to farmers in a pilot program for the purchase of more land and equipment (Tu, 2016). As of October

9th, 2019, the USDA did not have the official statistics for U.S. organic retail sales, and it was relying instead on industry sources such as the Nutrition

Business Journal (Maguire, 2019). According to Santos et al. (2016), the vertical farming market is projected to go to $3.88 billions in 2020, up from $1.01 billion in

2015, marking a 384% increase in five years, which translates to an annual growth of 76.8%.

Legal structuring of organizational business models:

for-profit

The for-profit model was relied upon until the creation of nonprofits.

Vertical farms are commonly classified as for-profit enterprises, as their loyalty lies with their investors. It is rare to find vertical farms that have a social purpose like that of a community garden. The most common reason for the failure of a for- profit venture is insufficient financial backing. Timing is critical for success in any market, and bad market timing in the vertical farm industry (insufficient interest of the public in health) can limit the possibilities for success.

In the general market, for-profit businesses have also failed due to lack of community support and/or involvement and governmental and nongovernmental organizational support. The focus of most vertical farms is on the technological and logistical development of the business, while neglecting to consider the communities that surround their facilities, which are usually low-income and home to ethnic minorities. It is argued that this indifference can be a factor in the

70 failure of a for-profit vertical farm. Similarly, increasing interest in research and relationship development can be of great benefit to a for-profit business

(Whittinghill & Rowe, 2012).

Working in a highly competitive industry, ventures are usually focused on developing the right concussion for the best nutrient solution for each crop. There is a sense in the industry that whoever is able to corner the market and make the most profit will be the next “Bigfarm” for the urban setting. Although competition is good and healthy for markets in general, it can also limit growth. As in any new free market, the first to sell is usually the one to sell the most; and this appears to be happening in the vertical farm industry. These are some of the challenges the vertical farming industry is facing due to the for-profit business model.

Nonprofit

Community gardens are commonly nonprofit organizations. While this business model has been proven to work in certain scenarios, it has failed in others. Community gardens are commonly set up as nonprofit organizations for the wellbeing of their local communities. The legal classification of a nonprofit is usually (501(c)(3)) (Kato, 2013). This has many benefits, such as keeping the organization tax-exempt on its income from sales, with the funds then reserved for covering the operational costs of the organization. It also allows donations from for-profit businesses to be written off as tax deductions. Nonprofit community gardens have many social benefits, building and strengthening social bonds by bringing people together from different socioeconomic classes, races,

71 ethnicities, cultures, religions, genders, age groups, and educational levels (Kato,

2013).

Community gardens also bring resources to underrepresented communities, teaching sociocultural values such as cooking, food growing, organizing, and knowledge sharing (Hodgson et al., 2011). They can also establish bonds with communities outside the area. Working with outsiders creates humanistic connections between people on different issues and for various organizations, thus rendering alliances via emotion (missions). Nonprofits also have an easier path through city regulations: as they are considered a direct benefit to the community, they are often encouraged by city leaders. Nonprofit organizations, such as community gardens, are more likely to be eligible for city programs geared toward education and youth development (Broadway, 2009).

Nonprofit organizations are created for the wellbeing, improvement, and assistance of groups who are – or have been – living with hardship. The income of a nonprofit organization is intended for the maintenance of the institution and not for the benefit of individuals. Nonprofits come in many forms, and they can be churches, schools, charities, clinics, hospitals, labor unions, legal institutions, research institutions, museums, government agencies, and community gardens

(Guitart et al., 2012).

Community gardens are welcomed into cities where the real estate market is less than desirable. There are often agreements between the community garden and the municipality, rather than contracts; and these agreements are usually terminated when the real estate market improves. A good real estate

72 market brings development in the form of construction (Saldivar-Tanaka &

Krasny, 2004).

Interest from outsiders is commonly associated with quick turnaround investment, frequently resulting in gentrification (a well-known practice of rehabilitating rundown areas in cities and making them more desirable to more affluent residents, and, as a result, pushing out existing low-income residents from the area) (DeVerteuil, 2011). The lack of a lease contract or ownership deed leaves the community garden vulnerable to market fluctuations and the city’s interests. Nonprofits are often known as dependent entities that bring social benefits to communities and cities during downtimes and are then discarded by municipalities when circumstances improve (Saldivar-Tanaka & Krasny, 2004).

Social enterprise

The social enterprise is a newer concept than those previously discussed.

The model developed out of the concern for social injustice and the need to support enterprises that address this (Ramus & Vaccaro, 2017). The model takes the social benefits provided by nonprofit organizations and pairs them with for- profit model practices. The structuring allows the social venture to sell goods and services, thus making it self-sufficient, while at the same time utilizing the legal benefits (such as tax exemption) of a nonprofit. A social enterprise is now commonly legally structured as a “B Corp,” or “benefit corporation.”

There are three approaches to obtaining “B Corp” status as an organization: certification, legislation, and impact measurement. The common objective for these structures is to deliver benefits to all stakeholders involved

73 with the corporation, and not only the shareholders. The two legal structures are governed by different agencies, with certified B Corps required to meet environmental and social standards set by the B Lab. Benefit corporations have a legal status administered by the state (Winkler et al., 2018).

An example is introduced here to illustrate how a social enterprise is more than a simple legal structure and how such an organization starts and develops in response to social challenges. The story of Westaway (2014) explains that the social enterprise came to be when the desire to help enslaved sex workers in

Southeast Asia highlighted a better way of doing business. Specifically, a group of concerned foreigners saw the socioeconomic disparity between themselves

(middle-class U.S. citizens) and a group of Thai women working in Bangkok

(enslaved women), and this led to new thinking about possible solutions. The

Thai women shared a common story of working in the city to send money back to their dependent families. Many of the women had little or no education and had been tricked into prostitution after coming to the city for honest work. The women often found themselves trapped in the new place, with no money to return home.

The common outcome of this scenario was a life of prostitution and enslavement

(Westaway, 2014).

The fortunate women who were able to escape the brothels were often forced into the life by necessity, as they were unable to find other occupations.

From this situation grew a collaboration between the concerned Americans and the Thai women, and a plan was developed to serve the needs of the women.

The Americans launched a fashion brand to manage some of the urgent needs,

74 which included on-the-job training (skills) and work. In parallel, a nonprofit was also created to combat sex trafficking.

The work began when the members of the nonprofit travelled to Asia, where the suffering of the affected women was evident. Aid then arrived from nonprofits, but most of this support was directed toward the women’s immediate requirements, and there was a need for something more than simple charity. In response, the nonprofit members began to discuss more permanent and sustainable ways of helping the women (Westaway, 2014).

With this in mind, the idea of the socially conscious fashion brand emerged. Women who have survived and escaped the sex trade are empowered by employment with the company. A part of the business is based in New York, designing jewelry and clothing, and the other section is in Bangkok, overseeing production. The products are marketed and sold in the United States, and the profits are reinvested in the cause of fighting the sex trade (as well as in the sustainability of the enterprise) (Westaway, 2014).

A social enterprise applies innovative business practices to create a positive social or environmental impact. Westaway says, “It’s where the heart of

Gandhi meets the mind of Henry Ford” (Westaway, 2014, pp. xiii). It is a new concept, and other labels – such as “social innovation” and “social entrepreneurship” – have also been used to define this socially conscious business model (Westaway, 2014).

In contrast to a social enterprise, a successful business is usually defined as one whose primary objective is profitability. This is a company whose primary

75 objective is profitability, even when that includes manipulation of quarterly earnings data, if the corporation is public; industry monopolies; and even the cannibalizing of repairable companies in the sole pursuit of profit. These practices are often accompanied by massive layoffs of loyal, long-term employees and the degradation of communities.

The conventional understanding of business teaches that we can measure the success of a business by its stock price. The pursuit of a high stock price drives businesses to (lawfully) adjust their numbers. This business model motivates the perception that the primary goal of a business is to maximize financial returns for shareholders (Jensen & Meckling, 1976). To show good performance in the short-term (quarterly), companies manipulate their balance sheets by selling, delaying, and/or cutting back on required investments, also known as “number manipulation,” which slows the true progress of the company

(Northrop, 2013).

Other legal but unethical practices regularly promoted by corporate

America include the acquisition of less-than-perfect companies for dismantling and selling off to the highest bidder, as if they were junk cars. These practices occur regularly, without analysis of the needs of the stakeholders affected. The decision to dismantle a company is often taken in the interests of the shareholders alone (who are usually high-level executives), without consideration of the ill effects on the communities that are dependent on the company. Such actions are often accompanied by massive, devastating layoffs, which have decimated communities to the point of creating ghost towns. The mentality

76 underlying these practices is common to many conventional companies

(Northrop, 2013).

Social enterprising is arguably a better business model because it takes into consideration the wellbeing of all stakeholders. These include people, profit, and the natural environment. Edward Freeman, an American philosopher and professor of business administration at the Darden School of the University of

Virginia, known for his work on stakeholder theory and business ethics, suggests that the stakeholder mentality is a superior business model. This model calculates the success of the company not on the basis of the profit collected for the shareholders, but by the wellbeing of everyone involved with it. The concept has come to be known as the “triple bottom line: people, profit and planet”

(Freeman, 1999).

Research shows that social enterprises can compete with and even outperform for-profit companies. The book Firms of Endearment by Raj Sisodia

(2003) details a study of 28 companies – 18 of which were publicly traded and 10 privately owned. Each of the companies embraced stakeholder value as its guiding principle. It was hypothesized that those companies that prioritized their employees in terms of wages, healthcare, investment opportunities, and environmentally friendly policies would perform worse than their for-profit counterparts. However, the study found otherwise. Between 1996 and 2011, the

“Firms of Endearment” (the 10 privately owned companies) outperformed the

S&P 500, 6.5% to 20% on return on investment (ROI), and they also performed better during the 2008 financial crisis (Sisodia et al., 2003).

77 A study conducted by the University of Northampton and the law firm

Bates Wells Braithwaite looked at the survival rates of the top 100 social ventures and the top 100 companies on the London exchange. The timeframe of the data observation was 30 years. The study found that the social ventures were more likely to survive than the 100 for-profit companies, by 41% to 33%

(University of Northampton, Bates Wells Braithwaite & E3M, 2014).

There are many possible reasons why social enterprises do well, and one clear advantage is that a more compelling story needs to spend less money on marketing. Westaway states, “An organization that has a stronger culture of innovation and collaboration will create products that customers will love. An organization that treats customers with compassion and dignity will win their loyalty” (Westaway, 2014, pg. 19). Like the companies previously mentioned, success stories make the news. According to Forbes magazine, the top five U.S. social enterprises in 2019 are as follows: “ME to WE,” which supports and promotes Fairtrade and volunteering; “Ashoka,” which provides networking for other social enterprises; “Grameen Bank,” which provides banking services and small business loans for the poor; “Babban Gona,” which helps small-hold

Nigerian farmers; and “Goodwill,” which provides job training and employment for at-risk individuals.

There are many urgent social problems in Pomona, California, and interest in finding plausible solutions has grown and developed into this analysis of three conceptual techniques that have been seen to work effectively in various fields – either as solutions or improvements. The techniques were chosen for

78 their proven track records and potential, which have been presented in this chapter as alternatives to conventional methods.

The elements taken from these ideas/concepts are those that have had most success in individual projects but have not yet been combined into a single project for the city of Pomona. These elements are the social benefits of community gardens, the innovations and capabilities of vertical farming, and the practices of social enterprises that define new ways of doing business. Data analysis is required to properly fuse the different concepts into an appropriate formula, tailored to the specific needs of the Pomona community. “Vertic

Garden,” as it will be called, will embody the two urban agricultural model techniques in the form of a social enterprise (Haigh et al., 2015).

79 CHAPTER 3

Economic development challenges in Pomona

This chapter will discuss the economic development concerns of Pomona, using factors identified in the U.S. Census (2010 and 2015, American Fact

Finder). The survey-driven factors highlight negative trends that characterize social and economic red alerts, revealing disparities between cities. The demographic factors concern characteristics of age, education, employment, household, and income, and they are presented in tables. These factors are closely correlated with Pomona’s economic development challenges, which include unemployment, poverty, food education, and insecurity. The data are reviewed, analyzed, and implemented to prove that a social enterprise is the better business model under the present environmental conditions in Pomona.

To analyze the challenges in Pomona, key census data are reviewed and discussed in terms of their impact on the community. There are a multitude of social needs, and this research focuses on the most critical issues currently affecting the area. Pomona’s main issue is not endemic to the United States, but it is shared by many other nations. The main issue, simply stated, is food availability. This includes factors of food insecurity, adequacy, timeliness, healthiness, and affordability; and these same issues are considered by the

United Nations Food and Agriculture Organization (UNFAO) to be the greatest challenge humanity currently faces (UNFAO, 2011). To define the most urgent challenges affecting Pomona, data have been retrieved from government and

80 non-governmental agencies, such as the U.S. Census 2010, USDA, FDA, and

ATTRA.

At the beginning of the century, Pomona was known for its agricultural economy, consisting of citrus groves and vineyards. As in other cities, a shift from agriculture to manufacturing occurred during the late 1940s. America became more industrialized and its jobs more technical and sophisticated. With the space race between the United States and the Soviet Union, many low- skilled jobs became highly technical, and this contributed to Pomona’s healthy economy. The aerospace industry employed a large part of the available labor force in Pomona, creating an up-and-coming middle-class community.

Unfortunately, in the 1960s, the aerospace industry – along with other businesses – began to leave the city, taking many good jobs and prompting a slow economic decline (Gallivan, 2007).

During the period of the space race, there was an increase in new infrastructure development throughout the United States.; and among those public works was Interstate 10. The introduction of the interstate took away much of the city’s traffic that had previously run through Holt and Mission Avenues.

Once the heavy traffic was gone, so too was some of the commerce. Pomona has always been innovative, from its agricultural days, when the “Pomona Pump” was invented and utilized worldwide for its capability (Gallivan, 2007). Since its first General City Plan in 1976, Pomona has fought its economic decline with plans for revitalization and downtown-area redevelopment (Pomona Tomorrow,

2014).

81 On April 9th, 2018, Pomona was confirmed as one of the California cities to have four nominated tract censuses defined as “Opportunity Zones.” The four nominations resulted in a pool of 3,516 nominees across the state, from which just 879 were chosen. The Opportunity Zones classification is designated to nominated census tracts for a period of 10 years. They are defined as a mechanism that provides tax incentives for investment by deferring or eliminating federal taxes on capital gains (dof.ca.gov, 2017). Opportunity Zones were a result of the Tax Cuts and Jobs Act of 2017 and institutionalized on December

22nd, 2017. It is clear not only to Pomona’s residents, but also to outside onlookers (government agencies) that Pomona is in serious trouble; and this is evident from the introduction of programs such as these.

According to the General Plan, “Pomona Tomorrow 2014,” Pomona has an employment issue. The highly technical jobs that are available in Pomona are often filled by outsiders, thus asserting a common tendency of working in

Pomona is good but, living in it is not. Although Pomona has shown a significant improvement on crime reduction, there is a lingering notion of a crime filled city.

Contrary to this statement, a significant number of Pomona’s residents commute out of Pomona for better paying jobs, as well as to purchase goods and services

(Pomona Tomorrow, 2014). Pomona is no longer the town it once was, but the relentless fortitude of its residents are slowly making it a better place to live.

Pomona’s challenges are many. The focus of this study is the population’s social needs, associated with a lack of opportunities, a lack of community involvement in city matters, and the population’s poor health due to cultural

82 paradigms and invisible socioeconomic barriers, indicative of a lack of education in nutrition and good affordable food at close proximity to low-income consumers

(U.S. Census Bureau, 2015). To support these claims, data have been compiled from the 2010 and 2015 U.S. Census Bureau American Community Survey

(ACS) and analyzed. The data were accessed through American Factfinder, using the five-year population estimate on its website: http://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml.

The data were analyzed to identify positive and negative trends in the factors provided by surveys. A comparison was conducted of Pomona and its neighboring region of Los Angeles County. The focus of the analysis was the disparities between Pomona and its neighboring cities and their respective challenges. The data are presented in tables below to evidence the specific social needs of Pomona as a community.

Table 1: City of Pomona youth characteristics

Factor Data Pomona, Pomona, Change, LA County, LA Change, location in 2015 2010 2010-2015 2015 County, 2010-2015 FactFinder (2015 2010 (2015 value value– – 2010 2010 value) value) Population Population 151,753 148,775 +2,978 10,038,388 9,758,256 +280,132 tab % Pop. Population 7.4 8.6 -1.2 6.4 6.8 -0.4 Under 5 y.o. tab Population Age tab 40,546 46,134 -5,588 2,322,174 2,460,513 -138,339 under 18 y.o. (children’s in households character.) % Pop. under 26.7 31.0 -4.3 23.1 25.2 -2.1 18 y.o. (under 18 pop/pop x 100) % Children Age tab 35.8 24.1 +11.7 27.4 19.3 +8.1 living in households receiving public assistance % Children Age tab 30.8 22.5 +8.3 25.8 22.4 +3.4 living below poverty level Source: U.S. Census Bureau, American FactFinder

83 Table 1 highlights that the population aged under five years old in Pomona fell 1.2 % in the period, three times greater than the county-wide fall of 0.4%. The data can be interpreted as reflecting a lower birth rate in the region, which itself can be attributed to outward migration to regions with more opportunities. The decrease in the under-18 population also reflects migration patterns, with this group shrinking at a rate of 4.3%, more than twice the regional rate of 2.1%

(Table 1). It can also be argued that an unsafe environment and poor job opportunities are effectively driving parents and young people out of the city. In comparison to the region (county), Pomona has a clear tendency toward higher rates of outward migration.

According to the USDA, low-income communities are affected by food deserts (Algert et al., 2006). Two strong indicators of low-income communities are social assistance take-up and poverty levels (Table 1). The number of households that are home to children and in receipt of social assistance has increased by 11.7%, putting it approximately 3% higher than the regional average. The increase rate of children living below the poverty level in Pomona is

8.3%, or three times higher than the regional average of 3.4%.

It is alarming to see the increasing numbers of people living below the poverty line in the region. This can be attributed to many variables, including loss of interest by the municipality in addressing the issues and the failure to resolve the root problems – instead choosing to address the symptoms, which, it can be argued, is represented here by the increase in social assistance. Lack of opportunities (in the form of quality jobs) for parents in Pomona may be a reason

84 for the rise in social assistance. The reasons are many, and a more extensive and profound study is needed to clarify these.

Table 2: City of Pomona elderly characteristics

Factor Data Pomona, Pomona, Change, LA County, LA County, Change, location in 2015 2010 2010-2015 2015 2010 2010-2015 FactFinder (2015 (2015 value – value – 2010 value) 2010 value) Population Population 151,753 148,775 +2,978 10,038,38 9,758,256 +280,132 tab 8 Pop. over 65 Age tab 13,492 10,449 +3,043 1,189,759 1,026,041 +163,718

% Pop. over 8.8 7.0 +1.8 11.8 10.5 +1.3 65 (over 65 pop/pop x 100) % Pop. over Age tab 37.3 38.2 -0.9 40.7 42.6 -1.9 65 - householder living alone % Pop. over Age tab 2.3 2.9 -0.6 1.6 1.8 -0.2 65 – responsible for grandchildren % Pop. over Age tab 42.9 35.2 +7.7 35.8 33.9 +1.9 65 – speak English less than “very well” % Pop. over Age tab 85.1 87.3 -2.2 82.0 84.1 -2.1 65 – not in labor force % Pop. over Age tab 15.2 10.3 +4.9 13.4 11.3 +2.1 65 – below 100% of poverty level % Pop. over Age tab 70.3 71.3 -1.0 65.3 66.2 -0.9 65 – owner- occupied housing % Pop. over Age tab 29.7 28.7 +1.0 34.7 33.8 +0.9 65 – renter- occupied housing % Pop. over Age tab 36.9 34.9 +2.0 35.3 34.5 +0.8 65 – owner- occupied housing – housing costs 30% or more of household income % Pop. over Age tab 60.5 56.4 +4.1 65.0 63.1 +1.9 65 – renter- occupied housing – housing costs 30% or more of

85 household income

Source: United States Census Bureau, American FactFinder

Comparing the elder population of Pomona with that of the region as a whole reveals a higher growth rate, with an increase of 1.8% versus 1.3% – a difference of 0.5%. While the difference is not as substantial as some others, it nevertheless constitutes a disparity (Table 2). The data also reveal a large disparity between the growth of the Pomona population aged 65+ who speak

English less than “very well” and that of the region. A cause of this inward migration is likely to be the lower cost of housing in the city (rent), which is often associated with less than desirable places to live. The figure for Pomona (7.7%) is six times higher than that of the region (1.9%).

This growth in the elderly Pomona population who speak English less than

“very well” may be the result of a non-native immigration (people coming from other countries, not other cities), according to the U.S. Census (U.S. Census,

2015). This tendency is likely to result in higher health care needs for the population, thus incurring more cost for an already suffering economy. The influx of elderly people with communication difficulties may result in an increase in unspecialized low paying work, thus adding to the number of low-level jobs.

Migrating populations often have difficulty integrating into established communities. A good example of this phenomenon is the undocumented immigrants moving from Asia and Latin America to low-income communities in the United States (Algert et al., 2006).

86 A possible solution to this issue is a community hub supporting the integration of the immigrant population in Pomona, specifically elderly immigrants with language difficulties. With this goal, it could assist in introducing the new residents to the area, while teaching important nutritional education to the established community. According to the USDA, a better diet is associated with better health, and good health is essential for an older part of the community

(Algert et al., 2006).

The data suggest that elderly residents in Pomona allocate more than twice as much of their household income to housing than those in the region as a whole do, thus limiting their money available for food. This higher percentage may be due to residents’ lower paying jobs. The cheap rent in Pomona attracts residents on lower incomes, but most of that income is then allocated to paying for living arrangements, whether it be rent or mortgages. The cost of living is the biggest expense for a low-income community, with very little left for expenses such as food, health care, education, and other less urgent needs. Low prices and proximity availability for good food are essential; and these, alongside price availability, are necessary for the model proposed here to achieve its social mission (Villegas et al., 2004).

87 Table 3: City of Pomona educational characteristics

Factor Data Pomona, Pomona, Change, LA LA Change, location in 2015 2010 2010- County, County, 2010- FactFinder 2015 2015 2010 2015 (2015 (2015 value – value – 2010 2010 value) value) % 18-24 y.o. Education tab 51.9 40.9 +11.0 57.8 51.2 +6.6 with some college or bachelor’s degree or higher % 25 y/o. or Education tab 5.0 4.0 +1.0 10.5 9.9 +0.6 older graduate or professional degree % 25 y.o. or Education tab 12.6 10.2 +2.4 19.8 19.0 +0.8 older bachelor’s degree % 25 y.o. or Education tab 24.8 26.0 -1.2 20.7 21.3 -0.6 older high school diploma % 25 y.o. or Education tab 12.7 15.7 -3.0 9.4 10.2 -0.8 older no diploma Source: United States Census Bureau, American FactFinder

As shown in Table 3, the Pomona population aged 18-24 years old and with some college education or a bachelor’s degree (or higher) is 11.1%, almost twice that of the county (6.6%). However, while the interest in higher education is clear, there is unfortunately something preventing completion: with 51.9% attending college, but just 12.6% completing. The possible reasons for this include a lack of economic assistance from the family, the need to start work to help with household expenses, and a family who does not consider education a priority when worrying about rent or mortgage payments. Combining full-time work with full-time school makes it very difficult to obtain a degree.

The number of people aged 25+ with bachelor’s degrees rose 2.4%, which was three times the rate of increase in the region (0.8%), suggesting that the technical workforce exists, but Pomona unfortunately lacks the opportunities,

88 which forces these graduates to look elsewhere for suitably technical work (U.S.

Census, American Community Survey, 2015).

Table 4: City of Pomona employment characteristics

Factor Data Pomona Pomona Change, LA LA Change, location in 2015 2010 2010-2015 County, County 2010-2015 FactFinder (2015 value – 2015 , 2010 (2015 value – 2010 value) 2010 value) % Income tab 7.3 6.9 +0.4 6.4 5.7 +0.7 Unemployment, civilian labor force % Employed Income tab 1.0 0.4 +0.6 0.5 0.5 0 pop. in agriculture, etc. (note: use industry data not occupation data for these values) % Employed Income tab 7.3 8.2 -0.9 5.7 6.3 -0.6 pop. in construction % Employed Income tab 13.3 17.3 -4.0 10.3 11.4 -1.1 pop. in manufacturing % Employed Income tab 4.7 4.7 0 3.5 3.9 -0.4 pop. in wholesale trade % Employed Income tab 11.1 12.3 -1.2 10.7 10.6 +0.1 pop. in retail trade % Employed Income tab 6.3 7.6 -1.3 5.3 5.2 +0.1 pop. in trans. and warehousing % Employed Income tab 1.9 1.6 +0.3 4.4 4.4 0 pop. in information % Employed Income tab 4.7 5.7 -1.0 6.3 7.0 -0.7 pop. in finance and real estate % Employed Income tab 10.7 9.1 +1.6 12.5 12.0 +0.5 pop. in professional, etc. % Employed Income tab 19.5 16.4 +3.1 20.6 19.9 +0.7 pop. in education and healthcare % Employed Income tab 10.4 8.5 +1.9 10.8 9.7 +1.1 pop. in arts and entertainment % Employed Income tab 6.1 5.3 +0.8 6.2 5.9 +0.3 pop. in “other” % Employed Income tab 3.0 2.8 +0.2 3.2 3.3 -0.1 pop. in public administration Source: United States Census Bureau, American FactFinder

Table 4 shows that manufacturing jobs are decreasing in Pomona at a rate of 4%, almost four times that of the region, thus taking a large part of the revenue and jobs that Pomona is known for. It is interesting to note that the

89 strongest employment sector in Pomona is education (for-profit) and healthcare, which are up to 19.5% from 16.4%, a growth more than four times that of the region (0.7%). The increase may be due to the city’s growing elderly population and health issues caused by poor nutrition in the population aged 16 years and older (He et al., 2004).

Table 5: City of Pomona household characteristics

Factor Data Pomona, Pomona Change, LA LA Change, location in 2015 2010 2010-2015 County, County, 2010-2015 FactFinder (2015 value – 2015 2010 (2015 value 2010 value) – 2010 value) Homeowner Housing tab 1.8 1.4 +0.4 1.3 1.6 -0.3 vacancy rate Rental vacancy Housing tab 3.0 5.6 -2.6 3.7 4.1 -0.4 rate % Owner- Housing tab 52.4 55.8 -3.4 46.0 48.2 -2.2 occupied % Renter- Housing tab 47.6 44.2 +3.4 54.0 51.8 +2.2 occupied % No. vehicle Housing tab 7.6 6.8 +0.8 9.7 9.5 +0.2 homes % Units with > Housing tab 19.5 20.7 -1.2 11.8 12.0 -0.2 1.00 occupants per room % Owner- Housing tab 50.2 61.8 -11.6 48.3 55.1 -6.8 occupied housing with a mortgage – housing costs 30% or more of household income % Renter- Housing tab 64.3 61.9 +2.4 59.7 56.5 +3.2 occupied housing – costs 30% or more of household income Source: United States Census Bureau, American FactFinder

Table 5 indicates that there is a larger proportion of vacant homes in

Pomona than in the region. The rental vacancy rate in Pomona decreased by

2.6%, more than four times the region rate of 0.4%, suggesting that more people are renting than owning. This shift from home-ownership can be attributed in part to the high cost of living in conjunction with low wages (Horowitz et al., 2004).

90 The number of households that did not own a vehicle increased from 6.8% to 7.6%, a hike of 0.8%. This is four times the region-wide increase of 0.2%. The numbers suggest that more people are relying on public transportation and lack the means to purchase personal vehicles. As a result, low-income communities in Pomona have limited mobility for shopping for healthy foods inside the city, and even less outside in neighboring cities (Morland et al., 2002). A developing pattern in the data is that Pomona lean towards the negative in comparison to the regional averages.

Table 6: Pomona income characteristics

Factor Data location in Pomona, Pomona, Change, LA LA Change, FactFinder 2015 2010 2010-2015 County, County, 2010-2015 (2015 2015 2010 (2015 value – value – 2010 2010 value) value) Per capita (per Income tab 17,557 16,682 +875 28,337 27,344 +993 person) income ($) Median Income tab 49,186 50,497 -1,311 56,196 55,476 +720 household income ($) % Low-income Income tab 50.6 49.4 +1.2 45.1 45.4 -0.3 households (<$50,000) % High- Income tab 2.0 1.5 +0.5 7.0 6.0 +1.0 income households (>$200,000) Low-high Income tab 25.3 32.9 -7.6 6.4 7.5 -1.1 household income ratio (low%/high%) % of all people Income tab 22.1 17.2 +4.9 18.2 15.7 +2.5 living below poverty level Source: United States Census Bureau, American FactFinder

Table 6 shows that per capita income in Pomona is $17,557, which is approximately 61% of the regional level of $28,337. This figure might explain why many highly educated residents flee Pomona, seeking better paying jobs elsewhere. The greatest disparity in the data for Pomona and the region is the low-high income ratio. Although down from 32.9% to 25.3%, the rate of change

91 dwarfs the region’s average: with Pomona’s rate being 7.6% and the region’s

1.1%, it suggests that the household incomes’ disparity in Pomona is seven times greater than the region’s.

In general, the data are indicative of the social challenges Pomona currently faces. The data also underline Pomona’s need for new and innovative solutions to old economic and social struggles. A simple explanation for these complex challenges is the city’s failure to evolve with the times. Pertaining to the topic of this research, this includes the failure to adapt to an ever-changing urban setting. The attempts to repair damage have been just that: a reaction to circumstances, a reaction to symptoms in the living organism that is the community (Lyle, 19994). A new way of thinking (a new business model) is needed for Pomona to reemerge as a community of creation and production.

Literature on Pomona’s social challenges analysis

The growing numbers of children living in households in receipt of public assistance can be interpreted as a symptom of what the community is experiencing on a much deeper level. Simply giving money or increasing public assistance can, in the long run, do more harm than good. It creates a dependency that keeps the recipient needy. Charity often prevents an individual or a community from growing and progressing (Westaway, 2014). The involvement of the community or city is needed to resolve its own issues. When a population thinks of social assistance as a form of income, this creates a state of laziness and dependency; and this mentality is passed down to the next

92 generation, thus creating habitual traits that perpetuate negative cycles

(Westaway, 2014)

The problem is much too complex to be resolved by simply giving money.

This can prevent the community from progressing. It discourages thought and accountability for one’s actions and decisions. It keeps poor people poor and provides no incentives to do better for oneself. One should not misunderstand this analysis: emergency or temporary assistance is good and it has its purpose

(Cotterill & Franklin, 1995). There are cases where people have grown complacent due to government financial assistance, and this can and has led to other negative symptoms for struggling communities.

A correlation between public assistance and a lack of variety in grocery store food produce was highlighted by one study of 21 cities in the United States.

The findings showed that cities with larger relative populations in receipt of public assistance had less grocery store food variety than middle-income communities

(Cotterill & Franklin, 1995). The data show that Pomona is increasingly dependent on public assistance (Census, 2015), and it is thus likely that Pomona has less grocery store food variety, according to Cotterill and Franklin. This lack of food variety can affect the health of a community’s residents by limiting the opportunities for healthy foods (Cotterill & Franklin, 1995).

Health problems such as obesity are known to be associated with poor- quality food consumption (Hung et al., 2004). Studies also show that U.S. households earning 130% or less of the poverty level are more vulnerable to poor health due to consumption of “bad food” – namely, produce that is non-

93 fresh, non-vegetables, and non-fruit (Reed et al., 2004). Given the data from the

U.S. Census 2015, it can thus be argued that Pomona’s residents are more likely to endure the ill effects of bad nutrition.

Pomona not only suffers limited access to healthy food, which affects dietary quality, but, as can be concluded from studies of other similar low-income ethnic communities, it is likely to have high rates of food insecurity (Algert et al.,

2006). Communities that suffer from food insecurity rely heavily on “food pantries” in case of emergencies. Food pantries were created to help low-income communities with food availability, and they commonly provide canned goods and nonperishables. Research shows that food pantry clients in Pomona are at greater risk of a poor-quality diet. These clients may be homeless, “working poor”

(low-income workers), undocumented immigrants, or elderly (Algert et al., 2006).

Research has found that Pomona’s lack of stores selling fresh healthy foods is highly likely to be due, in part, to its demographic and socioeconomic profile: namely, a low-income Latino community (70%), in which ~40% of people are non-English speaking and ~20% are undocumented immigrants (U.S.

Census, American Community Survey, 2015) (Algert et al., 2006).

Pomona’s municipality has experimented with different approaches to stimulate its economy, as mentioned earlier. Its “General Plan” is slowly contributing to the beautification and promotion of a revitalized city, enticing new professionals to not only work in Pomona, but also to live there. It is imperative to contemplate the idea of changing the approach when looking for alternative possibilities. In the General Plan, there is little discussion of community

94 development or involvement and no specific mention of how residents will engage with the “plan.” This lack of inclusion is, in part, what is driving the desire to develop this hypothesis for a social enterprise business model for the city

(Besthorn, 2013; Santos et al., 2016; Mougeot, 2000).

In the United States, few successful vertical farms operating as for-profit business models have proven economically sustainable. It is well-known that the developing technology is close to matching conventional farming in produce pricing, but with much more added environmental value (Haigh et al., 2015).

Vertical farms have the capacity to function just about anywhere in the world, giving more freedom to an already versatile business model. The vertical farm in this hypothetical model will be defined as a means to an end. Whether a vertical farm technically works it is not the main objective of this study, but it is an essential part to the overall success of the social enterprise.

The study focuses on the community’s unhealthy nutrition habits that, according to the research, have a high probability of being associated with the unhealthy food options available (geographically and economically) to residents

(Besthorn, 2013). Social ventures such as community gardens often mitigate these types of issues. Unfortunately, community gardens, as nonprofits, have challenges, such as a reliance on charity as their main source of income, thus leaving them dependent. This same organizational model can leave a community garden or other social venture entirely without resources, at a moment’s notice.

As a result, many of the goals set at the inception of a mission are never reached.

95 It is for these reasons that it is argued a hybrid for-profit/nonprofit enterprise is better suited to overcome the obstacles social ventures face.

Pomona’s population is suffering from chronic diseases due, in part, to a reliance on unhealthy foods, which is attributable to its geographical location, ethnic demographics, economics, and education level (Algert et al., 2006). Research has shown that social enterprises are more likely to thrive when a social need is met with a purpose to resolve it (Westaway, 2014).

96 CHAPTER 4

Business plan

Like many cities around the world, Pomona lacks the farmland to support its food requirements. Singapore is another such city, but on a much larger scale and with more urgency in the matter. In Pomona, there are no grocery stores that carry fresh organic foods, and the map indicates that most health food stores that do carry fresh organic foods are located at the edge of the city limits (Google

Maps, 2019). For this and other reasons, a vertical farm as a social enterprise is considered the best proposal to address the pressing issues in Pomona.

In this section, data are presented on the different characteristics of the business plan. These include the following: the progressive four-phase plan of establishment, a marketing plan, the products, the pricing, and the development.

A hypothetical location is proposed as a real-life case scenario. Promotional strategies are described, including the factors of the target market, marketing segmentation, strengths, weaknesses, opportunities, and possible threats.

Finally, a financial plan forms part of this section, presenting the startup costs, breakeven analysis, recurring costs, production capabilities, a profit analysis, and future projections.

The findings are a compilation of the best practices, operations, and calculations of all the synthesized data. The intended rationale for the research is to explore, hypothesize, and present a possible new way of conducting business

– one where money and social benefits have equal importance. The study also aims to enhance understanding of the potential of the social enterprise model for

97 a sustainable vertical farm. The data are presented to identify new ways of stimulating and improving Pomona’s economy and community’s social fabric. A business plan has been constructed to focus on healthy food availability and its corresponding challenges and in doing so, answer any questions.

The hypothetical model is intended to serve two main purposes. The first is to be economically sustainable, which means the business model should be able to sustain itself with reliance on charity from either the community or institutions (public or private), or indeed of any other kind. It is vital for the enterprise to be profitable if it is to be a serious business venture. The second purpose is to be socially accountable and beneficial.

The data used to support this study and business plan were retrieved from theoretical and actual vertical farms (case studies), peer-reviewed articles (on community gardens, social injustice, vertical farming, and social enterprises), and books. Due to the lack of information on vertical farming production (real case- scenario production data), YouTube conferences, newspapers stories and magazine articles have also been utilized.

The development plan is divided into four phases of execution. Phase one is the enabler, as this provides the financial backing for the rest of the plan.

During this phase, an economically sustainable vertical farm is established.

Phase two consists of the development of a think tank, comprised of technical experts in urban agriculture and the social sciences and members of the community. Phase three involves the symbiotic education of the community and the technical experts. This education will be more than simple lecturing: it will

98 involve reciprocal learning. Phase four can be considered the culminating part of the plan, one in which the rewards of hard work in the previous three phases are reaped. It consists of creating, producing, and providing (making It available), affordable and healthy foods for an educated self-aware community independent of charitable financial assistance.

In phase one, a vertical farm will be established that can produce food following the principles of “regenerative sustainability,” defined as a system “that provides for continuous replacement, through its own functional processes, of the resources used in its operation,” with minimal to no waste (Lyle, 1994). The objectives of the vertical farm are the introduction of a new industry to Pomona, the creation of good jobs, and the production of healthy chemical-free foods, with a minimal carbon footprint. The main objectives of the vertical farm as a social enterprise are to be profitable and to establish a deep connection with the residents in the community.

The introduction of the social enterprise to the community is of importance to the model, as this sets the basis for a symbiotic relationship between the community and the organization. In this part, the community is informed of what is to come and why it is planned. The principle of the model will be explained, and a presentation will show how the business model will work and the important role of the community within it. During the period of community outreach, information will be gathered from the community and used to build a rapport.

At the core of Pomona’s challenges is the lack of employment opportunities, and this section provides potential opportunities that resolve this.

99 Temporary jobs are needed for the initial construction and development of the operations, while permanent jobs are also required for the day-to-day operations.

Some of the jobs needed for the daily operations are technical and well paid. As production increases, additional positions may be created to meet demand. At the start of operations, a total of five social enterprise representatives will run the business. In the following section, the expectations and functions for the team as a whole and for the individuals will be stipulated (Besthorn, 2013).

The employees must be interdisciplinary capable. They will work as community outreach and researchers, or “NCC,” for approximately 6-12 months before the launch of the business operations. The plan is to have mission- oriented individuals working to do good for the community, as well as to make money and increase the level of community aid, thereby helping to resolve the social and economic challenges in Pomona. The ideal team would be comprised of an environmental engineer, environmental biologist, business marketer, agroecologist, and social scientist.

Regarding the working of the team, all members will be well informed of what is happening with the day-to-day operations (at the location, in the community, or elsewhere), while maintaining their own set of goals for their respective fields (departments). The team’s success depends on the members’ individual capacity to be versatile in fields other than their own: this is where the interdisciplinary skills are required and synergy appreciated. Every team member is encouraged to help their fellow members, even those in different departments.

100 The rationale for this work environment is the diversification of skills, the decentralization of power, and the development of team-building strategies.

Every team member is paid and worked equally to ensure they are learning every aspect of the business model. Thinking ahead, if the model is successful, expansion will be the next step; and sharing knowledge and leadership skills with everyone involved could lead to more and better vertical farms throughout this city and possibly in others.

The third part of phase one concerns the goal of producing healthy fresh food. The main objective is to establish a profitable vertical farm, capable of selling high-end organic fresh lettuce to neighboring affluent cities. The assumption made for the model is that the entire production will be sold with no loss due to unforeseen climatic occurrences. There appear to be no similar operations or competitors near this location. The marketing plan will follow the strategy used by other social enterprises, such as Fairtrade and Patagonia. This calls for the promotion of manufactured goods produced in third-world countries for sale in the U.S. to socially conscious consumers. The variance for the model in this project, however, is that the consumers will be helping low-income communities in a neighboring city (Despommier, 2009; Costache, 2012).

The initial plan is to produce leafy greens because the data show they are the most profitable crop of choice, requiring the lowest energy input. Historically, leafy greens have proven to provide good profit margins for vertical farms and quick turnaround on investment. Most consumers are familiar with this product, thus there is no need to construct a new market (Touliatos et al., 2016). Climate

101 change is making it increasingly difficult for conventional farming to keep up with demand. Prices will thus increase for conventional farming, but those of vertical farms can remain the same, or at least become more stable. If market projections prove accurate, the profit margins for the vertical farm have a better probability of significantly increasing. Product pricing will be equal to or higher than supermarket prices for equivalent organic foods.

Unlike that of conventional farming, the vertical farm model embodies regenerative principles. The model aims for a closed-cycle system, which reuses resources and minimizes the use of fossil fuels, chemicals, and nonrenewable resources. The model prioritizes the responsible management of waste and the integration of natural processes with social factors. Pollution from production is minimal to none, and this minimal pollution if offset by the absorption of outside air pollutants, such as carbon dioxide. Ultimately, it also prevents deforestation for agricultural land and helps to alleviate overexploited farmland, while producing good quality food (Lyle, 1994).

Phase two involves the creation of a “thinktank,” comprised of members of the social enterprise and the wider community. This is followed by the development of community-suggested products. The thinktank is the heart of the business model, made to unite and reinforce the bonds between the business and the community. Once information has been gathered from the community in the first outreach, a second outreach will be conducted to enlist members of the community who show interest in taking part.

102 Residents will be invited to join a thinktank with the objective of sharing the community’s concerns and questions regarding the company’s initial intentions, staying informed, and eventually being part of the decision-making for future plans for the community. The thinktank will also conduct market research for the improvement of food selection, production, and distribution. According to research, it is vital to involve the affected community when developing a vertical farm, thus showing cultural sensitivity (Sheriff, 2009).

The thinktank will be essential for the marriage of the community and the social enterprise. It will also be indispensable for the development of potential new crops, as the community can provide insights into niche product markets for ethnic consumers. The vertical farm’s technical team has the capabilities to provide the expertise for growing any desired crop. Vertical farms move into niche markets as this better fits their model, maximizing their potential and abilities to produce crops that are difficult to grow and transport. Currently, although feasible, it is neither advisable nor efficient to grow large amounts of cheap crops, such as grain plants, in a vertical farm.

Niche crops have a better potential to provide a larger profit margin, which can strengthen the business model by diversifying production. The production of food not often found in the local produce markets due to difficulties in growing and transport provides an opportunity to meet community demand. The ability to do this provides a competitive edge to the small enterprise. The concept is the opposite of conventional farming principles; and in practice, the model can

103 deliver fewer, newer, and better quality foods (in all aspects), thus providing quality over quantity (Despommier, 2013; Moustier, 1996).

Phase three is directed at the education of the community, and this is considered the most difficult part of the plan. It is easy to tell people to eat healthily; but it is much more difficult to demonstrate the importance of eating healthily and the ramifications of not following a healthy diet. A true commitment to eating healthily is required to change poor eating habits. There is no value in providing good, healthy, affordable, fresh food to a community who does not care for it or who does not accept the importance of a healthy diet.

Concerned citizens are often outsiders looking in, who have developed a genuine interest in helping those less fortunate than themselves, such is low- income communities who lack access to healthy fresh food. These outsiders often attempt to fix the issues without the community’s input. Accomplishments by these outsiders thus tend to disappear when the visitor leaves the community

(Santos et al., 2016). It is very important that such organizers are educated in the community’s needs, from community members directly, and not simply through data and news. Information gathered from the community can determine the success or failure of the business.

It is critical for the community to understand the importance of good nutrition and its implications for the development of chronic diseases (Algert et al., 2006). The community needs to understand that the consumption of healthy foods is extremely important for a healthy life, and even more important for the elderly, who – according to the data – make up a substantial part of Pomona’s

104 population (Census, 2015). The education phase will prepare the community for the final phase.

Phase four closes the socioecological system of production, and in doing so, healthy and affordable fresh food are provided for the Pomona community.

Once the lettuce market is established in the healthy food supermarkets of affluent neighboring cities, the sale of the high-end leafy greens in these cities will subsidize the price of the product sold in Pomona to low-income residents.

The price paid by the Pomona residents will match the lowest price of the non- organic leafy greens sold in the city.

The niche products will first be sold primarily to the Pomona community at a discounted price, for the purposes of conducting a market test. The products destined for the niche market will be chosen by the thinktank. Once the market test has been conducted, and it has been proven that the selected produce is in high demand and well received by the public, the product will be marketed to neighboring cities. A marketing campaign will be launched to promote exotic super foods, utilizing the established relations. If successful, this strategy will bring in a large income, thus adding resources to subsidize more foods for low- income residents.

The different phases of the plan are intended to build and reinforce acceptance within the communities involved. Phase one provides economic relief to the city. Phase two provides a sense of involvement in the community

(ownership). Phase three educates by providing preventative and progressive

105 services to the community; and finally, phase four delivers the means to provide healthy and affordable fresh food.

Marketing plan

A well-developed marketing plan is essential to the success of a business; and a business plan is partially comprised of marketing mixes. The marketing mix can be defined as the four Ps: product, price, place, and promotion. The

“product” is the intended item or service for sale; the “price” is the value of the product or service provided; “place” refers to the distribution channels, market coverage, and movement organization; and “promotions” concerns the outreach to the intended target market and communication with clients for the purpose of sales.

The marketing mixes concept was first proposed by Professor E. Jerome

McCarthy, who described marketing mixes as tactical tools for achieving business objectives. The tool analyzes the target market needs, comprehensive environment, competitive ability, and controllable factors. All analyses are intended to improve the gross profit of the venture (McCarthy, 1964). The marketing mixes are utilized to create a better rapport for anyone interested in research and/or developing the idea of a vertical farm business model as a social enterprise, and in doing so, giving a more extensive research in the form of data tabulation and application on possible models.

“Vertic Garden” is the name that will be used to refer to the venture, business, social enterprise, and/or model. In the following section, the marketing mixes for Vertic Garden are presented and analyzed.

106 Products

Crop selection, thinktank niche, and education

One of the marketing mixes is to identify the product or service that is to be sold for profit gain. In this section, we will look at three: lettuce, a niche market, and education. Lettuce was chosen for its strong and established market and its proven track record in commercial vertical farms. The niche crop market concept was developed from the collaboration between the community and organization, with the community contributing cultural knowledge as tangible data and the organization contributing technical expertise. Regarding education as a product/service, there are two types of education programs: one for technical expertise and the other for community development.

Product: lettuce

Lettuce is the dominant crop for most vertical farms throughout the world, for the reasons presented in the feasibility study conducted by the Institute of

Space Systems, System Analysis Space Segment (DLR) in October 2013 and backed by NASA research. Lettuce was chosen on the basis of the presented calculations and production yield potential in a vertical farm setting, as well as the availability of parametric data for artificially controlled environments and biomass output (Zeidler et al., 2013).

According to the DLR study, compared to nine other common crops

(cabbage, spinach, carrots, radish, tomatoes, peppers, potatoes, peas, and strawberry), lettuce had the highest yield numbers and the least amount of inedible biomass. Table 7 on the DLR findings lists the crops selected for

107 comparison. Analysis of the data reveals that other crops have higher yields than lettuce; for example, tomatoes yield 16.14 g/ft²*day and peppers 13.84 g/ft²*day.

Table 7 also displays the amount of biomass produced by the crops per day, per square-foot area.

Table 7: Plant parameters (biomass production)

Crop Fresh edible biomass Fresh biomass (g/ft²*day) (g/ft²*day) Lettuce 12.2 0.67 Cabbage 7.04 0.63 Spinach 6.78 0.67 Carrots 6.95 5.56 Radish 8.52 5.11 Tomatoes 16.14 11.83 Peppers 13.84 11.83 Potatoes 9.78 8.38 Peas 1.13 14.96 Strawberry 7.23 13.42 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

Another factor taken into consideration in the selection of lettuce is the minimal waste created (inedible biomass) from the growth process. Waste must be allocated in a sustainable manner, and an efficient method is conversion into organic compost. Waste management will be addressed later, once other aspects of the model have been established. For this model, the inedible biomass or waste will be sold to firms dedicated to the manufacture of organic compost (to be chosen later). The inedible biomass produced by lettuce is minimal in comparison to that of tomatoes and peppers, which consists of vines and branches for plant support (better yield crops), thus translating into lower expenses for waste management. The inedible biomass that cannot be utilized

(sold) will need to be removed at a cost.

108 Another motive for choosing lettuce is the resources required for growth.

Much less light, water, and nutrients are required for lettuce than for other products in terms of the inedible versus edible biomass produced.

Allowable cultivation area is another reason why lettuce makes more production sense. Allowable cultivation is based on the size of the space needed for cultivation, as per case study 1 (Zeidler, et al. 2013). Lettuce utilizes available cubic area more efficiently than all the other crops in the study. Table 8 shows that lettuce more efficiently utilizes available space in the same amount of square footage than other crops. This conclusion is based on 25 floors of growth area in the DLR case study (Zeidler, et al. 2013). The maximum number of multi-layers allowed, in conjunction with other positive factors, results in a more efficient operational model. The data findings show that growing just one crop can maximize the usage of a growth area in a three-dimensional manner, as presented in Table 8 (Zeidler et al., 2013).

Table 8: Crop growth area

Total Maximum number of stacks Cultivation Number Total number cultivation Crops (grow channels) per grow area per of PCF of grow units area per VF unit floor [m2] per VF [m2] Lettuce 6 5,508 4 304 22,032 Cabbage 5 4,590 2 152 9,180 Spinach 6 5,508 1 76 5,508 Carrots 4 3,672 2 152 7,344 Radish 5 4,590 1 76 4,590 Tomatoes 4 3,672 3 228 11,016 Peppers 4 3,672 2 152 7,344 Potatoes 2 1,836 5 380 9,180 Peas 3 2,754 4 304 11,016 Strawberry 6 5,508 1 76 5,508 TOTAL 25 1,900 92,718 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

109 Since lettuce is a winter crop, it needs less heat and sunlight than other crops that are not able to grow during the winter. The ability to grow during the cold weather months amounts to less energy expenditure for the growing process, thus minimizing costs. Ever increasing demand, as well as crops lost due to climatic occurrences, make it very difficult for producers to produce adequate amounts of produce. As a result, production is pushed to its limits.

However, vertical farming with indoor environmental control offers realistic certainty.

Recently, there has been a rise in bacterial outbreaks affecting lettuce, and this – in combination with a higher demand – has contributed to prices rising by as much as 168%, according to CNBC e-news (Haigh, 2018). Vertical farming can improve controls of bacterial contamination, as it uses a meticulous production method and follows strict hygienic control procedures.

Price of lettuce

According to the USDA, organic lettuce will have one the biggest potential pricing increases of any crop in the foreseeable future. In comparison to all other organic crops grown in the United States, the organic lettuce market had the best value sales in 2016 ($241,275,010) (USDA Survey, 2016). Pricing varied for

Pomona’s community members (subsidized) and outsiders in neighboring communities (retail).

The pricing will be derived from the average of three different factors. The first is retail pricing for organic lettuce in the southwest region of the United

States, identified through up-to-date news from USDA reports; for example,

110 $1.99-$2.50 per pound. (USDA, 2019). The second factor is the average price of organic lettuce in health stores in the neighboring communities. An example of the pricing at the time of this research was $1.99-$2.99 per pound (USDA, 2019).

The third factor is the cost of production given by the profitability analysis, with the break-even analysis showing a cost per pound of $1.80.

Product from the thinktank

Thinktank products are defined as the crops that are untested, difficult to grow in the United States, difficult to find, and challenging to ship due to their delicate nature. These crops are often sold at very high prices in low-income communities, with great success despite minimal marketing (Batres-Marquez et al., 2001). The community’s input is vital to the success of the enterprise, with the community and the enterprise coming together for the common goal of supplying the demand. Under the umbrella of the social enterprise model, the thinktank will serve as the equivalent of a community garden, connecting the technical with the social, thereby combining resources and ensuring a symbiosis between the vertical farm and Pomona’s residents.

The social enterprise provides the technical expertise for growing crops, and the community’s participation supports research into the local market and an insight into potentially untapped niche crops. The community’s involvement in the decision-making can teach community members how enterprises are run and how certain aspects of their cities can benefit them and their fellow citizens. The main purpose of thinktank crop production is to uplift the community by making it

111 a part of the process, to encourage innovation, and to produce extra income for community members and the social enterprise.

The exotic cultural niche market falls under the jurisdiction of the thinktank, which forms part of the R&D department of the social enterprise. The niche market has been chosen as a viable economic opportunity, on the basis of the number of successful ethnic-driven grocery stores that reside within

Pomona’s boundaries. Latino and Asian grocery stores such as Hoa Binh,

Cardenas, El Super, and Superior provide a few examples, and they provide nostalgia and nourishment for immigrant patrons who cannot travel back to their countries of origin for their preferred produce (Santo et al., 2016). The cost of these exotic crops/products is usually high in comparison to other basic products, due in part to the transportation cost and lack of availability (difficulties in growing and exporting).

Ethnic grocery stores understand and exploit the importance of food in often isolated communities. Crops sold at local ethnic grocery stores are good examples to consider when designing a niche market: pouteria sapota, turmeric, ginseng, wasabi, mushrooms, pitaya, ginger, spondias purpurea, and cashew fruit (Anacardium occidentale) and nance (Byrsonima crassifolia) (Batres-

Marquez et al., 2001).

Exotic, nostalgic, and difficult to obtain fruits, vegetables, and herbs from around the world – from as far afield as Chile and Thailand – make up some of the foods sold at Latino grocery stores and other specialty stores throughout

Southern California. The products are primarily sold in low-income immigrant

112 communities. The cost of transportation, the delicate nature of the crops and the unutilized/overlooked market potential by mega-corporations – combined with the fastest growing population in the United States being that of immigrants (Latino people) – together provide the conditions for a strong opportunity in the food market, specifically for small stores tailored to their host communities (Census,

2010; Batres-Marquez et al., 2010).

Ethnic crops are not commonly found in regular neighborhood grocery stores, and this scarcity drives the high demand for such products in immigrant communities. The stated conditions provide a good foundation for a market in the

Pomona region, given the population is approximately 75% Latino (Census,

2010). Vertical farming technology has the ability to provide the most favorable environmental conditions for any crop, assuring a consistent and sustainable model of operations. The adaptability of operations in a controllable environment could allow for any crop to be grown efficiently, in any part of the world, without the need for pesticides or sunlight (Zeidler, et al. 2013).

Price of thinktank product

The pricing of thinktank products is determined by two inputs: the average price of nearby, comparable produce and the cost of production derived from the profitability analysis for each individual crop. These pricing factors are some of the variables the thinktank’s crops can bring better profit margin to the social enterprise than conventional crops. According to the Specialty Crops Market

News USDA, the cost of a pound of sapote at the Los Angeles produce terminal is approximately $3 (wholesale), and it can retail for as high as $5 per pound

113 (fruit averages 4-6 lbs.). The red dragon fruit is commonly sold for $4.80 per lb.

(wholesale), turmeric for $3.50 per lb. (wholesale), ginger root for $2.00 per lb.

(wholesale), and ginseng root $200 - $400 per lb. (USDA, Specialty Crops

Market News. Federal-State Market News Service, February 2019).

Product: education

Education is essential to the success of any social venture. Academic education plays a very important role in the development of children and adults alike. Education, like ecosystems, is continuously evolving in response to new discoveries. Examples of these include computers, medicines, telephones, and newly discovered species. A lack of education about our natural environment – whether that be the Brazilian jungles or our very own neighborhoods – has created extensive and some may argue insurmountable complications for the human species to adapt and overcome (Santo et al., 2016).

Nutrition education has not been a core interest for the common citizen. In many cases, people only become aware of their lack of knowledge when they become ill. This lack of education also affects highly educated professionals, including general doctors. Due to the limited time to spend with patients and the lack of human connection to discuss information in nutrition at a personal level may be some reasons why doctors are losing the battle against the epidemic of cardiovascular disease in the United States (Aggarwal et al., 2018).

The American Journal of Medicine has noted that cardiovascular disease is the leading cause of death globally, accounting for 31% of all deaths in 2013, an increase of 42% since 1990. Cardiovascular disease has been attributed to

114 poor diet. The westernized diet, which consists primarily of refined sugars, highly processed foods, and animal-based foods, is a strong contributor to this epidemic

(Aggarwal et al., 2018).

Nutrition education plays two roles within this social enterprise: community involvement and empowerment (for local, low-income residents in Pomona) and educational services for interested individuals, schools, and organizations

(private and public) from the surrounding communities (outside Pomona). The services will be in the form of tours, clinics, and intensive technical training. For those schools interested in tours and learning clinics outside Pomona, the plan is to use government grants to facilitate educational seminars for those unable to pay for such activities.

Nutrition education is already being implemented in hospitals for patients diagnosed with prediabetes and other chronic diseases attributed to poor diet.

The proposed conceptual nutrition educational plan differs drastically from that described here, as it is intended as preventative education for the family. An education plan in conjunction with a hands-on vegetable production experience will create a more impressive experience for students and visitors alike. It is important to raise awareness of the importance of nutrition education, especially among children and lower-income communities, who – according to the research

– are the most heavily affected (Algert et al., 2006).

Price of education

The pricing for nutrition classes applies only to schools and organizations outside Pomona’s city limits. Schools and other organizations (public and private)

115 will follow a model comparable to that of Cal Poly Pomona’s Rain Bird BioTrek, which hosts tours and workshops for students (K-12 and college), often paid for by government grants. The payment for such conferences can start at $6 per individual, the cost has shown success for the self-sustainment of the BioTrek teaching program, in the sense that it covers the expenses required for teachers and staff. The minimum charge for groups can be $180. Conferences and classes in the field of innovative growing plant techniques can also start at $6, with an increase in cost as the level of teaching increases. The tours, conferences, and workshops will be conducted by staff, with speakers brought in for special events.

For schools, K-12, and colleges outside Pomona, financial assistance from third parties can be utilized to subsidize educational activities (based on annual applications). Such third parties may include the Federal Employees

Distributing Company (FEDCO) Charitable Foundation Classroom Enrichment

Fund Grants. The grant applications can come through the nonprofit organization or California Community Foundation, or directly through FEDCO. Once the grant has been awarded, the disbursement will consist of $500 for teachers interested in enriching their students’ educational experience with a field trip, and a maximum of $2,000 for four teachers for one trip. These funds can be used to subsidize any expense incurred for transportation, admission, and related materials directed to a learning experience, with a maximum allowance of

$40,000 per year (California Community Foundation, 2019).

116 Technical seminars and classes can be offered for older high-school and university students as in-the-field experience or partial fulfillment of the school curricula (to be discussed with the institutions). Highly specialized classes and advanced conferences will be available to serve national and international interests. The cost of these conferences and classes will be determined by the success of Vertic Garden’s initial acceptance by the community.

Classes, seminars, workshops, and tours will be free of charge for

Pomona’s schools and residents. This will be possible due to the sale of tours, seminars, and classes to schools and organizations outside Pomona, in addition to the sale of fresh foods.

Place

For the hypothetical model a location has be chosen that meets the criteria of a social enterprise. Vertic Garden is to be located at 246 East Center

Street, Pomona, CA, in Los Angeles County (Loopnet.com). The property is surrounded by a mixture of residential single-family homes, industrial buildings, and empty lots. It is located inside Pomona’s Opportunity Zone, which is identified by the green highlighted area in Figure 3. The facility is surrounded by west and south alleys, while the main entrance is located on the north side, on

East Center Street. Across the street is a residential home and a commercial building.

The location meets all the requirements for our business model: proximity to the community (residential homes) and industrial and commercial allowance; a diverse floor covering; a warehouse, office space, open lot area (parking lot and

117 side yard); and sufficient electrical and industrial water delivery capacity to meet production needs. It is also strategically located at the center of all the targeted organic lettuce retailers. The intended retailer cities within a 10-15-minute drive are La Verne, Glendora, Claremont, San Dimas, Walnut, Diamond Bar, Chino

Hills, and Montclair. Vertic Garden’s focus is an area of a 10-mile radius from the point of production, ensuring an efficient distribution setup. The goal is the ability to deliver at a moment’s notice to retailers in urgent need of produce, thus providing a way into the local market and giving shoppers a local alternative . A delivery service will be considered once the business is up and running.

Figure 3: Opportunity Zone in Pomona, CA., highlighted in green Source: http://www.ci.pomona.ca.us/

118

Figure 4: Map of location 246 E. Center St, Pomona, CA. Source: Google Maps

A persistent problem in many community gardens is contaminated soil left behind by polluting industries. The location selected at 246 E. Center St. does not have an open soil plot of land. It is covered entirely by concrete or asphalt, making it a poor location in which to grow food in the conventional way (relying on soil). However, while the location is less than optimal for a community garden, this does not affect the vertical farm model. The location supports diverse operation practices, with indoor and outdoor areas, providing sunlight and artificial lighting.

According to the National Oceanic and Atmospheric Administration

(NOAA), southern California averages 266 days of sunshine annually (73% of the time), thus sunlight is the more efficient option. The facility provides accommodation for an existing structure retrofit (warehouse), which could be advantageous in providing a diverse type of growing settings, in which different techniques can be applied. Some operations rely heavily on artificial lighting, but

119 this hypothetical business model involves diverse lighting capabilities and is thus more efficient and sustainable.

The operation of choice (equipment) at this location consists of two techniques: the carousel growth towers and the DLR. In the carousel towers model, the towers are housed in extra tall greenhouses, erected outside in the open space areas (the parking lot and side yard), depicted in Figure 5. The towers, chosen for their reliability and simplicity, were the creation of the former engineer – now a vertical farmer in Singapore – and founder of Sky Green, Jack

Ng (Benke & Tomkins, 2017).

In the warehouse area, the DLR model is utilized in the production. The

DLR technology in this area of operations is the equipment recommended by the case study “CE Study Report – Vertical Farm,” conducted by the German

Aerospace Center (DLR) Institute of Space Systems (Zeidler et al., 2013). The equipment calls for artificial lighting, six non-moving layers with an aeroponic irrigation system, and an HVAC system: a complete, controlled environment. The details of the operations are described in the profitability analysis section of the study.

120

Figure 5: Blueprint of the location chosen for the facility Source: http://www.remaxcommercial.com/loopnet.aspx

Promotion

Promotion will be conducted during face-to-face interaction between the residents and a team of two NCCs. The plan is to deploy these individuals into the surrounding community 6-12 months prior to launch. When the facility is open, the consultants will continue this work, travelling to houses in the surrounding areas. The initial intended area for promotion is the vicinity of one square mile. This area is home to approximately 1,708 households (US Census,

2010). Assuming a pace of six households per day, it will take approximately 284 days to reach all the households in this area.

The purpose of the NCCs is to educate the community about Vertic

Garden’s business model (social enterprise) and what they can expect from it.

The NCCs will also promote the importance of nutrition education and the role the community can play in the business. They will gather data from the community in the form of surveys, concerns, and input (visual). Some of the data will be integrated and employed in the development of a strong bond between

121 the community and the enterprise for the purpose of establishing social enterprise.

The recruited community members will become part of a database belonging to Vertic Garden. With this information, a (free) membership system can be developed for data gathering and a systemic (capable of being repeated in other areas of the city and other cities) work environment. The membership will be used as proof of eligibility for subsidized vegetables by Pomona residents determined by the NCC to be enduring economic hardship.

The price of lettuce will be equal to the average lowest price found in any supermarket in Pomona. The NCC will also reach out to nearby schools

(elementary schools, junior highs, high schools, universities, and adult trade schools) to establish relationships with them and promote field trips, conferences, and classes. The consultants will also establish contact with the municipality, utility companies, government, and non-governmental agencies, informing them of the social mission of Vertic Garden for the community. The NCC will also work to identify resources and organize collaborations from these aforementioned entities.

A sales representative will reach out to establish relationships with all 18 health food stores located within a 10-mile radius of the farm (Google Map,

2019). This individual will also seek out relationships with the nine neighboring community gardens and inform them of our mission and business plan, with a goal of agreeing future collaborations.

122 Social media promotion is essential. Although a website may not be developed prior to launch, there will be a presence on Facebook, Twitter,

Instagram, LinkedIn, YouTube, and WhatsApp. There will be direct advertisement on Facebook, targeting health-conscious individuals. The demographics of this group can be provided by the social media platform. (The target market will be described in the following sections.) The paid social media platform for direct advertisement can be linked to the others, the strategy is to save money while period of establishment. The only paper advertisement used in the promotions (mailers) will be the informational literature provided on-site at the farm. The budget for marketing will be minimal, amounting to less than 1% of the total annual budget; and the bulk of the efforts will involve reaching out to nearby residents and organizations. The key is to develop a personal relationship with the clients, community, suppliers, workers, and municipality.

Target market

The vertical farm movement has caught the interest of several countries, due in part to their respective food import needs. The situation in Pomona is not as severe as that in places such as Singapore, for example, where most of the foods are imported due partly to a lack of space for cultivation (Haigh et al.,

2015). For the business side of this model to work and be profitable, and thus sustainable, the target market must be very well researched. The health food stores in adjacent cities have the most interest in this type of product, according to the USDA, providing a market for high-end organic produce (USDA, Organic

Market Overview, 2017).

123 The data show a consistent increase in organic product acceptance by the public. According to the USDA, consumers are seeking out organically grown produce, especially fruits and vegetables, due to concerns about health, the environment, and animal welfare; and these consumers are willing to pay high premium prices (USDA, Organic Market Overview, 2017).

Marketing segmentation

Research shows that women are 21% more likely than men to consume organic produce. In addition, higher levels of education are associated with greater consumption of organic produce. Studies suggest that high-school graduates are 1.05 more likely than those without any formal education to eat organic, followed by those with college degrees (1.39), and those with graduate degrees (1.68) (Curl, et al., 2013). Per capita household income is also associated with rates of consumption of organic produce, with higher income households consuming more organic produce (Curl, et al., 2013).

Based on existing research, our direct market segmentation has been broken down as follows: educated women will be a key target, followed by highly educated men, and finally the more affluent consumers in the adjacent cities and the wealthier Pomona residents. These groups will be approached and presented with the product. As stated earlier, all direct marketing will be through social media (e.g., Facebook), governmental and non-governmental agencies, municipalities, organizations and institutions, and face-to-face discussion.

Strengths, weaknesses, opportunities, and threats analysis (SWOT)

124 The business world is unpredictable and unforgiven for new industries, such as vertical farming. This section details the contingency preparations and an analysis of the business’s strengths, weaknesses, opportunities, and threats

(SWOT). A SWOT analysis is commonly utilized in strategy development and competitor analysis, and it is frequently the method of choice in the elaboration of a business plan.

The potential strengths of Vertic Garden are its innovation, independence, environmental benefits, and diversification. The weaknesses are its limited crops, expensive energy requirements, high startup costs, perceived as a competitor to conventional farming, and the challenges of “scaling up.” The opportunity here is that the farm is the first of its kind in the area. There are community gardens and some greenhouses, but there is nothing similar to Vertic Garden, as a community-building hub with a high production yield operation, set to transform perspectives of urban farming practices and, in the process, revitalize a socially challenged economy in Pomona. The threats come in many shapes and forms, including the fact that it is the first of its kind in the area (acceptance), as well as its labor costs (largest running expense) (Zeidler et al., 2013).

Strengths

Innovation is the baseline for progress in any industry. Innovations in vertical farming come in many forms. One of these is the model’s ability to produce much more than conventional farming in the same area, thus generating more production capacity. In an urban setting, vertical farms can lower carbon dioxide levels in two ways: first, by reducing the transportation needed to

125 transport food between the production and consumption locations (Despommier,

2010); and second, as plants uptake carbon dioxide as a means of production, also known as photosynthesis. Metropolitan areas are commonly saturated with carbon dioxide, as a byproduct of engine combustion.

The strengths include the ability to produce food year-round, with higher yields per footprint, a business tailored to its environmental conditions, and the creation of jobs. Another important strength of vertical farms is the limited use – or total avoidance – of chemicals for pest control. These cited strengths are some of the most important for vertical farming.

Innovations in artificial lighting have sped up the growth process of the crop. Recent advancements in technology over a relatively short period of time have given freedom from lighting energy requirements. Artificial lighting is considered a primary obstacle to the development of vertical farming. However, technological innovation in the form of new generation LED lights has meant that lighting is no longer a determining factor (Benke & Tomkins, 2017).

Environmental control technology can provide predictable production, regardless of the unpredictability of climate or pest, it is capable of no fluctuation in prices and thus capitalizing on market price increase, due to climatic circumstances such as droughts, floods, prolonged seasonality, and an increase in bacterial outbreaks. Vertical farms opposed to conventional farms, have better control over production and tracking in cases of outbreaks.

There is real environmental and diversification potential, as vertical farms can promote habitat conservation and reclamation of those habitats already lost

126 to agricultural needs. Diversification in vertical farming can be defined in different ways, with the possibility of interdisciplinary job creation for engineers, contractors, farmers, biologist, environmentalist, marketers, unskilled workers, mechanics, electricians, welders, scientists, and more. The infrastructure that has not yet been implemented to supply the vertical farming industry could also provide new types of job that may not currently exist (Benke & Tomkins, 2017).

The business model recommends many small vertical farms work to meet the needs of a city or region, as opposed to one large vertical farm. This concept promotes decentralization of resources, thus making it safer for food production, as this is favorable in cases of a natural disaster and/or isolated incidents of fire, flooding, infestation, and vandalism (Lyle, 1994). Wealth sharing among many diverges from the conventional way of doing business, which involves a few having control of most capital.

A number of small ventures promotes competition between growers, thus benefiting the industry and consumers alike. Giant corporations can set any guidelines that suit their own interests, as opposed to those of the consumer, which tends to undermine the wellbeing of the consumer when such corporations control the market. Considering the points described here, it is assumed that many small operations are better for a community than one large operation

(Moroz et al., 2016).

Weaknesses

There are weaknesses or limitations in the development of any industry, and the evolution of production and/or services should overcome these

127 challenges. Conventional farming has a head start of approximately 10,000 years

(Despommier, 2009). Vertical farming has fewer than five decades of evolution

(Besthorn, 2013). There are many types of crop that are not (currently) economically viable for the vertical farm setting; and for this reason, most R&D has focused on leafy greens (a small, fast-growing crop).

In conventional farming, leafy greens have challenges that are becoming difficult to overcome, due in part to climatic inconsistency (Benke & Tomkins,

2017). In contrast, thanks to technology, any crop can be grown in the controlled environment of a vertical farm. Currently, there are some crops which it does not make economic sense to grow for profit; rather, they are only grown in this context for reasons of experimentation.

As research continues, new technology is developed to meet demand.

Agricultural technology is rapidly evolving. There are dwarf trees that can produce fruits at a three-foot height in less than a year, using rootstocks practices (Benke & Tomkins, 2017). This type of technique can transform the way in which food is produced, in urban settings and out on the great planes.

Energy expenditure is another weakness for the model due to the requirements for production. For example, in harsh and extreme climatic conditions, such as extreme heat and cold, high energy expenditure is inevitable as extreme weather conditions must be counteracted by cooling and heating

(HVAC) systems. Due to new technology, artificial lighting is no longer a critical factor in the business model of a vertical farm (Benke & Tomkins, 2017). To alleviate energy expenditure, vertical farmers are implementing more efficient

128 types of alternative energy producer, such as wind turbines and solar panels, as in the case of the Sol Invictus proposal (Benke & Tomkins, 2017). In addition, some entrepreneurs are now contemplating off-grid indoor farming operations

(Benke & Tomkins, 2017).

High start-up costs are commonly associated with vertical farms, in some cases due to their proximity to high-priced and highly desired metropolitan real estate (for rent or purchase). In comparison to conventional farms, the cost appears extremely disproportionate. Upon closer inspection, the disparity is smaller than appears, though nevertheless substantial. The condensed and high yielding vertical farms are no economic match for high-end apartments and penthouses.

Research suggests that the more sensible approach to vertical farming involves taking advantage of the former industrial districts located near major cities such as New York, Chicago, and Los Angeles. It is common in the United

States to refurbish old dilapidated buildings into vertical farms, as in the case of

AeroFarms in 2015 (Benke & Tomkins, 2017; Frazier, 2017). One must consider the amount of conventional land it would require to produce the same amount produced in a vertical farm. It is common for most conventional farmers to own their land – 61% of which is then used as farmland, and the remaining 31% usually rented out for others to work, leaving little in reserve for motivated new farmers (Bigelow & Hubbs, 2016).

Competing with conventional farming would not be realistic at this moment in time. The sheer size of the land on which conventional currently produces

129 food, makes it impossible to replace the established food system. The new possibilities/alternatives will not pose a threat, but rather provide a possible solution to the lack of remaining arable land. Research shows that greater production can be achieved by the horizontal expansion of multi-rack systems and the construction of more vertical farms in cities (Benke & Tomkins, 2017;

Despommier, 2012). Conventional farming has unfair advantages over vertical farming, such as subsidies in the form of cheaper utility scale and financial assistance. The USDA has begun to take notice of the potential for urban vertical farming, and it is now investing resources in the form of loans and grants to promote the industry (USDA, 2019).

Scaling up may not seem to be a challenge, but it is certainly not as simple as in conventional farming. The running costs for the infrastructure used on a conventional farm differ from those of a vertical farm. A conventional farm can scale up with minimal increase in infrastructure expenses. For example, there is no need to purchase an additional tractor, processing plant, or extra harvesters (machine) to increase production. Rather, scaling up can consist of more seeds, more water, extra labor from a current employee or hiring an additional one, and additional fuel and energy spending.

For a vertical farm, scaling up requires substantial additional infrastructure. If production were to scale up by 10%, there would be a need for more troughs to hold this 10% increase in produce, as well as more artificial lighting; and as lighting increases, so does energy consumption. If the building amperage is on the threshold of amperage augmentation and the extra load

130 pushes it over the limit, rewiring will be required to handle the additional power demand. More lights can equal more heat; thus more power is required for cooling. More air conditioning units may need to be installed. In the case of Vertic

Farms, it would call for more vertical carousels, which are a considerable part of the model. Scaling up for vertical farms does not necessarily mean better profit margins either, as production cost is relative to initial cost (Zeidler et al., 2013).

Opportunities

The ability to produce different types of crop in a consistent manner, without the use of chemicals, in a designed climatic condition, and without harming the natural or urban environment, has great potential for new opportunities. A problem that strongly affects community gardens in Pomona is the polluted soil left behind by careless industries, such as recycling centers. In those cases, vertical farms can provide a simple solution that requires no extra effort or cost. The model heavily conserves water, with none of the water runoff of some community gardens, thus preventing contamination of aquifers. The model potentially creates an array of new opportunities for careers, education, social benefits, and an untapped niche market in ethnic crops.

Threats

Aside from being a threat, labor cost is an important variable in the Vertic

Garden’s business model, not only because it is the largest running expense, but also because the wellbeing and the respect of the employees are highly important to the organizational mission of a social enterprise. There are plans to mitigate the labor costs through greater efficiency in production and a focus on

131 high-cost and difficult to produce crops, namely by targeting a niche market,

R&D, and the identification of other social tools to bring more benefits for Vertic

Farm’s organizers and community.

Like conventional agriculture, vertical farms are at the mercy of natural disasters, but they stand a better chance of surviving such events. There are also threats in the form of pests, though these can be handled with checks and balances that mimic nature. An example of this is an outbreak of aphids. This problem can be resolved with the introduction of Coccinellidae, also known as

“lady bugs,” which are the natural predator of such pests.

Financial plan

The financial plan includes figures and projections for three years. The figures include the initial cost of startup, the labor force cost, potential sales speculations, a break-even analysis, and a long-term plan. They also include data gathered from two case studies and applied to our business model. This case study, the CE Study Report on vertical farming by the German Aerospace

Center (DLR) Institute of Space System, was selected because it is the most complete and technically oriented example found. Although it was completed six years ago, it implements the current and newest type of growing technologies. It provides detailed study on the costs, production, and multiple scenarios of a full construction theoretical model (37-floor building). The design calls for total enclosure from the outside environment, using only artificial lighting and a hydroponics and aeroponics systems and an aquaponics system (which was not analyzed for this study) (Zeidler et al., 2013).

132 The second case study analyzed here is that of Sky Greens. This is an running business model, established in Singapore as a commercial farm with the financial help of the government in 2012. This case study was chosen, in part, for its simplicity, reliability, utilization of available resources, and proven model. The model is also exemplary of the vertical farm industry because it is a relatively low-cost startup, which started small and has the capacity to expand if necessary

(Kurt & Tomkins, 2017).

Another important factor taken into consideration when these case studies were chosen was that they have the most data available for production, sales, and technological expertise. Data gathered from the case studies were heavily relied upon for the construction of the financial analysis.

According to this analysis, Vertic Garden needs approximately

$3,140,477.42 to cover the initial cost funding. This figure is discussed later in detail as it pertains to the case study. The plan is to conduct a fundraising campaign that includes the big retail health food chains Trader Joe’s, Sprouts, and Wholefoods. Any additional funds will be acquired through bank loans, microlending, and if necessary, crowdsourcing. This strategy mimics those of other successful vertical farms.

According to the USDA, when California began growing lettuce in the

1930s, the demand for delicate organic produce (e.g., butter lettuce) was strong; but due to the damage incurred during transportation, it became the least preferred type for cultivation by big farms in Salinas, California, and Arizona

(Geisseler et al., 2014). The challenges conventional farms have with this type of

133 crop and unpredictable climate provide a great opportunity for the vertical farm industry. The benefits of vertical farming that alleviate the current challenges could help when reaching an agreement with retail health store chains (USDA,

Organic Market Overview, 2017).

To calculate the initial cost, data from both case studies were taken and applied to the parameters provided by the chosen location. To determine the best operational model, an analysis of the different types of operations model was conducted. The findings indicate that a new construction would not be the best option for Pomona because, first, the cost is 4-5 times higher than that of the retrofit model (e.g., the tower garden model). Second, the business concept has not been proven in this area, thus it is advisable to start small and prove the concept, then later proceed to expand on the basis of sustainability.

Another operation model considered, but ultimately not recommended, is the shipping container. As portable vertical farms, they provide many advantages for specific scenarios and environments; but for this location, the model would be considered wasteful, as it does not utilize the resources available in the environment, thus making it less than optimal. Southern California is one of the sunniest places in the United States. The social enterprise principles rest on the sustainability basis that Professor Lyle suggests is better for all stakeholders: namely, working with the environment and not against it (Lyle, 1994). Not using available resource, such as energy in the form of sunlight, can be considered a waste of resources.

134 Lighting is the number one energy consumer subsystem and the second highest expense in the social enterprise model. For these reasons, other models were chosen. The research suggests that shipping containers are most efficient in places that suffer from extreme climate variation, including extreme heat or cold, droughts, floods, and contaminated areas (Benis et al., 2017). The cost is lower than that of other operational models, but innovation and scarcity mean that there are more efficient models available within.

The location chosen for production and community outreach consists of a lot of 19,373 sq./ft. The lot is divided into a building area (10,879 sq./ft), a warehouse (8,513 sq./ft), an office space (2,365-2,500 sq./ft), a parking area

(5,723 sq./ft), and a small side yard (~1,710 sq./ft). The ceilings are 11-foot high in the offices and 14-foot high in the warehouse area. The annual rent with a

20% margin is $109,660.80, and the monthly charge is $9,138.40. Loop.net, a commercial real estate company website, was used to find an available and reasonably priced location available to rent in a specific area of Pomona.

Start-up funding

The money borrowed from investors will be paid back over a ten-year term. Money borrowed from banks will be paid back on a 30-year mortgage commercial loan at 4.00% interest rate (current rate) (Commercial Loan Direct,

2019). The projections suggest that Vertic Garden will be able to repay its loans with 5-6 years of uninterrupted production. The annual payment for the initial cost plus a 20% margin is set at $173,238.82 (or $14,436.56 monthly). Table 3 shows

135 the annual cost of doing business (recurring cost), plus the cost of the initial startup.

Important assumption

The assumption of the model is that all the lettuce produced at Vertic

Garden will be sold. The produce for consumption by Pomona residents will be grown in the R&D area, in collaboration with the community and social entrepreneurs. This area is labelled in Figure 5 as the “showroom”.

Background on systems

German Aerospace Center (DLR) systems

The technologies implemented in the Pomona model are derived from two specific sources of information: a feasibility study titled, “Vertical Farm EDEN,” produced by the Institute of Space Systems Department of System Analysis

Space Segment, Evolution, and Design of Environmentally-Closed Nutrition-

Sources (EDEN), by the German Aerospace Center, finalized in 2013; and a real-life case scenario and currently working model, named “Sky Greens”

(subsidiary to Sky Urban Solutions [SUS]), established in Singapore by Jack Ng in collaboration with the Singaporean government in 2012.

Despite extensive research on urban vertical farming, limited data were found on existing working operations in the United States; thus, research then led to Germany and Singapore. These two examples were ultimately selected as the main sources of data extraction for their logistical applications for the selected socioeconomic and geographical location. More specifically, the feasibility study report contains a thorough plan and detailed information on a complete “zero to

136 complete construction” of a building structure intended solely for the purpose of growing foods. It also provides data on production methods and capacities, alternative models, and an economic analysis with projections (Zeidler et al.,

2013). The Singapore model, Sky Greens (carousel towers), was chosen because it is a proven and established model that has been successfully producing food since 2012 (Benke & Tomkins, 2017). The carousel tower gardens consist of revolving carousels, enclosed by extra tall greenhouses.

The feasibility study concerns an entirely enclosed and environmentally controlled vertical farm model. The design utilizes well-known technological methods currently in use in conventional greenhouses and bio-regenerative life support systems in space missions. The DLR study provides an economic feasibility assessment to prove the viability of the concept. It focuses on

Controlled Environment Agriculture (CEA), derived from space-proven growing technology. The main criterion of the study’s viability is its break-even analysis, which states that if the cost of producing food in a vertical farm is greater than that of producing food conventionally in the fields, the model is unlikely to succeed (Zeidler et al., 2013).

The design is divided into 13 subsystems: system analysis, design of subsystems and actual building structure, analysis of structure, germination and cleaning systems, selection of crops and its supporting infrastructure, a fish farm design, nutrients and water delivery system, lighting system, environmental control system, food processing, processing of inedible byproduct, economic analysis, and alternative scenarios. In this study, the focus is on the subsystems,

137 structure design, gemination systems, crops selection with its supporting infrastructure, nutrients and water delivery system, lighting system, environmental control system, economic analysis, and alternative scenarios.

Due in part to the simplicity of fish farming versus the farming of animals, the final DLR design includes a fish farm to support the semi-closed system. The structure consists of 37 floors, in which a diverse range of vegetables and fruits are grown in a completely controlled environment. For a better understanding of the design, a rendering of the structure is shown in Figure 6.

Figure 6: Vertical farm floor distribution Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

To analyze the cost of construction (per sq./ft) in the warehouse area, data from the DLR study for a more complex system (37 floors of a complete building construction) are partially utilized for the calculations. In the case of Vertic

Garden, it is only necessary to include the subsystem costs pertaining to the design of the operational model. The subsystems are germination, plant

138 cultivation, nutrient delivery (aeroponics), lighting and environmental control, plus a 20% margin (Zeidler et al., 2013).

Figure 7: Outer and inner structures of the DLR vertical farm case study Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

“Sky Greens” system

Sky Greens, unlike the DLR case study, is not a concept. Sky Greens is a subsidiary of its parent company, Sky Urban Solutions (SUS), based out of

Singapore, a small island with a population of more than five million people, that imports 93% of its foods. In response to these circumstances, the company was founded by Jack Ng with assistance from government in 2011. The operations site is in Lim Chu Kang, which occupies an area of 3.65 hectares and produces approximately a ton of fresh vegetables every two days (Al-Kodmany, 2018).

139 The technology, known as “Sky Greens” or “A-GO-GRO,” is based on a

20-30-foot “A-shaped” rotating carrousel tower, driven by water hydraulics, in which 6-38 doubled troughs rotate three times daily, maximizing sunlight exposure and air movement. Each tower’s footprint is approximately 60 sq./ft, making it 10 times more efficient than conventional farming. The system uses no artificial light and it is enclosed in tall greenhouses. One tower consumes approximately 40 watt hours per day, therefore the monthly cost of energy consumed is $3 per tower (Benke & Tomkins, 2017; Al-Kodmany, 2018).

The vertical farm produces a variety of tropical vegetables, including

Chinese cabbage, spinach, lettuce, xiao bai cai, bayam, kang kong, cai xin, gai lan, and nai bai. Its ability to produce these crops is remarkable, and it is even more so that it does this at affordable prices for low-income consumers. In addition to providing food and financial benefits, the farm also engages with the community in educational programs. It encourages citizens to visit the site to get an understanding of how the food is grown. Sky Greens is also a recipient of the

Minister for National Development’s Research & Development Award 2011 (Merit

Award) for its vertical farming (Al-Kodmany, 2018). For a better understanding of the growing technology, a visual representation is given in Figure 7.

140

Figure 8: Representation of Sky Green’s inner-workings Source: Krishnamurthy, R., (2014). Vertical Farming: Singapore’s Solution to Feed the Local Urban Population. Retrieved May 29, 2017, from https://permaculturenews.org/2014/07/25/vertical-farming-singapores-solution-feed-local-urban- population/

Economic analysis

Initial costs

Vertic Garden’s facilities are divided into three operational areas: the warehouse, the outside area (parking and side yard), and the office (R&D area).

This financial analysis only includes the for-profit side of the enterprise, as it focuses on proving whether a for-profit business model is economically sustainable. Once it has been determined that the model can hypothetically produce crops for less than or equal to the cost of conventional farm products, unification with the nonprofit part of the business will be considered. The most suitable growing technologies have been chosen for each area. The warehouse and offices areas utilize the DLR study technology, and the outside use the Sky

Greens technology. Data retrieved from the study and model and pertaining to

141 costs in different currencies have been converted into the US dollar for the purpose of the calculations.

The German Aerospace Center (DLR) study technology is most suitable for enclosed areas that lack sunlight and have limited ceiling heights (Zeidler et al., 2013). Research has been taken into consideration when calculating the initial cost per square footage in Vertic Garden. The cost of the five subsystems from the DLR study were added to reach a total of $147,536,085.60 (including a

20% margin). This was then divided by the number of floors (37), resulting in a cost of $3,987,461.75 per floor. This number was then divided by the square footage of one floor (20,838.93 sq./ft for the case study building footprint), giving a cost of $191.34 per sq./ft for the cost of equipment only (five sub-systems).

Due to economies of scale, the figure of $191.34 may be an underestimate; but for simplicity, this figure will be assumed. This sum was then multiplied by the square footage of the warehouse (8,513 sq./ft) to obtain the cost of “equipment only” for the DLR technology section in Vertic Garden. This gives a total of

$1,628,877.42 for the initial cost.

According to research (Benke & Tomkins, 2017), Sky Greens technology is most suitable for areas in which sunlight is abundant and ceiling height is unlimited. Therefore, the model is likely to be highly efficient in Vertic Garden’s outside areas. In addition, the simplicity of the technology ensures greater reliability and efficiency than any other model available at the time of this research. Production capability were gathered from the literature to support the

142 calculations of production and initial cost per square footage for the Vertic

Garden outside areas.

According to Benke and Tomkins (2017), a $10,000.00 tower can produce approximately 5.4 pounds of leafy greens per day. Using this data, the initial cost of equipment per square footage can be derived. Taking the cost of $10,000.00 per tower and dividing this by the square footage of a tower (60 sq./ft) gives a cost of $166.76 per sq./ft. Adding a 20% margin, the final total is approximately

$200.00 per sq./ft. The outside area consists of a total of 6,933 sq./ft (using just

115 towers). Multiplied by $200.00 per sq./ft, the total initial cost for tower equipment (with a 20% margin) is $1,386,600.00. In addition, $100,000.00 is required for a greenhouse to enclose the towers, and $25,000.00 will be allocated to purchase a used delivery van.

Recurring costs

The recurring costs of the model are broken down into several sectors: consumption of energy, resources (seeds, nutrients, water), personnel, allowance for equipment maintenance, and lease/rent. As mentioned earlier, energy consumption varies according to the technology used, thus adjustments have been made accordingly to the calculations. In this section, the equation will be explained on how the data has been extrapolated from case studies and literature for operational model of this case study.

Power consumption cost

This section provides an energy consumption analysis for the warehouse area (DLR). The data on energy consumption can be found in Table 32. This has

143 been broken down into subsystems, of which have been selected for their utilized applications. The subsystems’ energy consumption is due to germination, environmental control, nutrient delivery, and lighting.

The total consumption of these subsystems (highlighted rows) is 412,287 kWh per day (under the guidelines of a 37-floor structure). This was divided by

37 floors to give 11,142.89 kWh of energy consumption per floor daily. The result was then divided by 20,838.93 sq./ft (a single floor footprint), resulting in energy consumption of 0.534 kWh per day per sq./ft. The daily consumption was then multiplied by the square footage of the warehouse area (8,513 sq./ft). The result is a daily energy consumption of 4,545.94 kWh for the warehouse area.

Table 9: Summary of power and energy consumption of all subsystems

Total cost Peak Daily Daily energy Margin Total cost with 20% Subsystem power operation consumption of 20% [k$/a]** margin [kW] time [h] [kWh]* [k$/a] [k$/a] Fish farming 15 24 360 23.14 4.62 27.77 Waste management 15 24 360 23.14 4.62 27.77 Food processing, staff, 38 - 252 16.21 3.24 19.45 and control

Germination 150 24 3.600 231.49 46.30 277.79 Environmental control 15.123 - 327.203 2,1040.15 4,208.03 25,248.17 Nutrient delivery 15 24 360 23.14 4.62 27.77 Lighting 5.931 - 81.124 5,216.52 1,043.31 6,259.82 Total 413.259 26,573.79 5,314.75 31,888.55 Turbine generator - - 7.776 500.02 100.00 600.02 Total needed 21.287 - 405.483 26,073.77 5,214.75 31,288.53 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

The annual cost analysis for energy consumed in the warehouse area found that daily usage (4,545.94 kWh), multiplied by Pomona’s industrial rate of

$0.1049 per kWh, resulted in a cost of $476.86. When multiplied by 365 days,

144 this gave an annual cost of $174,057.30 for the warehouse area. With the addition of a 20% margin, the total reached $208,868.76.

The outside area will implement the two technologies. Considering the average annual sunlight in southern California (approximately 76%), the Sky

Greens technology is likely to be most efficient in this area of the operation. Less sunny days (24% of the year) can be managed by incorporating artificial lighting

(NOAA, 2019). The light time requirement for healthy lettuce is approximately 16 hours per day. Using the data presented and the DLR calculations for energy consumed by the lighting subsystem, an approximation of the amount supplemental lighting needed for the outside area can be identified (Zeidler,

2013; Benke & Tomkins, 2017).

The annual cost analysis for energy consumed in the outside area began with a calculation of the energy consumed by the supplemental artificial lighting.

The daily consumption of the lighting subsystem for the entire structure is 81,124 kWh. This was divided by the number of floors (37) to give 2,192.54 kWh consumed per floor each day. The result was then divided by square footage of one floor (20,838.93), resulting in 0.105 kWh per day per sq./ft. The conversion of this figure into annual consumption is as follows: 0.105kWh per day per sq./ft x

365 days = 38.402 kWh per year per sq./ft.

According to data from the DLR study, the daily energy consumption for the lighting is 0.105 kWh per sq./ft. As the outside area is 6,933 sq./ft, the energy consumed by the artificial lighting is therefore as follows: (0.105kWh per day per sq./ft X 6933 sq./ft) 727.965 kWh per day. However, in this section, the system

145 only calls for supplemental light in 24% of the year. The figure was thus converted into an annual consumption of 24% of 265,707.225 kWh, giving

63,769.734 kWh per year, per site. To convert power consumption into cost, the annual kWh per site was multiplied by Pomona’s industrial rate of $0.1049 per kWh. The subtotal of the energy cost is $6,689.445 for the outside area lighting section. After adding a 20% margin, the total annual cost of energy consumed by the outside area (lighting only) is $8,027.33.

The energy consumed by the hydraulic movement of the carousel was deduced by taking the available outside area of 6,933 sq./ft and dividing it by the area covered by one tower (60 sq./ft). A total of 115 towers fit into this area. The area can technically fit 123 towers; but space must be reserved to move around in response any unforeseen problems with cultivating and harvesting. Thus, the starting number of towers is 115, as expansion of a system is always easier than reduction. According to the research, a tower consumes approximately 40 watts per hour, and the tower runs for 16 hours per day (based on the guidelines of light needed for lettuce), resulting in energy consumption of 640 watts per day.

With 115 towers using 640 watts per day, this is equivalent to 73,600 watts used daily per facility. Conversion to kilowatt-hour gives 73.6 kWh per day for the outside area for the movement of all 115 towers. The following calculation was performed to find the cost: (73.6 kWh X $0.1049), giving $7.72 per day and

$2818.03 per year. The addition of a 20% margin gives a total annual cost of energy for the towers on site of $3381.63 (Benke & Tomkins, 2017).

146 Resources (seeds, nutrients, water) costs

The cost of seed was calculated using data from the DLR case study, shown in Table 10 (the data have been converted from square meters to sq./ft).

The cost of the seeds was analyzed by taking the total annual cost for lettuce seeds estimated to cover 22,032 sq./m (237,150.47 sq./ft), which is approximately 5,597 euros ($6,281.23). To obtain the cost per square foot, the cost was then divided by the cultivation area (237,150.47 sq./ft). The annual cost of lettuce seeds is thus calculated to be $0.026 per sq./ft. When multiplied by the total growth area of Vertic Garden (15,446 sq./ft), this gives a total annual cost of lettuce seeds for the entire organization of approximately $401.59. Adding a 20% margin, the total is thus $481.91 (Zeidler et al., 2013).

Table 10: Seed costs per year

Total Growth Plant density Growth Cost Seed growing period Plants [plants/m2] period [$/seed] Costs area [m2] amount [plants/a] [42] [d] [6] [40] Total cost [6] [periods/a] [$/a] Carrots 50.00* 7.344 75 4.87 1.787.040 0.00054 9585.99 Radish 40.00 4.590 25 14.60 2.680.560 0.00054 14,378.99 Potatoes 6.00 9.180 132 2.77 152.305 .027 4,049.77 Tomatoes 10.00 11.016 85 4.29 473.040 0.0070 3298.83 Pepper 6.00* 7.344 85 4.29 189.216 0.020 3806.43 Strawberry 12.00 5.508 85 4.29 283.824 0.0076 2,163.62 Peas 6.00* 11.016 75 4.87 321.667 0.0080 2,588.64 Cabbage 19.20* 9.180 85 4.29 756.864 0.0032 2,435.59 Lettuce 20.00 22.032 28 13.04 5.744.057 0.0011 6,162.74 Spinach 20.00 5.508 30 12.17 1.340.280 0.0016 2,157.01 Total set-up costs 50,627.62 Margin of 20% 10,125.52 Total set-up costs with 20% margin 60,753.14 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

To analyze the cost of nutrients for Vertic Garden, data from the DLR study were used. In Table 11, the figures (in bold) show the amount used per

147 facility, per day, for all the crops. Consumption was assumed to be 30L per day, and this was converted into 7.93 gallons per day, or an annual consumption of

2,892.63 gallons for the entire 37-floor case study. The conversion into consumption per square footage was as follows: the full 2,892.63 gallons was divided by 25 (floors of cultivation), resulting in an annual consumption of 115.71 gallons per floor. This was divided by 20,838.93 sq./ft (area of each floor) to give the annual amount of nutrients recommended per study analysis: approximately

0.0056 gallons per sq./ft. With a cultivation area of approximately 15,446 sq./ft

(footprint), Vertic Garden is expected to consume approximately 86.50 gallons of nutrients per year. The cost of nutrients, based on data from Heavy Gardens

(https://heavygardens.com) and assuming wholesale prices and purchase in bulk of 55-gallon drums, is approximately $22 per gallon. The annual cost of nutrients would be approximately $1,903.00. With the addition of a 20% margin, this amounts to $2,283.60 (Zeidler et al., 2013).

Water costs show the differences between two different growing technologies. The first analysis used the data provided in Table 11, taken from the DLR case study water consumption calculations. The water consumption for all plants in the facility would be 22,670 liters (5,988.78 gallons) per day. This figure was divided by the number of floors (26) used for growing and germinating crops, giving 230.33 gallons per floor per day. The number was then divided by

20,838.93 sq./ft, giving the amount of water consumed per day per sq./ft as 0.011 gallons.

148 Conducting this analysis for Vertic Garden produced an approximation of the amount of water needed. The annual water consumption needed to grow plants is 4.03 gallons per sq./ft. Vertic Garden’s warehouse has an area of approximately 8,513 sq./ft, thus it requires approximately 34,307.39 gallons annually for cultivation. Based on Pomona’s current industrial rate of $3.32 per unit (and 1 unit = 748 gallons), and a metered service of $7,472.16 per year (with half the service fee allocated to this calculation, and the sum split for the two systems), the usage, fees, and margin are approximately $3,888.33 (45.86 x

3.32 + 3,736.08), plus a 20% margin. The subtotal cost for annual water consumption using DLR data is therefore $4,665.99 (City of Pomona web, 2019).

According to the Sky Greens data, each tower can produce 5.4 lbs. per day of food. Vertic Garden’s design calls for 115 towers to produce 678.5 lbs. per day and 247,652.5 lbs. per year. Sky Greens uses approximately 1.44 gallons to produce one pound of leafy green foods. The production of 247,652.5 pounds of food requires approximately 356,619.6 gallons of water. At Pomona’s rate of

$3.32 per unit (1 unit = 748 gallons) and a metered service fee of $7,472.16 per year (half of the sum allocated to this calculation), the usage cost is (356,619.6- gal / 748-gal X $3.32), or $1,582.85. The annual cost for water consumption for the outside area (based on Sky Greens data) would be approximately ($1582.85

+ $3736.08 + 20% margin), or $6,382.71 (Benke & Tomkins, 2017; City of

Pomona webpage, 2019).

149 Table 11: Nutrients, fish feed, and water consumption costs

Resource Amount Price Total Cost [k$/a] Nutrients (Beyond TM) 30 L/day $89.33/L $977.76 Fish feed 360 kg/day 2.75 $/kg 362.26 Water for plants 22.670 L/day $0.0020/L $16.52 Total set-up costs 1,356.53 Margin of 20% 270.87 Total set-up costs with 20% margin 1,627.39 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

Personnel plan

The labor force consists of five employees, each earning the same

$60,000.00 salary. This gives an annual cost of $300,000.00, making it the largest recurring expense. As with the other calculations, a 20% margin is added to the total allocated for employment, giving a total of $360,000.00 per year.

Unforeseen challenges may call for additional workers. Based on research findings, the number of workers was calculated in proportion to the size of the business (square footage) (Zeidler, et al., 2013; Al-Kodmany, 2018).

Equipment maintenance or replacement

Resources must also be allocated for equipment maintenance and replacement. The DLR case study calls for 10% of the initial equipment cost to be added to running expenses. The engineers in the case study recommend that the equipment be replaced every 10 years. Vertic Garden’s guidelines will differ from the DLR case study calculations. In reference to the DLR feasibility study, the percentage of the resources allocated for maintenance and replacement of equipment as a running expense has been determined to be too high of a cost.

In contrast, Sky Greens does not mention any resources allocated for maintenance or replacement of equipment. Although an important part of the

150 model, the percentage for Vertic Garden is set at 5% and it is only applied to the

DLR equipment initial cost. This results in a total annual cost for repairs and replacement of $81,443.87.

Production capacity of systems

Although the technologies do not differ strongly in production capacity, they do vary quite significantly in terms of consumption of resources. Data pertaining to production by the technologies were analyzed to determine Vertic

Garden’s capacity for production in pounds per day.

Table 12 shows the DLR case study breakdown of crop production in tons per year for the two types of growing technique. It is noted that aeroponics yields a larger amount of lettuce (in bold). All other crops in the table show significantly greater production for aeroponics versus hydroponics.

According to the DLR research, the system can produce approximately

9,242 tons of lettuce per year, cultivated on 25 floors, with each floor having a growing area of approximately 20,838.93 sq./ft (giving a total of 520,973.25 sq./ft.). Dividing the production (9,242 ton per year) by the square footage available for cultivation (520,973.25 sq./ft) results in 0.018 tons per sq./ft per year. For a better understanding of this analysis, tons have been converted into pounds (35.6 pounds per sq./ft per year), with that number then divided by 365.

The daily production of lettuce using DLR technology data was thus determined to be 0.098 lb. per sq./ft (Zeidler et al., 2013).

151 Table 12: Edible biomass yield for the Vertic Garden crops in case of mono-crop production

Total growth area Edible biomass yield Edible biomass yield with Food [m²] [ton/year] aeroponics [ton/year] Lettuce 137,700 6,602 9,242 Cabbage 114,750 3,174 4,444 Spinach 137,700 3,668 5,135 Carrots 91,800 2,507 3,510 Radish 114,750 3,840 5,375 Tomatoes 91,800 5,822 8,151 Peppers 91,800 4,991 6,987 Potatoes 45,900 1,764 2,470 Peas 68,850 307 429 Strawberry 137,700 3,914 5,480 Source: Zeidler, Conrad und Schubert, Daniel und Vrakking, Vincent (2013) Feasibility Study: Vertical Farm EDEN. DLR-Forschungsbericht

Sky Greens’ production capacity for one tower is 5.4 pounds of food per day. By dividing the weight of production by the footprint of one tower (60 sq./ft), one identifies the tower’s daily production capacity for a square foot area as

0.0983 pounds (Benke & Tomkins, 2017).

Implementing DLR technology and with a growing area of 8,513 sq./ft

(multiplied by 0.0980 lbs. per sq./ft per day), the warehouse could yield 834.27 lbs. per day. The outside area, with the implementation of the Sky Green technology and with an area of 6933 sq./ft (multiplied by 0.0983), could yield

681.51 lbs. per day. Annual production for the warehouse area (DLR) could be

304,508.55 pounds and, for the outside area (Sky Greens), could be 248,751.15 pounds. For the entire facility, the annual production would thus be 553,259.70 lbs. of lettuce.

Profitability analysis

The analysis investigated the annual cost breakdown for the business side of production, and it tabulated expenses versus production. The results can

152 serve as a tool for approximating the break-even cost of product per pound (see

Table 13). The information can serve as a guideline for adjustments in expenditure, which could benefit the model in the initial stages of planning.

Table 13 presents the initial startup cost, with a 20% margin for each major factor in the venture. The sum of these factors provides the approximate total required to launch the business. The sum of $3,140,477.42 is the total initial cost of installing the Sky Greens and DLR technology equipment and other infrastructural equipment, plus a 20% margin.

It is assumed that most of the money will be funded by business loans, one of which will be a 30-year maturity commercial loan at a 3.92% interest rate.

The loan repayment plan in monthly and annual increments is provided in Table

14. Continuing the cost analysis, the total of all recurring and non-recurring costs

(with a 20% margin) is presented in Table 15.

Table 13 Initial non-recurring costs, with 20% margin

Expenses Cost DLR equipment $1,628,877.42 Sky Green equipment $1,386,600.00 Greenhouse construction $ 100,000.00 Delivery van (Used) $ 25,000.00 Lease (first and deposit) $ 9,138.40 TOTAL COST $3,149,615.82

In a comparison with a full new construction (such as that depicted in the

DLR study), Vertic Garden comes in at a quarter of the cost. This is the rationale for choosing a retrofitting model for operations. The monthly mortgage payment for the initial loan is set at $14,891.85 and the total recurring cost of running the

153 business at approximately $75,922.35 per month (including a 20% margin). A breakdown of the first-year cost is given in Table 15.

Table 14: Initial costs and repayment, with a 20% margin

Non- Cost with Loan time Interest Month Year recurring 20% margin period rate (%) (recurring) cost source Initial $ 3,149,615.82 30 years 3.92 $14,891.85 $178,704.00 Cost

Table 15: Recurring Costs

Recurring cost Units Month Year source Loan repayment Dollars $14,891.85 $178,702.20 Power consumption kWh $18,356.47 $220,277.72 (20%) Resources Seeds/nutrients/gallons $1,151.18 $13,814.21 consumption (20%) Personnel (20%) Employees (5) $30,000.00 $360,000.00 Equipment Replacement/maintenance $6,786.98 $81,443.87 Insurance N/A $166.67 $2,000.00 Lease N/A $4569.20 $54,830.40 TOTAL $75,922.35 $911,068.40

The production capacity for each of the technologies is shown in Table 16.

Production is broken down into several timeframes and mass units to present the daily details and yearly projections of production. Due to the technologies’ high dependability, loss of crop is not taken into consideration – as it is when planting conventionally, where a 30% loss is a highly probable aspect of the cultivation and harvest. Research shows that there is a high probability that most of the crop grown in a vertical farm is harvestable (Despommier, 2009).

154 Table 16: Production capacity: total Vertic Garden (Sky Greens and DLR)

Amount German aerospace Sky Greens Total (DLR) Production Pounds (day) 834.27 681.51 1,515.78 Pounds (month) 25,375.71 20,729.26 46,104.97 Pounds (year) 304,508.55 248,751.15 553,259.64 Tons (year) 152.25 124.37 276.62

The break-even analysis for the business side of the model is an important component of the case study, due to the importance of being an economically sustainable social venture. In Table 17, the findings show the break-even amount in cost per pound of production. The figure is calculated by taking the annual recurring expenses and dividing the total by the number of pounds of production in one year. The equation is derived from the DLR study, which provides the cost per pound of food needed to maintain sustainability. For Vertic Garden, this is

$1.64 per pound (Zeidler et al., 2013).

Table 17: Analysis of minimum requirements

Parameters Unit Values Annual recurring cost U.S. dollar $911,068.40 Annual production Pounds 553,259.64 Annual production U.S. tons 276.62 Break-even cost U.S. dollar/per lb. $1.64

Table 18: Tabulation of Expenses versus a Fixed Production Price

Variables Day Month Year Production ($1.99/Lbs.) $3,016.78 $91,748.90 $1,100,986.80 Expenses ($2,496.08) ($75,922.35) ($911,068.40) Potential profits $520.70 $15,826.55 $189,918.40

According to the Los Angeles Terminal, the average prices for organic lettuce range from $.075 to $1.83 per head (USDA, Los Angeles Terminal Prices,

2019). The USDA has determined that the average weight of a head of lettuce is approximately a pound (a conversion from units to pounds has been conducted).

155 In comparison to the current organic lettuce retail market in the United States, where prices are $1.99-$2.99 per pound (USDA, Specialty Crops Market New,

2019), it is safe to say that the model is highly likely to be feasible in a for-profit setting, given that cost of production is below the retail average price and sufficiently competitive with wholesale and terminal prices.

It is also suggested that the probability of success can increase if the 20% margin was not applied, as it has been applied for the purpose risk management in the model. If the margin was not applied, it would bring the cost of production down to $1.34 per pound. Table 18 provides an educated annual projection of sales, costs, and profits, assuming the lowest retail price per pound of organic lettuce of $1.99 (USDA, Specialty Crops Market New, 2019).

Table 19 shows the first annual projections, including three months without any sales and only production expenses. This is due to an initial growing period of approximately 28 days, estimated based on the research (Zeidler et al.,

2013). Ninety days are reserved for troubleshooting and resolving complications with hands-on learning time, thus giving an allowance of three months of preparation, during which the operation will be running at a 25% capacity (-

$18,890.59).

Two scenarios are presented on Table 19. The first scenario concerns the

2018 past sales prices for non-organic lettuce at retail in the Los Angeles area. In this scenario, the monthly fluctuation results in no profit for the year, with a negative -$137,512.61 for the year. The second scenario assumes the lowest retail average price for organic lettuce in the area (a worst-case scenario). This

156 scenario indicates a high probability of a positive net income of approximately

$297,118.96 for the first year of production, accounting for nine months of sales and 12 months of production cost.

Table 19: Lettuce: Year 1 projected sales and costs, data 2018 USDA

Production per month 46,104.97 Lbs. / Recurring Cost per Month $75,922.35 Time/2018 Non-organic Organic Non-organic Organic sales retail retail Month Ave price Sales Lowest Sales Potential Potential lbs. average profits profit price lbs. 1 Growing Growing ($18,890.59) ($18,890.59) 2 Growing Growing ($18,890.59) ($18,890.59) 3 Growing Growing ($18,890.59) ($18,890.59) 4 $1.52 $70,079.55 $2.50 $115,262.43 ($5,842.79) $39,340.08 5 $1.43 $66,045.36 $2.50 $115,262.43 ($9,876.98) $39,340.08 6 $1.42 $65,469.05 $2.50 $115,262.43 ($1,0453.29) $39,340.08 7 $1.40 $64,731.37 $2.50 $115,262.43 ($1,1190.97) $39,340.08 8 $1.42 $65,469.05 $2.50 $115,262.43 ($1,0453.29) $39,340.08 9 $1.42 $65,469.05 $2.50 $115,262.43 ($1,0453.29) $39,340.08 10 $1.43 $66,045.36 $2.50 $115,262.43 ($9,876.980) $39,340.08 11 $1.42 $65,469.05 $2.50 $115,262.43 ($10,453.29) $39,340.08 12 $1.60 $73,952.37 $2.50 $115,262.43 ($1,969.97) $39,340.08 TOTAL $602,730.21 $1,037,362.00 ($137,512.61) $297,118.96

A six-year speculative projection analysis compared cost and sales. In

Table 20, the retail price for organic lettuce of $2.50 per pound is given an annual growth rate of 2.6% (USDA., National Agricultural Statistics Service, 2016).

According to the data in Table 20, it is highly probable that the money accrued in six years could amount to $3,216,019.38, with a possible annual profit average of

$563,867.57. The initial startup cost for Vertic Garden is estimated to be

$3,149,615.82, from these figures it can be determined that it is highly probable the business loan can be repaid much sooner than the 30-year term and with this amount of profit remaining $66,403.56 in the period of six years. According to the analysis, the return on investment time period can be an approximate 6-10 years.

157 Table 20: Six-year projection

Year Annual Annual Total sales Annual Annual Potential production price expenses potential accrued (pounds) increase (COST) profit profit 2.6%

1 553,259.64 $2.50 $1,037,362.00 ($740,242.91) $297,119.09 $297,119.09 2 553,259.64 $2.57 $1,419,110.98 ($911,068.40) $508,042.58 $805,161.67 3 553,259.64 $2.63 $1,456,007.86 ($911,068.40) $544,939.46 $1,350,101.13 4 553,259.64 $2.70 $1,493,864.07 ($911,068.40) $582,795.67 $1,932,896.80 5 553,259.64 $2.77 $1,532,704.53 ($911,068.40) $621,636.13 $2,554,532.93 6 553,259.64 $2.84 $1,572,554.85 ($911,068.40) $661,486.45 $3,216,019.38

Table 21: Net present value (20 years)

Year Annual sales Discount rate Discount rate Discount rate 2.6% price 14% 12% 16% increase 1 $297,118.96 $260,630.67 $265,284.79 $256,137.03 2 $508,042.58 $390,922.27 $405,008.43 $377,558.40 3 $544,939.46 $367,818.61 $387,877.14 $349,119.65 4 $582,795.67 $345,061.82 $370,377.18 $321,872.86 5 $621,636.13 $322,858.33 $352,733.03 $295,969.05 6 $661,486.45 $301,364.33 $335,129.62 $271,501.99 7 $756,050.64 $302,146.05 $341,998.91 $267,513.04 8 $818,921.33 $287,080.29 $330,748.59 $249,791.85 9 $881,792.03 $271,158.05 $317,983.05 $231,869.84 10 $944,662.72 $254,816.92 $304,156.11 $214,139.55 11 $1,007,533.42 $238,399.91 $289,641.78 $196,889.06 12 $1,070,404.11 $222,172.12 $274,746.07 $180,323.32 13 $1,133,274.81 $206,334.65 $259,717.34 $164,581.64 14 $1,196,145.50 $191,036.39 $244,755.07 $149,751.84 15 $1,259,016.20 $176,383.74 $230,017.55 $135,881.86 16 $1,321,886.89 $162,448.86 $215,628.39 $122,989.06 17 $1,384,757.59 $149,276.44 $201,682.11 $111,067.74 18 $1,447,628.28 $136,889.37 $188,248.99 $100,095.20 19 $1,510,498.97 $125,293.42 $175,379.17 $90,036.51 20 $1,573,369.67 $114,481.09 $163,106.14 $80,848.32 NET PRESENT VALUE $4,826,573.33 $5,654,219.47 $4,167,937.80

The economic analysis shows the for-profit side of the social enterprise can be sustainable and profitable. In addition, Table 21 shows the net present value for the next 20 years, revealing a positive outlook for the three discount rates. The next step is the incorporation of the social benefits that can be

158 provided to the community, as explained earlier. The profit remaining after paying off the loan could fund the community involvement plan, thinktank discussions and planning, and a nutrition educational program, as well as subsidizing foods for the community.

When the loan is paid off, the average annual profit would significantly increase to approximately $714,707.21. The figure was obtained from the annual average, plus the amount designated for the mortgage ($536,003.21 +

$178,704.00) per year. The profit earned would then be reinvested into the community’s social purpose, which has been defined as providing fresh affordable healthy foods, education on nutrition, and empowerment for the local community. When the model has been proven to work, expansion of the organization to other parts of the city that suffer from the same social and economic problems as Pomona will be considered.

Economics of social purpose

The purpose of establishing the social enterprise, as stated earlier, is to provide fresh affordable foods to low-income residents in Pomona, California.

The plan for distributing the profit back into the community is described in this section. The figure used as a basis of income is derived from potential annual earnings, minus 30-year mortgage loan repayments, giving $536,003.21. The plan shows where and how the money will be implemented to provide affordable fresh food. The plan also shows the number of residents who could benefit and gives an explanation of how the benefits will be distributed.

159 At the beginning of the venture, a neighborhood outreach is to be conducted, targeting approximately 1,708 households. According to QuickFacts, there is an average occupancy of 3.79 per household in Pomona (QuickFacts,

2013-2017). An average population per square mile of 4,245 individuals was used to calculate food demands. It is important to know the population size of the first outreach because this can serve as a quantifiable basis for determining food production requirements for the subsidization program.

According to the USDA, the average individual consumes annually 23 pounds of fresh lettuce, 109 pounds of fresh vegetables, and 184 pounds of potatoes, sweet potatoes, and mushrooms (USDA/CDFA, 2017). The plan for subsidizing the cost of food is to assist, and not to give free food. The goal is to provide a leveled playing field for those who would prefer to eat better quality food but cannot do so due to their socioeconomic level or geographical location.

The purpose of the subsidies is to provide Pomona residents with access to good foods.

Table 22 shows the amount of food (in pounds) required to meet the demands of the population found in an average square mile radius in Pomona

(4,245 residents). It also shows the different levels of subsidies and production requirements required to meet the potential demand of the community (assuming that individual consumption is 100%). Averages have been used for all vegetable needs (including potatoes, sweet potatoes, and mushrooms).

160 Table 22: Annual consumption, production, and subsidies for 4,245 residents

Food Annual Production Ave. Ave. Org anic Non-organic Subsidie consumption per (lbs.) organ non- s capita (lbs.) ic organic amount Lettuce 23 97,635 $2.28 $1.70 $222,607 $165,979 $56,628 Vegetables 109 462,705 $1.42 $1.20 $657,041 $555,246 $101,795 Vegetables 184 781,080 $2.05 $1.75 $1,601,114 $1,366,890 $234,324 & more Source: https://www.ams.usda.gov/mnreports/fvwretail.pdf & https://www.ers.usda.gov/data- products/chart-gallery/gallery/chart-detail/?chartId=58340

Table 22 presents the different levels of subsidies. This can help to determine the subsidies that could be allocated with a potential budget of

$536,003.21. In the original facility, the rooftop of the warehouse area was not considered for production use, although this could be a possibility for meeting the production needs of the intended population. However, it would call for structurally retrofitting the building. Using data from the original model (Vertic

Garden) and Pomona’s current residential circumstance (proliferation of small empty lots), it is concluded that an additional complete smaller facility would provide more benefits and assurance than increasing production at one facility alone.

Table 22 shows the production capacity versus food demand in three different categories: lettuce alone, vegetables (lettuce, celery, onions, tomatoes, and carrots), and “vegetables/more” (potatoes, sweet potatoes, and mushrooms).

According to the data tabulation, the lettuce demands of an average population of 4,245 residents could be satisfied by one facility alone. To meet the demand for various vegetables would require two vertical farms of the same dimensions; and to meet the other needs is likely to need four vertical farms. Consideration has not been given to the question of polyculture versus monoculture production capacity, with production averages for lettuce used as an approximation.

161 Polyculture production capacity could be higher or lower, depending on the choice of crop. Although they are similar, DLR data indicate that variances are present, this is a subject for further research.

Empty and abandoned residential lots are an issue that continues to affect primarily the lower income neighborhoods throughout the city. This challenge was the catalyst for the decision to implement many small vertical farms, as opposed to one large one. One can argue that utilizing these available lots is a better strategy in terms of regenerative sustainability principles, which call for working with the environment to efficiently utilize resources. Pomona’s lack of redevelopment ideas can be attributed to its reliance on large housing developers.

One reason for looking elsewhere for production is the many small, empty, residential lots (where houses once stood) throughout the city. These empty lots are too small to be of interest to large housing developers (track homes) and too costly and undesirable for residents and outsiders; thus, no action has been taken, nor are there any plans for such action in Pomona’s 2014 General Plan.

Although extremely necessary, no strategies or ideas have been stipulated in the

General Plan for these small lots, and the ideas that are present in the plan are vague and include no specific actions (Pomona Tomorrow, 2014).

Empty lots often encourage squatters, illegal trash dumping, crime, and drops in house prices, making the area less appealing to outsiders considering moving in. In this way, they lower inward migration into the city and push current residents to move out (Santos et al., 2016; Pomona Tomorrow, 2014). The plan

162 is to utilize these empty small lots to produce food specifically for Pomona’s residents. The preferred facility location is within a square mile of Vertic Garden, for the purposes of support and to keep production local, thus benefiting the community at various levels – such as employment, revitalization, and recognition. Following the success of this project, the plan will move outward into the neighborhoods most in need of the benefits.

Pomona’s General Plan states that it is focusing its resources on the redevelopment of small infill lots throughout the residential and commercial areas. Pomona has limited undeveloped land, but it has many small empty lots in lower income residential areas, and there is an interest in finding new ideas for these (Pomona Tomorrow, 2014). According to research, the installation of small vertical farms in these empty lots has the potential to bring social benefits and generate innovation.

The average home lot in Pomona is approximately 6,000 sq./ft, and several of the empty lots surround Vertic Garden. The model analysis uses the current empty lot located at 238 E. Center St. (two lots East). It is 6,060.53 sq./ft and, due to the environmental conditions, the technology most suitable for this scenario is that of Sky Greens (revolving plant towers inside extra tall greenhouses).

The Sky Greens technology has a minimal cost of construction and power consumption, while most efficiently utilizing the environmental characteristics of the region (sunlight abundance for the greater part of the year). The same production calculations for Vertic Garden were used for the smaller vertical

163 garden (6,060.54 sq./ft). The potential production capacity of this facility is 596 pounds per day, or 18,128.33 pounds per month, and 217,540 pounds annually

(calculations based on a monoculture of lettuce). Calculations suggest that a facility this size could have an approximate initial cost (including a 20% margin) of $1,212,108.00.

The annual budget for food subsidies is $536,003.21. This would be sufficient to cover the cost of production ($289,076.63; Table 23) and all the

“vegetables/more” subsidized demand cost ($234,324.00; Table 22), which amount to $523,400.63, leaving an annual funds surplus of $12,602.58.

Table 23. Recurring costs for small empty lot vertical farms

Recurring cost Units Month Year source Loan repayment Dollars $5,731.03 $68,772.36 Power consumption kWh $247.50 $2,969.95 (20%) Resources Seeds/nutrients/gallons $976.58 $11,718.92 consumption (20%) Personnel (20%) Employees (5) $12,000.00 $144,000.00 Equipment Replacement/maintenance $5,050.45 $60,605.40 Insurance N/A $84.17 $1,010.00 Lease N/A $0.00 $0.00 Total $24,089.72 $289,076.63

Unfortunately, existing technology would only allow this facility to meet

30% of the total demand for “vegetables/more” (polyculture). A further in-depth analysis is recommended to identify the most beneficial approach for subsidized production. The two choices to be considered in this model are either the production of lettuce only (monoculture), which could meet total demand and have the capacity to produce an additional 220%, with a substantially lower subsidized cost; or the production of “vegetables/more” (polyculture), meeting

164 just 30% of the demand. Both options have strong respective benefits, but the choice is for the affected community to make.

It is strongly recommended to take into consideration what the community has to say about these matters. It has been demonstrated in the examples of past ventures that lack of consideration for the community’s input can be the sole cause of failure (Santo et al., 2016). The thinktank will be designed to play an important role in situations such as these, bringing together the residents and technical team to identify the best possible plan of action for their neighborhood.

The field concerning the lease in Table 23 has been left blank because, for the model to have a better chance of a sustainable future, it is advisable to have the involvement of all stakeholders, including the government, the private sector, and the community. The construction of new policies regarding allowances can be a determining factor in success or failure. These policies could pertain to the use of empty lots and possibly be in the form of indefinitely withheld charges or charges withheld with time limits and other contingencies.

The lots could also be deemed parks capable of producing foods, thus rethreading the social fabric of the community.

165 CHAPTER 5

Discussion and conclusion

A regenerative world mentality could become a reality with the implementation of regenerative business model techniques. At the root of humanity’s industrial evolution is the destruction of complex natural ecosystems, and the culprits of such destruction are the deliberate extraction and movement of natural resources for human interests. The competitive business mentality sets aside ethics and morals in the pursuit of economic gains and unnecessary day- to-day comfort.

Social movements, even when effective, can take decades to achieve their purposes, and this is time that the human species may not have. History shows that economic interests are more effective in changing the mentality of consumers. As a consumer society, it is more viable for consumers to accept modifications of their consumption habits than to stop consuming all together.

The threshold of going back to a life of cave dwelling was crossed long ago, meaning humans cannot reverse habitual evolution such driving, flying and informational technology. The habits and comforts of the majority take precedence over ethics and morals: this is evident every day, as humans drive fossil fuel-powered vehicles, despite the availability of the technology that makes this unnecessary.

The destruction of the environment has been the result of economic greed; it is thus appropriate that the reparation of the environment also comes from economic interest. Simply asking for handouts (charity) and appealing to

166 people’s better nature can momentarily alleviate the symptoms of neglectful consumerism; but providing a better option for the consumer could permanently change their mentality.

A regenerative alternative could make the difference that society has been seeking, since it is clear that humans are the primary cause of environmental destruction. A regenerative alternative is much more complex than the conventional model, as research has shown. As mentioned earlier, vertical farming as a social enterprise has the ability to provide various regenerative alternatives, as well as the potential to revolutionize food production while improving the broken social fabric of lower-income urban communities.

The ability to integrate the different elements of an urban environment in the same manner in which nature’s elements are integrated into perpetual ecosystems provides a better alternative to the conventional (business as usual) or the complete stoppage of human development. Under regenerative principles, all affected elements are taken into consideration when designing a model.

Unlike nature, the human species does not have the luxury of engaging in trial and error for millions of years to achieve an ecosystemic balance. It is for this reason that planning and design are critical when selecting each element of a new regenerative enterprise.

Like nature’s ecosystems, Vertic Garden relies on its capacity to utilize all available resources: the blended legal structuring, its ability to adapt to and evolve with its environment, and its development of symbiotic relationships among all the elements inside and outside of the model (including other

167 businesses) and, by default, the global ecosystem (economic and environmental). These are essential factors that can dictate a new way of doing business in a world of limited resources.

Blending the two legal structures (nonprofit and for-profit) in one business entity strengthens the model’s capacity to provide multiple benefits in a way that neither could accomplish alone. The models could be successful as a single- purpose entity, with the for-profit model managing healthy food stores’ accounts and never providing any social benefit aside from low-skilled and low-paid jobs, such as those offered by the warehouses and manufacturing companies Pomona is known for (noted earlier in this paper in the employment demographic table).

In the case of Pomona, the failure to produce social benefits would be a disservice to the community. Conducting business for solely economic purposes would be no different to conventional farming. Having a social intent as part of the business mission promotes the regenerative principles that Pomona needs

(as shown earlier, using the census data). Pomona requires more than just economic stimulation, as proven by the city’s multiple General Plan updates since 1976. The updates published in 2005 and 2014 highlight many of the same problems, thus indicating that the actions implemented in the past have not resolved these issues (Pomona Tomorrow, 2014). The latest update, in 2014, gives no concrete and focused plan for the social improvement of the community, other than job creation and new places in which youth and families can congregate, offering no specifics.

168 The municipality appears to rely on the principle that “if you build it, they will come.” Under the city’s plan, the top priority is building and revitalizing the downtown area, and it has been since 2005. The goal of this is to entice professionals living outside Pomona to move into the newly built homes, which are often too expensive for local residents due, in part, to the low wages paid by the jobs typically available in Pomona (warehousing and manufacturing).

Throwing money at the symptoms of a problem will not solve its larger and more complex underlying cause, which can be defined in this case as “Pomona’s ecosystem” failure.

At the core of the decline of the social fabric are the major nonprofit organizations that use the city’s resources, while neglecting to pay their fair share, thus exploiting the little that Pomona has to offer for its lower income and underrepresented communities. Pomona has been depicted as a dumping ground for neighboring cities. It is difficult to change a city physically, but it is even more difficult to change the mentality of its citizens. It is for that reason that it is important for socially oriented enterprises to take preference over economically driven organizations. It is vital to promote the possibility of hope to residents, as this strategy means that change is often easier, faster, and longer lasting.

Projected sales are difficult to calculate, but an analysis of the market tends to increase the probability of success. A few factors were not considered in the analysis. Fluctuation in the market price of the crop as a result of climate

169 change or pathogens is likely to occur, but it was decided that any price changes would only bring better profit margins to the model.

As the industry is in its infancy, there are still many business possibilities within reach. The study gives an insight into a new type of organization, one which has the capabilities for food production and social benefits. The unexplored part of the industry (vertical farming) shows an industry that is only growing conventional crops using a newly adapted production design. The vertical farming design has been adapted to grow traditional crops, in the same manner that the natural landscape was once altered to meet the needs of the desired crops when agriculture first emerged.

The crops grown in vertical farms have been tailored by the conventional farming industry over thousands of years to do exactly what they do, which is produce vast amounts of biomass in the fastest and most efficient way possible, while inefficiently using natural resources to achieve this. The data show that production is much more efficient in a controlled environment, but due to society’s unwillingness to see the true cost of conventional agriculture for the environment, food scarcity might come sooner than anticipated.

The vertical farmer mentality should shift from trying to create the technology to fit conventional crops to thinking about crop manipulation for better nutrition. Manipulation is not necessarily genetic, but can refer to the old- fashioned method of breeding for desired traits over rapidly induced generations.

Thinking in this manner takes the guidelines away, leaving endless possibilities.

For example, one might make crops smaller to fit more into vertical settings, the

170 shape of the crops can be changed, and currently unpopular but more nutritious crops can be investigated. As technology advances, so does the capacity to grow more nutritious plants.

Conclusion

In any study, there are many unanswered questions and more questions are usually created. This study is dependent on the accuracy of the data retrieved from the studies used. The numbers could only be verified by taking the study to a real-world application. The study was conducted under the guidelines of an industry that has been neither proven nor tested long-term in the United

States.

The two main case studies used to formulate the equations were conducted in foreign countries (namely, Germany and Singapore). Different countries have varied laws, regulations, and processes. For example, the tower gardens used in Singapore might not be permitted in the United States because of their height and building material requirements. Many variables can challenge new technology from outside the country. Although there was no indication that the technology would not be allowed in the United States, this topic requires further investigation. The analysis used to formulate the square footage cost enabled an approximation of the true cost. New ventures often have many unforeseeable challenges that can only be experienced and dealt with during real-world application.

It was useful to see the similarities of the two types of technology, as in the case of water usage, as this supported the formulation of the data. The

171 industry is evolving rapidly and, much like other fast-moving industries, a new model emerges every six months. The data for the business side of the industry are limited by the literature available on this geographical location, which means that numbers applicable elsewhere in the world may be affected by Pomona’s environmental conditions. This was mitigated by consideration of the weather history of the location chosen for the model.

The literature does not address cases of infestation, nor which procedures to follow or what could be the consequences of a loss of revenue and to the industry as a whole, in terms of consumer loyalty. The simplicity of the study thus may not do justice to the complexity of the industry. The technological side of the industry has been proven to work without exception: what is left to do is to put the hypothetical to work in a real-life model.

Support from the municipality would solidify the success of the business model and make it an even more substantial part of the community by cleaning and repurposing otherwise wasted resources. In other words, it would work exactly as an ecosystem does: taking the waste – which, in this case, are the empty lots – and repurposing it to create new life, in the form of plants and better communities. Many cities in the United States and around the world have shown support for socially oriented vertical farms, with a great success rate, as in those examples already mentioned.

The ERS.USDA.gov data indicate that it takes one acre (43,560 sq./ft) of fertile rich soil to produce 26,000 pounds of lettuce per year. Vertic Garden could potentially produce 553,259 pounds of lettuce annually in just 0.44 acre (19,373

172 sq./ft). Farming conventionally would require 21.3 acres (927,828 sq./ft) to produce the same amount. The production capacity of Vertic Garden could supply the entire lettuce needs of Pomona, with the addition of five locations

(similar in size). To meet all of Pomona’s vegetable and fruit requirements would require approximately 30 locations of similar size (ERS.USDA.gov, 2019). The number may seem high for healthy food production, until it is compared with the number of fast food restaurants per capita (100,000) in the Los Angeles County area, which is also 30. In other words, 30 healthy food production locations could feed 53,000 more people than 30 unhealthy fast food places can.

The minimization of water usage, the complete eradication of fossil fuels for transportation and pest management (zero pesticides), the complete elimination of runoff, as well as carbon dioxide sequestration at the point of origin, are all improvements that are immensely beneficial across the world and not just the communities directly involved with Vertic Garden.

The future is uncertain across the world. Educated speculation can be made in the industry, but innovation is the X factor in any market that relies on technology. The efficiency of solar panels continues to increase, and L.E.D. lighting technology continues to improve in terms of energy consumption and the reliability of the product. The constant improvements in growing techniques have the potential to maximize production and, by default, profits.

As in a natural ecosystem, diversification is key to success; and the social enterprise model is no different. Most large vertical farm companies, such as

AeroFarms, mimic the methods of large conventional farms (regarding the size of

173 the production area), assuming that bigger is better. In the case of conventional farming, it reduces the cost of doing business, due to economies of scale; but in vertical farms, it does not translate in the same way. In vertical farms that use artificial lighting as their only source of lighting, costs are augmented every time production is increased, due to rising costs for light, energy, and other supporting components (e.g., hoses, water, seeding, nutrients, ducting, pumps, and nozzles).

Research shows that having multiple smaller vertical farms can have more advantages than disadvantages. All industries have threats, and these should be minimized wherever possible. Having multiple locations ensures production can continue in the event of unforeseen climatic disasters, pest infestation, and human-made disasters. Smaller locations can be more profitable and efficient because of their ability to provide tailored assortments of vegetables and fruits to their local communities (niche markets).

The social benefits of being smaller in size concern the greater opportunities for human connectivity: when companies become conglomerates, the people involved tend to lose their identity and become reduced to barcodes and employee numbers. The need for social aid in Pomona is clear in the data presented here, and it is for this reason that this case study recommends the social enterprise model as the best fit for Pomona’s new economic and social redevelopment plan.

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