In leading the Greater University Circle Initiative, the Cleveland Foundation has set out to achieve nothing less than a dramatic reduction of poverty in the six Cleveland neighborhoods adjoining the Circle, which are home to 43,000 residents whose average household income is below $18,500. In addition to stimulating major physical improvements within the Circle, the initiative has undertaken two neighborhood-rebuilding campaigns, the objectives of which can be summed up in the phrases “Live Local,” “Hire Local,”and “Buy Local.” The first phrase describes an employee housing assistance program. The second and third phrases underpin a business formation plan that taps into the $3 billion the Circle’s anchor institutions spend annually on procurement.

Devised by the foundation in partnership with the anchor institutions, the business formation campaign represents a new paradigm for neighborhood economic development. The partners have committed to creating a network of for-profit businesses that recruit their workforces exclusively from the pool of residents who live in neighborhoods surrounding the Circle. The businesses offer their recruits on-the-job training and award them a living wage and full health benefits.

Jobs alone are not enough to break families out of the cycle of poverty, however. Once the businesses achieve profitability, employees who have worked for a year or longer will also receive an equity stake in the business. Employees’ shares of annual profits are to be distributed into their portable capital accounts. Profits will also underwrite worker training and new business start-ups.

Three employee-owned businesses employing about 90 workers have been launched since 2009: an industrial-scale laundry that washes and irons bed linens, a hydroponic greenhouse that raises lettuces and herbs, and a solar panel installation company that also offers weatherization services. Called Evergreen Cooperatives, they all operate according to the latest “green” principles. In addition to reaping long-term savings from their sustainable business practices, the cooperatives have a good chance of succeeding because University Circle’s largest institutions have contracted with them for goods and services.

The hard-won experience of the Cleveland Foundation’s program director for neighborhoods, housing and community development informed the partnership’s discussion about how to reverse the loss of jobs in Buckeye-Shaker, East Cleveland, Fairfax, Glenville, Little Italy and Hough. As the former director of the City of Cleveland Empowerment Zone, India Pierce Lee appreciated that employment tax credits offered by the federal program had not created a sufficient number of jobs to make a critical difference in the targeted urban neighborhoods. She had also observed the pitfalls of workforce training programs that prepared low-skilled city residents for jobs largely available in distant suburbs. Recognizing the need for an out-of-the-box job creation strategy, the foundation turned to Ted Howard, a national expert on community wealth building based at the University of Maryland.

Howard was retained as a consultant to the foundation in 2007. He helped the Greater University Circle partners formulate the cooperatives strategy and carefully think through each element of a model employee-owned business, right down to calculating the estimated $65,000 that each worker could expect to accumulate in his or her portable capital account at the end of eight years of employment.

To help the model designers visualize the end product, Howard led representatives of Case Western Reserve University, the Cleveland Clinic and University Hospitals of Cleveland (among others) on a study tour to Spain’s Basque region, the location of the Mondragon Cooperative Corporation, an interconnected group of 120 cooperatives with 100,000 employees and $25 billion in sales that has been built over a period of 50 years. Howard also met with national foundations that had never before worked in Cleveland and obtained seed grants from several funders who recognized the undertaking’s value as a “learning lab.” 

In recognition of his contributions to the design, financing and rollout of the Evergreen Cooperatives, Howard was subsequently named the foundation’s first Steven A. Minter Fellow for Social Justice. In this capacity he continued to collaborate with the Greater University Circle partners on the refinement of the cooperatives strategy and advise other urban communities interested in replicating the Cleveland model.

The Cleveland Foundation granted $1 million toward the start-up of the first three Evergreen Cooperatives. These seed monies, along with the promised procurement contracts, helped to leverage an additional $35 million in venture and operating capital from a variety of sources, including grants from local and national foundations, long-term, low-interest federal loans, tax credits, state grants and even commercial loans. The foundation has also contributed more than $2.5 million to the development fund of the Evergreen Cooperative Corporation, a not-for-profit holding company whose foundation-led board oversees the existing cooperatives and plans to raise between $50 million and $100 million to capitalize the next generations of start-ups.

One locally rooted, sustainable business at a time, the economies of Greater University Circle neighborhoods will be revitalized. The long-term goal is to create hundreds, if not thousands of new jobs that will pay wages on which families can be raised and help those families achieve the American dream of building wealth.