Santa Ana Officials Endorse Worker-Owned Businesses and Declare Intent to Support Them

Kaitlin Washburn for Voice of OC

Santa Ana City Hall sign outside of City Hall.

Santa Ana’s top officials are strongly endorsing businesses owned by their workers, unanimously declaring the city wants to be the first in Orange County to support small business development through worker cooperatives.

A resolution passed 5-to-0 by the City Council last week said the cooperatives provide local goods and services, stable jobs, and economic opportunities for low-income workers, while also keeping wealth local. At the same time, it added, cooperatives are often limited in their ability to get bank loans.

And with many small business owners about to retire and potentially close shop, the city says conversions to worker cooperatives could help preserve those jobs.

At their meeting last week, the City Council directed staff to study actions to assist cooperatives – such as reducing business license fees and allowing them to apply for small business grants – and bring back recommendations to the council within 90 days.

A cooperative is essentially a self-organized business that is owned and governed by its workers, with profits shared among the workforce. They often are small businesses that provide services like housecleaning, baked goods or electrical work.

There are about 300 to 400 worker cooperatives in the United States, “employing around 7,000 people and generating over $400 million in annual revenues,” according to a 2015 report by the U.S. Federation of Worker Cooperatives.

Councilwoman Michele Martinez, who brought the item to her colleagues, said the city needs to develop a system to support the cooperatives.

She cited the example of Rainbow Disposal, a Huntington Beach-based trash hauler that merged with a larger company. Because Rainbow was a cooperative, Martinez said, many of the employees became millionaires, which she said “is very cool.”

Martinez also pointed to the yogurt company Chobani, which last year promised ownership stakes to its 2,000 full-time workers if the upstate New York company goes public or is sold.

On a unanimous vote, the council approved the resolution, which directs city staff to study and bring back potential action items in the future on a variety of changes to assist worker cooperatives.

These include providing incentives related to city government purchases, allowing cooperatives to obtain federally-funded small business grants, and lowering the fees charged to cooperatives for Santa Ana’s infamously-expensive business licenses.

As of 2010, the licenses each cost between $200 and $10,000 per year, and averaged around $350 annually, according to the Orange County Register. City officials didn’t return a message Friday asking for updated figures.

And they directed city staff to work with local stakeholders to develop a possible business ordinance related to worker cooperatives.

Other council members also declared strong support for cooperatives.

Councilman Jose Solorio said he supports the profit-sharing concept used by cooperatives, and the city can help “reduce exploitation” of workers currently in underground jobs by supporting their transition to legal work.

“I’m very supportive, and look forward to seeing our economy grow,” Solorio said.

“I’m also very supportive of this,” said Councilman Vicente Sarmiento, emphasizing the importance of helping local entrepreneurs access loans to start and expand their businesses.

The cooperative model has generated praise for allowing workers to share in more of the wealth they create, but it has also been criticized as potentially leading to organizations having little leadership expertise and a slow and inefficient decision-making process when crises emerge.

During public comments, Ana Urzua of the Santa Ana Building Healthy Communities coalition said cooperatives have been successful across the country.

“At a worker cooperative, profits – rather than going to distant investors – instead go directly to the workers themselves. As a result, the money stays grounded in the local economy, building community wealth, and contributing to our city’s economic [development],” said Urzua, who directs the health advocacy group.

Several cooperatives already exist in Santa Ana, and have been supported by the health coalition.

Members of some of those existing cooperatives addressed the council members Tuesday.

Esther Hernandez, who works in a cooperative called United Mothers Creating Art, said the opportunity helps her family make ends meet while her husband works three jobs.

Voting for the pro-cooperative resolution were Martinez, Solorio, Sarmiento, Juan Villegas, and Mayor Miguel Pulido. Councilmen Sal Tinajero and David Benavides were absent from the council meeting.

The City Council directed staff to return within 90 days, or late October, with their recommendations for action.

Urzua, whose comments were strongly supported by Martinez, said the health coalition is working with a network of worker cooperatives across the country, including the national federation of cooperatives.

“We’re laying the groundwork for a worker cooperative network” across Santa Ana that allows for “shared prosperity” among workers, Urzua said.

Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at ngerda@voiceofoc.org.

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  • Cynthia Ward

    I agree with any effort to support incubators for entrepreneurial start-ups. Anything (reasonable) spent to get people out of dead end jobs that must be subsidized by taxpayers in a variety of hidden programs ends up being a net positive when the start up becomes a success. Traditional subsidy programs benefit only huge corporations that don’t really need it, they just have better lobbyists. Small business, the backbone of economic opportunity, tends to need access to capital/credit and help with the crushing regulations of upper tier government from State an Fed requirements that can kill a business. Offering this small assistance is “mice nuts” in comparison to the massive subsidies to big corporations, and the money made actually remains in the community, while those big corps take our money to their out of state (or out of the country) HQ office never to be seen again by our local economy.

    However, I don’t like the idea of converting existing business to employee-owned if government is involved. I think we can all see the potential for abuse there. (Yes, you used to own this, now your crew owns it. See big American car companies for example.) But one of the big things gov can do is underwrite legal services to help these startups file for “B corp” status, which codifies the business issues and gets those obstacles to success out of the way. As far as; ” it has also been criticized as potentially leading to organizations having little leadership expertise and a slow and inefficient decision-making process when crises emerge.” whoever said this fails to understand the survival of the fittest nature of business. Our rights include equal access to the same tools of success, not an equal outcome. Businesses that are slow, lumbering, and without adequate leadership, will fail, and some will learn from the failure and retool to try again, avoiding the things that led to failure last time. Others will crawl off to work for others in recognition they may have a skill set that makes them valuable but business ownership is not one of them. Welcome to America, let’s get to work.

  • LFOldTimer

    The concept described sounds similar to communism.

    Communism and sustained economics mix like water and oil.

    Russia and China started to thrive when they adopted capitalism as their principle economic driver. In fact, those 2 countries have a purer form of capitalism than we do.

    When government takes a lead role in economic planning – watch out. The loss of your freedoms are about to follow. World history has proven this time and time again.

    This is the nonsense I would expect from the SA city council that isn’t known for it’s intellectual prowess.

    • verifiedsane

      This is Santa Ana doubling down on so called “progressive” communist principles….the declaration of bankruptcy, much higher taxes for working stiffs, and reduced services are on the horizon…

      • LFOldTimer

        But as long as the police union donations keep pouring in there will be no reduction in police services and the cops can count on another big pay raise.

  • kburgoyne

    Very positive concept. Good for them. The arguments against worker coops are apparently made by people with some reason to be fearful of them, or by people who have been indoctrinated by others to be fearful of them. A worker coop can be structured to be indistinguishable from any other commercial fictitious legal entity (aka corporation) unless somebody looks into its shareholders. Thus claims about being unable to respond in a crisis are simply false because nothing stops a worker coop from having a Board of Directors elected by the workers and a CEO either elected by the workers or by the Board of Directors.

    • David Zenger

      Yes, sounds wonderful, until you think about it: why is the City involving itself in economic (and social) engineering at all?

      What makes a “co-op” more deserving than a single proprietorship, for instance?

      And then you reflect on all the massive problems SA has with meat and potatoes governance issues and you realize that the city council is beyond clueless, especially when they aren’t told what to do by the police union.

  • David Zenger

    Their ship is sinking and this is the sort of thing that captures their fancy. Kind of sad.