The Green City Growers in central Cleveland is a co-op reviving blighted neighbors. It’s producing fresh salad greens for local hospitals, schools, restaurants and grocery stores, while providing jobs for 36 people and giving those workers the opportunity to invest in the business. The worker-owned cooperative is part of a larger effort to improve living standards in struggling Cleveland neighborhoods, says John McMicken, CEO of Evergreen Cooperatives. “If we’re ever going to move the economic needle in Cleveland, we need to do it at the neighborhood level.”

Green City Growers is one of three worker-owned cooperatives developed by the Evergreen Cooperative Initiative, an economic development effort started in 2008. The effort is led by several anchor partners, including University Hospitals, the Cleveland Clinic, Case Western Reserve University and the Cleveland Foundation. While Evergreen is an organized as a 501(c)(3) nonprofit charitable corporation, Green City Growers is not, McMicken says. “We’re very much a for-profit organization.”

In addition to Green City Growers, Evergreen has launched a commercial laundry and an energy company that works with sustainable energy projects, such as installing solar power systems and retrofitting facilities with LED lighting. Evergreen retains 10% ownership in each of the three co-ops, and employees hold the remaining equity in the businesses. The laundry and energy companies, the first two co-ops launched, are showing consistent profits. Green City Growers, which opened in 2013, isn’t quite there yet, but, McMicken says, “The light is very visible at the end of the tunnel.” The greenhouse is currently producing at 80% of capacity, growing toward 100% as sales increase.

Evergreen’s approach to job creation focuses on establishing businesses that serve the community and then training employees to work in the businesses, rather than training people for jobs that may not even be available. By studying local investments in goods and services, Evergreen identified business opportunities that would keep more local dollars in the community. The idea for a hydroponic greenhouse grew because the local demand for lettuce was not being met with local production. “We only needed a very small percentage of the lettuce market,” McMicken says.

Unfortunately, putting the idea into practice was more complicated than organizers first thought. They selected a site close to a freeway entrance and adjacent to food warehouse and distribution centers. Of the 38 houses in the 12-acre neighborhood, all but three were abandoned and the area had become unsafe and run down. However, to replace those houses with a greenhouse required an investment in demolition and brownfield remediation before greenhouse construction could even begin, McMicken says. Most of the funding for the project came from a loan from the city, but securing financing was another hurdle. “What we thought would take two years, took four,” he says.

In the meantime, other hydroponic greenhouses were being built in the area, increasing competition, McMicken adds. “At first our expectation was that the lettuce would wholesale for $2 a head, but it turned out to be $1.25.”

In all, Green City Growers spent $16 million to complete the facilities. In comparison, construction in a rural area would probably be 25% less, McMicken estimates. A bare lot wouldn’t require demolition and brownfield remediation, and construction costs would likely be lower outside the city limits. “We could have done this faster, cheaper, maybe even better out in a rural area,” McMicken notes. However, locating in a rural area would not meet the goal of revitalizing the city. “We’re married to urban agriculture,” he explains.

About half the co-op employees live in the surrounding neighborhood and 90% live somewhere in Cleveland. In addition to addressing overall unemployment in the city, the co-op is helping to reintegrate former prisoners into the community by providing jobs. About 40% of the employees were hired through a program that helps people readjust after their release from prison.

As the co-op begins turning a profit, its employee-owners will share in those profits. Almost half of the employees have bought a share of the co-op at this point. Workers can choose to buy a single share in the co-op after they have worked for the co-op for a year and after other employee owners have voted to approve them as owners. Each share costs $3,000 and can be paid for over time through payroll deductions, McMicken says. Profits will be returned to owners annually. Twenty-five percent of each owner’s profit will be distributed as a cash bonus, and the remaining 75% will go into a patronage account, which the owner can borrow against or save for retirement. Organizing the business as a worker-owned co-op goes beyond providing jobs by giving workers a way to build equity in the business, he adds.

Slow but sure
When Green City Growers began production in 2013, sales were slow to take off, McMicken recalls. “The first couple of years were very scary.” Even though several large wholesale buyers had agreed to buy the co-op’s lettuce, many of them only replaced part of their supply with lettuce from Green City Growers and maintained their relationships with previous suppliers. Buyers needed to see that the co-op could provide a consistent supply over the long term, McMicken says. Overall, local wholesalers have been supportive, but the co-op also began aggressively pursuing relationships with retailers a year and a half ago, he adds. “That has really helped sales.” Currently about half the co-op’s sales are wholesale and the other half are to retailers.

Sales to retailers have proven to be more consistent than those to wholesale buyers, but margins are lower because of packaging, McMicken notes. For instance an ounce of fresh basil requires 35 to 40 cents worth of packaging for retail sale. The co-op’s most profitable products are micro-greens, which have a high selling price and short growing period, but the demand for them is limited.

Some buyers choose to buy from Green City Growers because they like the co-op’s social mission, but that isn’t enough to sustain the business. The co-op must also appeal to buyers based on value compared to other greens on the market, says McMicken. The lettuce does cost more per head than lettuce grown on the West Coast, but it gets to wholesale customers or retail shelves within 48 hours of being harvested. That freshness is an advantage, because buyers have less loss from shrinkage and spoilage. Customers are finding the local lettuce to be a better value, he explains. “The math really works.”

Back to the future
While Cleveland was once a leading producer of greenhouse crops, most of those greenhouses went out of business decades ago because energy prices made production unprofitable. Energy prices have stabilized recently, but a spike in energy costs could still threaten the business, McMicken says. However, the hydroponic production system Green City Growers is using is more energy and water efficient than traditional soil-based growing systems.

COZY START: A heated floor in the Green City Growers seed starting room helps plants get off to a good start before they are moved to the hydroponic ponds. The flowering plants in the background are used to produce edible blossoms that are included in the co-op's decorative mixtures of micro-greens.

The 3.25-acre greenhouse covers a series of ponds for production of lettuce and other salad greens. Each of the 13 ponds is 330 feet long, 30 feet wide and 16 inches deep. The facility also includes a separate growing area for basil and other herbs, a room with a heated floor for starting seedlings, a packaging and warehouse space, and a water treatment area.

Workers start seeds in trays holding plugs of growing medium, and then transplant the plants into rafts that start at one side of the greenhouse. As they grow, the plants work their way across the greenhouse. Workers transplant them a second time to allow more growing room and move them toward the harvesting area as they continue growing. The entire process takes 45 days, and requires precise coordination among workers to keep the flow of production going, explains McMicken. “For every seed we plant today, 45 days from now there’s a truck backed up to the dock, ready to take it.”

Although plants are grown floating in rafts on ponds, they use considerably less water than field-grown plants, McMicken says. Each head of field-grown lettuce requires about 40 gallons of water from seed to harvest, compared to about 1 gallon for hydroponic lettuce. In addition to that efficiency, Ohio has an advantage over Western states because of its more abundant rainfall, he adds.

About 80% of the water used in the facility is rainwater and snow collected from the greenhouse roof, then sand-filtered and purified using ultraviolet light. To maintain the correct growing conditions, water is continually recirculated through the treatment system, one pond at a time. A computerized system adds nutrients as needed and adjusts temperature, oxygen levels and water pH. Managing the water treatment equipment has created a separate career path for maintenance technicians, McMicken notes.

No matter what job workers have within the facility, it is a pleasant working environment, McMicken says. “Even if it’s cold and snowy outside, in here there’s green lettuce as far as you can see. That puts you in a good mood in the morning.”