The WV Food and Farm Coalition has been working on a bill to enable the creation of varied cooperative businesses in the food industry.
While West Virginia allows for producers of agriculture to form cooperative businesses, no other person involved in the local foods system, or any other industry, can form a cooperative. This means that tomato growers (or producers) can form a cooperative with other produce growers, but a volunteer or employee at the farmers market where they sells their tomatoes cannot be part of the cooperative, unless that person also grows tomatoes.
A number of businesses across the state approached the Food & Farm Coalition last summer to express frustration with these restrictions and ask if the organization could get a law passed for expanded cooperatives. Groups like the Wild Ramp in Huntington and the Mountain People’s Co-Op in Morgantown were already effectively acting like multi-stakeholder cooperatives, but could not incorporate as such and receive the benefit – and taxation clarity – of being a cooperative.
Multi-Stakeholder Cooperatives as a Holistic Solution
Working with a number of partners, including former Senate Agriculture chairman Ron Miller (Greenbrier Co), the Food & Farm Coalition identified a broad multi-stakeholder cooperative business model that they believe would be a good fit for West Virginia. This type of model is working well in states like Ohio, Wisconsin and Minnesota.
A multi-stakeholder cooperative is a business that is structurally similar to a limited liability corporation and is made up of member-owners who earn their ownership through financial contributions to the business, time spent working for the business, or some other value that is set forth in the business’ bylaws. Member-owners set the direction and goals of the business, and they share in the profits of the business. Cooperatives differ from LLCs in two primary ways: first, there is no limit to the number of owners that a cooperative can have. An LLC is limited to 25 owners. Second, cooperatives are not subject to the “double taxation” that LLCs have at the federal level. Profits earned by the business are taxed but the excess profits that are shared with member-owners are not taxed.
Expanding Producer Cooperatives to Promote WV Food Hubs
The Food and Farm Coalition has also worked with legislative leadership to try to expand the producer cooperative section of the WV Code to provide for more inclusion of members and organizations involved in the value chain of the food system. Expanding beyond agriculture producers will enable further growth and economic development in the local food sector.
The Senate Natural Resources Committee passed SB 352 amending the producer cooperative statute to include additional classes and member groups in the local foods arena. While this bill would not create opportunity for the formation of cooperatives in any sector, it does address the challenges that were identified last year by food hubs around the state. The bill now goes to Senate Judiciary, where it must be put on the agenda by Senator Charles Trump (Morgan Co.) to move forward.
The (continuing) Saga of Senate Bill 352
The movement of SB 352 is an interesting example of how things can work in the Legislature.
SB 352 was originally introduced to address challenges that communities were facing in creating recycling programs because of current restrictions on recycling entities. WV Citizen Action Group identified recycling co-ops as a potential solution to this challenge. The bill originally amended the County and Regional Solid Waste Authorities section of the WV Code. It was introduced by Senator Chris Walters (Putnam Co.) and referenced to the Natural Resources and Judiciary committees in the Senate. A companion bill on the House side was introduced by Delegate Mike Pushkin (Kanawha Co.) and has been referenced to the Political Subdivisions and Judiciary committees.
Before the Senate bill was taken up in the Natural Resources committee, a committee substitute to the bill was drafted significantly revising it. Committee substitutes are bills rewriting the original bill and incorporating edits . Unlike amendments, committee substitutes are wholesale revisions of the bill. They are introduced during the committee, discussed and voted on. If the committee votes in favor of the substitute, that version of the bill is sent on to the next step in the process.
The committee substitute for SB 352 omitted all the changes to the Solid Waste Code and attempted to incorporate recycling programs under the Producer Cooperative section of the Code. It also incorporated language provided by the Food & Farm Coalition to expand that section of the code to provide for food hub cooperatives.
While the committee members were supportive of expanding the code to support food hubs, they would not allow the inclusion of recycling and composting under the agriculture code. It was too much of a stretch of the imagination to include those categories in that section of the code.
As such, the bill that passed out of the committee provided for cooperatives for the local food sector but move forward the original purpose of the bill – recycling.
This is just an example of how a bill can start in one spot and end in a completely different spot during the legislative session.
The Food & Farm Coalition is asking supporters of food cooperatives to call on the Senate Judiciary Chairman Charles Trump (304-357-7980) and ask him to put SB 352 on the committee agenda.