The Bethlehem Food Co-Op: the question of Council members’ conflict of interest

logo The latest in a series of posts on City government logo

The first question Gadfly had was whether a for-profit like the Bethlehem Food Co-Op could qualify for a federal CBDG grant. All good, as he indicated last time.

The other threshold question about approving the Bethlehem Food Co-Op for the $100,000 federal grant was that of the possible City Council conflict of interest in voting since 6 of 7 members of Council are members — “owners” — of the Co-Op.

Solicitor Spirk parsed the legality of the Council members’ position and found no problem.

Council members’ proportionate ownership is extremely small, the dividends will be extremely small, and membership would not be an issue anyway, since Council could not act if the 6 members recused themselves. Sayeth the Solicitor.

To top things off, Council members spoke of not taking dividends but turning them back to the BFC.

Case closed on the question of conflict of interest.

Gadfly is satisfied that the Bethlehem Food Co-Op grant meets the funding criteria

logo The latest in a series of posts on City government logo

Gadfly would like to bring some closure to the discussion about whether or not the Bethlehem Food Co-op meets the criteria for funding by a Federal government CBDG grant.

Remember that the City approved $100,000 this year but that several residents raised reasonable questions, not about the mission of the Co-op (everybody is enthusiastic about that!) but whether it fit the guidelines for Federal funding.  (See “Co-op” on the Gadfly sidebar to refresh yourself on the discussion so far.)

At the November 6 City Council meeting (see Council video, min. 25), Gadfly (a BFC member) expressed support for the BFC but expressed desire that we had enough specific information about it to know that funding was “cleanly” done and that no “shadow” would fall on the BFC as it progressed forward.

In short, after obtaining additional information, Gadfly is satisfied that the BFC grant meets the funding criteria.

At the November 6 City Council meeting, a number of people spoke in support of the BFC funding (see video, part 1, min. 57:25 and video part 2, the opening 3:25 mins.).

Gadfly thought the presentation most effective at addressing in brief time the specific question of whether the BFC met the guidelines for CBDG funding in a positive manner was done by a woman whom he thinks was Colleen Marsh, past Head of the BFC (video part 2, the opening 3:25 mins.). Gadfly thinks you will find Colleen’s remarks a profitable 3 minutes.

Gadfly obtained the document package provided to prospective grant applicants plus both the 2018 and 2019 BFC applications for the CBDG grant via a Right-to-Know request to the City. Tip o’ the hat to the City staff.

As you can imagine, the paperwork for a government grant is long and dense.

But here are a few important highlights.

From the application package:

CBDG 1

For fiscal year 2020, the BFC applied for $189,840 for physical improvements. The entire application (73 pages) is linked here: Bethlehem Food Co-Op 2019 application.

Here is a key “nutshell” statement of the project:

CBDG 3

For most of us, the first 10 pages or so of BFC’s application will be the most pertinent. Gadfly always encourages followers to go to the primary source and make personal observation and judgments. But here are just a few selections from this opening portion of the application that struck him as fitting the grant guidelines:

CBDG 4

CBDG 5

CBDG 6CBDG 7
There are Gadfly followers more skilled and experienced in such matters than he. Further comments, of course, always welcome.

Bethlehem Food Co-Op: enthusiasm for the project but concerns about financing

logo The latest in a series of posts on City government logo

Barbara Diamond enjoys retirement as Lehigh University Director of Foundation Relations by engaging in various activities and organizations hopefully for the betterment of the community. Her particular interests at the moment are preventing gun violence, local government ethics reform, and Bethlehem Democratic Committee work.

Dear Gadfly,

I have been following the recent commentary about the BFC. Many thanks to you for your research and Dana for his expertise to help us consider whether using these important grant programs are appropriate, especially in the amount proposed, for this purpose.

I am also a BFC member; I believe I was #297 or 298 at a time when the goal was 300 members to get off the ground. That was about 3 years ago. I understand that such a major endeavor takes more capital than originally expected.

I remain enthusiastic about the project, but I also have concerns about financing the project with such a large grant from those programs. Is the BFC the highest and best use of those precious community development funds? As you have proposed, the city should provide more information about why it selected this program for a grant of this significant amount.

I appreciate Kathy Fox’s comment about some of the good things the BFC is doing in the community and finding in their By-laws that they are a non-profit is reassuring.

I think it would be further reassuring if the public and the Council could learn from the city and/or the BFC about how the $200,000 + funds collected from the public so far have been deployed, as well as the $50,000 grant from the city. A bit of transparency would help.

Dana’s suggestion that the BFC consider a low-interest loan from the DCED seems like a good way to go too.

Barbara

A funding option for the Bethlehem Food Co-Op

logo The latest in a series of posts on City government logo

Dana Grubb is a lifelong resident of the City of Bethlehem who worked 27 years for the City of Bethlehem in the department of community and economic development, as sealer of weights and measures, housing rehabilitation finance specialist, grants administrator, acting director of community and economic development, and deputy director of community development.

Thanks for your research, Gadfly.

In my mind, the City still needs to explain how it will achieve low/mod benefit. Job creation/retention was another possibility, and that is generally done through economic development loans. The DCED director did indicate that there is an economic development loan pool available. Whether CDBG is involved with that, I don’t know. In my time it was called FRED (Fund for Revitalization & Economic Development). If a loan was made and 51% of the jobs either retained or created were either offered to or filled by low/mod income individuals, compliance with the statutory objective was met. Of course everything was documented to support that and reported to HUD on performance reports.

I think it’s still important for the City to explain how it will achieve compliance on this allocation.

A low-interest economic development loan through the city’s DCED removes ethics and conflict of interest (real and perceived) from the equation.

Dana

The Bethlehem Food Co-Op: “It can be so much for the Bethlehem community” — but is taxpayer funding ok?

logo The latest in a series of posts on City government logo

Still thinking about the tension of funding the Bethlehem Food Co-Op with Federal government CDBG money through the City.

The question seems to be whether means and end are aligned.

No question — Gadfly says as a Co-Op member! — that the end is noble.

Listen to BFC Board member Kathy Fox (remember that Kathy posted about BFC activities a day or so ago) during audience discussion at a panel after Festival UnBound’s “Poets, Troubadours, and Troublemakers” event a few weeks ago.

“One of our goals in having a community-owned full service grocery store in downtown Bethlehem is to bring people together through food . . . Co-ops are much more than just a grocery store . . . It’s all about community . . .You have to educate . . . I talked to some of the Latinos that joined to find out just trying to find out what we have to do in order to make our store a place from your neighborhood would come to . . . It can be so much for the Bethlehem community . . . consider joining it to try to create this hub for our community, to shop and to meet and to talk and to learn.”

Noble cause, no question.

But even BFC member Gadfly was surprised at tax dollars as a means to that noble end.

And is hoping that the City can help clarify the issue.

Gadfly has had his share of grant application experience.

From his experience, he remembers applications, on the one hand, that are open-ended — just tell us what you want to do.

On the other hand, he remembers applications that are very specific — here are the specific goals of our program, tell us exactly how what you want to do fits these goals.

Gadfly feels that the application for a government grant would probably lean toward the latter kind of application.

And thus Gadfly feels that more information from the City about the BFC application and how the City saw that application in compliance with CDBG guidelines would help clear the air.

But Gadfly is still wondering about the question of Council members voting on a project that they “own”?

Anybody with ideas on that point?

Bethlehem Food Co-Op funding: Gadfly thinks the ball is in the City’s court

logo The latest in a series of posts on City government  logo

We’re following the controversy over the Council approval of the City awarding $105,000 in Federal Government CDBG funds (HUD) to the Bethlehem Food Co-Op ($50,000 last year).

With a little online searching, Gadfly found several sites that related to CDBG funds and Co-Ops. (Along the way, Gadfly noted several references to the CDBG program as “flexible” and used often to “leverage” projects).

Can a non-profit like BFC qualify for CDBG funds?

A faithful follower of Gadfly has recently posted the opinion that food co-ops often receive CDBG funding.

Gadfly’s non-professional web search did pick up several instances of such funding.

A particularly good example, in fact, came from HUD itself:

The Community Development Block Grant (CDBG)
Serving Low- and Moderate- Income Neighborhoods since 1974
A Multi-Media Scrapbook
Department of Housing and Urban Development
2014

The BFC application would have to fit the following general criteria that we have cited before (p. 2):

The Community Development Block Grant (CDBG) program helps local governments develop viable urban communities. It is an important and flexible program that is used to address one of three national objectives:

  • Benefit low- and moderate-income (LMI) persons;
  • Aid in the prevention or elimination of slums or blight; and,
  • Meet an urgent need of recent origin that the unit of general local government is unable to finance on its own.

A link in the scrapbook’s bullet 1, takes you to:

The following activities are different ways of meeting the national objective to benefit low- and moderate-income persons.

  • Activities carried out in neighborhoods, consisting predominantly of persons of low- and moderate-income, to provide services for such persons, can qualify under the LMI Area Benefit national objective.
  • Activities involving facilities, designed for use predominantly by persons of low- and moderate-income, can qualify under the LMI Limited Clientele national objective.
  • Activities that involve the acquisition or rehabilitation of property to provide housing, which upon completion will be occupied by low- and moderate-income persons, can qualify under the LMI Housing national objective.
  • Activities involving employment of persons, a majority of whom are persons of low- and moderate-income, can qualify under the LMI Jobs national objective.

Gadfly can’t be sure, but bullets #1 and #2 seem most probably the ones pertinent to BFC. So let’s look at them.

More on Bullet #1:

Examples may include the following when they are located in a predominately LMI neighborhood:

  • Acquisition of land to be used as a neighborhood park
  • Infrastructure improvements, such as sidewalks, in a residential neighborhood
  • Construction of a health clinic
  • Development of a community center

The activities listed above benefit all residents in the service area (that is predominately LMI) and thus are the type of activities that may qualify under the LMI Area Benefit national objective.

More on Bullet #2:

Examples include:

  • Acquisition of building to be used as shelter for homeless persons
  • Rehabilitation of a center for persons with disabilities to learn life skills
  • Demolition and clearance of a building to prepare a site for a future senior center
  • Public service activities such as provision of health care primarily for lower-income clients

The listed examples qualify under the Limited Clientele national objective because the beneficiaries can be identified as LMI residents.

Then go to Economic Opportunities (pp. 18-19) and find — mirabile dictu! — a main example of a food co-op and links to a couple other food co-ops.

A business like a food co-op seems to need to qualify in one of two ways:

Projects providing essential goods and services will typically qualify either on the basis of:

LMI Area Benefit.

To qualify under the LMI Area Benefit National Objective, the service area must be primarily residential in nature. There must be documentation that the business is providing essential goods and services to that service area population. Goods and services might include grocery stores, dry cleaners, pharmacies, health care, etc. A high-end boutique or souvenir shop would not be considered as providing essential goods and services.


or

LMI Job Creation/Retention.

A Job Creation/Retention activity is one that creates or retains permanent jobs, 51% of which are held by or made available to LMI persons. Jobs indirectly created by an assisted activity (i.e., trickle-down jobs) may not be counted.
—–

Gadfly sees nothing that says non-profits can’t receive CDBG funds, which was a question he and others had.

And a food co-op is a highlighted example of a HUD-funded project in a HUD document, so there would seem to be no hindrance to such a proposal under HUD guidelines.

—–

The City DCED administrator told us that applications for the CDBG funds were examined internally for compliance with HUD regulations, which, Gadfly assumes, means the points he has outlined above.

The City no doubt has to ultimately certify that compliance in pretty specific detail for HUD.

Gadfly is not sure whether at this early date — that is, prior to Council approval — that the final HUD paperwork would be filled out.

But the City could provide or at least describe the BFC application and explain how it is in compliance with the HUD guidelines we see above (perhaps last year’s application as well).

Just what is BFC saying it will specifically do with the money?

And that would seem to settle the issue.

At this point Gadfly — feeling less like the Benedict Arnold of the co-op movement — is leaning toward the position that an award to BFC would be legitimate (if all bureaucratic minutia is satisfied, of course).

And that the ball is in the City’s court to explain the compliance in more detail to answer the questions raised.

But what about the objection that City Council members are voting on a project in which they are “owners”?

Jeez.

Chatter around Gadfly’s water-cooler about funding the Bethlehem Food Co-Op through a government grant

logo The latest in a series of posts on City government logo

Gadfly’s ear has picked up the following:

  • I think I’ve convinced myself that the store will have a significant impact on low-income residents, especially if it’s located on/very near a bus line.
  • How many low-income people have paid to join the Co-Op?
  • The city government should stay out of private business.
  • What are the results of the William Penn program? I haven’t heard of it.
  • No one says it has to be located in a “blighted” area but that would certainly be a plus, especially as far as CDBG is concerned.
  • What programs in other cities are the Co-Op following?
  • The problem with low/mod benefit is that you need to be able to justify and quantify it to qualify for funding.
  • To my mind, you just take the hand of the needy and share your table with them. Simple.
  • The CDBG funds are “once and done” — when the store is open it will not need that kind of funding. Unlike, say, a non-profit offering a service, which in theory will be back year after year unless the need goes away (not likely).
  • Is there anything on the BFC web site that would indicate its mission with low and moderate income families? It would not appear so.
  • “The end doesn’t justify the means.”
  • Presumably BFC will be paying more property taxes than the current building owner, the process of improving the building will provide jobs and purchase of materials from local sources, and the store, when open, will provide new jobs. So definitely adding to the local economy.
  • It’s a noble effort but shouldn’t receive public funds.
  • If I was sitting in a Council seat I could convince myself to vote for it, on its merits. But I do admit that I find the potential conflict of interest question an interesting one, as the potential to profit from the Co-Op is real.
  • If the City ok’d it, it should be ok.
  • With so many Council members — and the mayor — members, what would Robert’s Rules of Order dictate if they all recused themselves?
  • It does seem odd that “blight,” which is in the CDBG guidelines, gets so little and the BFC, whose status is a bit questionable, gets so much.
  • Have other Co-Ops across the country successfully applied for CDBG funding? Or   have they been deemed ineligible?
  • Is it “Co-Op” or “Co-op”?

What are you hearing?