A simple question about Council votes on the Bethlehem Food Co-Op

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Stephen F. Thode is Professor Emeritus, Department of Finance and Law, Lehigh University.

Gadfly:

Let me frame this as a simple question:

Do Members of Bethlehem City Council believe it is ethical for a Council Member to participate in a decision to grant public money (taxpayer dollars) to an entity for which that Council Member is an owner, and, therefore, has a financial interest in the outcome?

Steve

In a previous communication, Steve advises that “owner” is “the word the Co-Op itself uses.” Gadfly had been wondering how membership in BFC differs from membership in, say, the YMCA/YWCA, of which, it is conceivable, some or all Councilpersons are members, and which has been awarded funding too. Should membership in the Y trigger recusal as well? But the idea of ownership, that BFC members benefit financially (discounts, sales, etc.), probably answers Gadfly’s question.

Funding the Bethlehem Food Co-Op: concerns about compliance

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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.

Gadfly,

Regarding competition for the CDBG & HOME funding, one of the weaknesses in City Hall is the lack of dissemination of the availability of the applications using the City’s website to make these kinds of announcements. That being said, I think the competition is found more in the amounts requested (over $324,000) versus what is awarded (over $190,000). Under the “Other” category I did notice a few different proposed recipients.

As far as the $155,000 allocation to the Bethlehem Food Co-op, $50,000 in 2019 and an additional $105,000 proposed for 2020, the question and my concerns expressed have absolutely nothing to do with the merits of that initiative. My concerns are about compliance, which means meeting the legal requirements of the federal Community Development Act of 1974. Nobody has explained how allocation of this funding will benefit clientele in which 51% or more qualify as low and moderate income in order to meet both the legal and regulatory requirements for CDBG.

When I asked the DCED director after the meeting how these requirements were being met, she shrugged her shoulders as if to say, “I don’t know.” Well, how can you recommend that a Mayor include this allocation and that Council approve it if you don’t know how it qualifies? There hasn’t been one example given how funding a food co-op will benefit primarily low and moderate income residents. I’m assuming the co-op will be open to all residents, yet 51% of Bethlehem’s population is not low and moderate income. Have the 660 members been surveyed to see if 51% are low and moderate income? I doubt that. So where is the statutorily required low/mod benefit?

Councilman Reynolds’ comments served to prove my second concern about conflict of interest as he touted his membership #141 and praised the initiative of the Bethlehem Food Co-op. Unfortunately, cheerleading something in which an elected official has a financial interest is not the way to go. The promise of future member benefits such as special sales/deals and already existing benefits of discounts at an array of Bethlehem businesses have monetary value that can add up if the Co-op is successful. THAT does not read well and it was similar conditions that lead to a Grand Jury investigation into a former City Councilwoman who was forced to resign because of her conflict of interest between her elected office and the non-profit she was involved with. Elected officials seldom seem to learn from other errors.

Councilman Reynolds should only be concerned about compliance with the federal law!

So, what should happen. First, I would question the need for $5,000 for operations. At $350 for each of 660 co-op members, a total of $231,000 should have been collected. Operations should come from that pot, not from taxpayers. Why is anything needed for operations? Was an audit submitted with the application to demonstrate the sound financial management of co-op memberships collected? Second, is there a way to justify low and moderate income benefit for the additional $50,000 already allocated and the additional $100,000 requested? I believe there is, but is it my responsibility to outline how? And it may reduce the amount needed for physical fit-out of a co-op facility if it’s used in a way that complies with federal law and CDBG program regulations.

So, here is my suggestion if anyone cares to listen. The $150,000 (or less if it costs less) total should be used for ADA (Americans with Disability Act) improvements ONLY when the co-op is constructed. Accessible checkout stations, ADA certified entrance doors, ADA restrooms, etc. HUD recognizes a “presumed” low/mod benefit when ADA improvements are completed using CDBG. Of course at this point there are no construction estimates to base this on, which if I were still running the CDBG program would be problematic.

In the end, the issue of conflict of interest, perceived or real, is the biggest hurdle to overcome in my opinion. And as I suggested to the DCED director, a low interest economic development loan is ultimately the best path to follow, because no elected official who is a co-op member would need to weigh in on that and cast a vote.

I administered grants, including CDBG and HOME, for the City of Bethlehem for 16 years of my 27 year city career. The city does not want to be caught misspending any grant money, let alone federal grant money. You want to build trust with funding agencies by administering grants based on law and regulations, not happy feelings that something is good for your community. For several years the City of Chester, Pennsylvania, lost its federal funding and had to repay all of it. Bethlehem does not want to fall into that trap, and it’s best if City officials, both elected and appointed, cross their tees and dot their eyes so it doesn’t ever happen!

Dana

Remember that Dana spoke at Monday’s Community Development meeting, and we provided the video here on Gadfly on Wednesday. Dana elaborates in this post on the two points he made at that meeting. Note that in the previous post, Kathy Fox does give an example of the kind of activity that Dana mentions as missing in his third paragraph. Gadfly appreciates the way Dana provides options/solutions to the problems he sees for a project that has merit.

Responding to some skepticism about the Bethlehem Food Co-op’s commitment to lower and middle income families

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Kathy Fox is a member of the Bethlehem Environmental Advisory Council, a co-chair of the Northampton County Council of Democratic Women’s Environmental Committee, and a member of the Board of Directors of the Bethlehem Food Co-op.  Kathy involves herself in positive organizations and activities that foster community, environmental awareness, education, and good health.

Bethlehem Food Co-Op

Food is Our First Medicine

For me, attending the Community Development Committee meeting was an opportunity to thank the City of Bethlehem and the Community Development Committee for supporting many organizations which submitted applications for Community Development Block Grants.  The Bethlehem Food Co-op appreciates being included as one of the recommended recipients of grant monies.

I’d like to expand upon the phrase “Food is Our First Medicine,” mentioned by me last evening [Monday] at the Community Development Committee meeting.  You can look at this phrase from many angles.  I like “Food is our First Medicine” because it speaks to many levels.  For our personal health, eating foods produced locally and by environmentally friendlier methods give you much more nutritionally dense foods and improves physical and mental health.  For our surrounding environment, cleaner growing methods mean cleaner water, air, and soil.  For the community, “Food is our First Medicine” is about building a healthy, diverse, and inclusive community through healthy, communal meals for all and commonality of needing and enjoying food, through a grocery store which is committed to our local people, not distant shareholders, through education by the Bethlehem Food Co-op in our elementary schools via our Community Hubs Program and other courses taught by our members.

In response to some skepticism about the Food Co-op’s commitment to lower and middle income families (note that the BFC will be open to ALL to shop, not just members), it is a fact that some of BFC board members and volunteers were unable to attend last night’s meeting because they were facilitating our Community Hubs program at one of Bethlehem City’s elementary schools. For the program, the Co-op works with the principal to find lower income families who are interested in healthier eating and lifestyles, and involvement in their community.  We meet with the families quarterly, provide them with healthy dinners graciously donated by some of our local restaurants, discuss nutrition, community, and what their families would like to see at the co-op.  After completing the year-long course, we have generous benefactors who provide household memberships to the Co-op to the families who attended all the sessions.  Additionally, we have a scholarship program supported by other local families and businesses, which search for families on some type of assistance who also have an interest in healthier lifestyles and who participate/volunteer in their community. You can see involvement in community is a very important aspect of the Co-op.  When the Co-op opens, we will have additional ways to include people from all economic backgrounds.  Meanwhile, we depend on the vast majority of our members to pay their own way to support the Co-op’s mission.  The co-op is much more than just a grocery store, its goal is to be an integral, stable part of the community.

I’m very proud to be part of an all-volunteer organization which believes in giving their time, talent, and financial support to help the community as whole rather than for personal monetary gain.  Everyone is invited to attend our events and join our BFC team to assist us in creating a safe place, third place, healthy place, community-oriented, and inclusive place for ALL.  I encourage skeptics to make a positive investment in the Bethlehem community by becoming a member and volunteer for some of our committees, projects, classes, and events.

Kathy

Now the specific examples in the core of Kathy’s essay are precisely what Gadfly was looking for in the previous post on Councilman Reynolds’ defense of the BFC. Those examples specifically address part of the objections by Grubb and Haines, showing the BFC operating within CDBG guidelines. Hurrah! But this conversation is not over.

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Funding the Bethlehem Food Co-Op: “There’s not a project more important in the City of Bethlehem than the Bethlehem Food Co-Op”

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Bethlehem Food Co-Op

We’re following the argument against funding the Bethlehem Food Co-Op $105,000 with funds from the Housing and Urban Development CDBG program administered by the City of Bethlehem.

Remember that though all the proposed CDBG allocations were approved by the Community Development committee last Monday, the “package” will still have to be approved by full Council.

Councilman Reynolds forcefully countered the questions raised and the positions taken against funding BFC that we presented in the last post in this series.

Let’s look at how he did that.

  • There’s not a project more important in the City of Bethlehem than the Bethlehem Food Co-Op.
  • The Co-Op is providing something to this City . . . through not just the organization and the services that are being provided at William Penn Elementary School and Thomas Jefferson Elementary School, but there’s also a spirit — how do we create things that benefit every single person in the City of Bethlehem.
  • People look at it as being about food security and about shopping and to be able to make your own choice, but it is much more than that — it is about how you create a sustainable city.
  • I hear the stories of the kids who walk home past Allen High School, and I don’t blame them when they are going to McDonald’s or they’re going to Burger King, because they are the only food options that they have around.
  • This is an issue of equity, it’s an issue of social justice, it is an environmental issue.
  • When you look at the growth that has occurred, it is growth that has occurred by spreading the idea of the Co-Op without even having a location that is announced yet.
  • And it is that idea and that spirit that we can create a third place for people, a place where people don’t just go to work and where they live but it brings the community together, and we don’t have a lot of those in this city.
  •  What we do have in this city is private businesses that look for tax incentives.
  • There is not a vote that I am prouder of than I am to vote for the Co-Op because of what it represents for the future of this city.
  • It has not been an easy path to get to this point of 660 members.
  • This is what it means to be part of a community.
  • This is how you put together real change in a community.
  • It is an example of what our city can be when we look at what we can accomplish when we come together.
  • I’ll bet that if there was an idea that there would be even one comment about the Co-Op [tonight] that we could have gotten all 660 households to come to this particular meeting to talk about what [BFC] means to this community.
  • In a day and age where a lot of people think that the government doesn’t stand up for these kinds of projects and these types of missions. [the support from all areas] is a real testament to what this community can be and what people are able to accomplish when they come together for a mission that goes beyond their own self-interest.

BFC could not have a more vigorous defender on Council than JWR.

He is a powerful speaker, a spellbinder, in fact, and he was totally engaged, totally in high gear.

“There’s not a project more important in the City of Bethlehem than the Bethlehem Food Co-Op,” he asserted —  but that’s a claim that even this BFC supporter felt a bit of a stretch.

“There is not a vote that I am prouder of than I am to vote for the Co-Op because of what it represents for the future of this city,” he asserted — but, again, that’s a claim that even this BFC supporter felt a bit of a stretch.

Frankly, Gadfly felt JWR overdid with such statements in BFC’s defense.

Doffing his BFC cap for a time and donning his professorial robe, Gadfly was looking for  reasonable arguments from JWR specifically aimed at Haines’s reasonable arguments.

For BFC isn’t a non-profit, and it would be in competition with other food stores, and when Gadfly canvassed the City for his collage of yard signs, he wasn’t finding them in low and moderate income areas.

So one question is how is BFC meeting the federal guidelines?

Apparently the BFC is doing some program with William Penn and Thomas Jefferson. That’s the kind of down-to-earth detail nerdy Gadfly was looking for from JWR (or somebody) to show that BFC complied with CDBG guidelines of tending to the welfare of low and moderate income folk.

Instead, Gadfly felt JWR’s emphasis on BFC as a well structured, unique program populated by a fiery, loyal, ever-growing membership that, tapping the power of community (Gadfly’s aphrodisiac word!), is a model for social change and progress was, while true, somewhat off-point.

Ok, BFCers are great people (hey, I’m one of them!) running a great program.

But how does the BFC specifically meet the bureaucratic guideline in regard to low and moderate income families that enables it to receive taxpayer dollars?

And how does the BFC answer the objection that it will operate in the free market enjoying the advantage of a not-so-hidden-hand helping it along.

Gadfly feels that JWR’s enthusiastic superlatives — with which, remember, Gadfly agrees! — still miss the point of the reasonable objections raised.

Ha! Gadfly, you say, if you are on the side of the BFC, why don’t you just shut up!

Gadfly is such a complicated person.

He’s starting to feel like the Benedict Arnold of the co-op world.

But he likes to make sure things are done by the book.

The next post helps in that respect.

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Funding the Bethlehem Food Co-Op: “Philosophically, we’re on the wrong path”

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Bethlehem Food Co-Op

Full disclosure: Gadfly is a member of the Bethlehem Food Co-Op, supports it, has talked it up with family and friends, has promoted it here on Gadfly, hopes to live to enjoy its “fruits” and to see it flourish. Gadfly published a collage of member yard signs with the caption: “Gadfly loves everything that speaks community.” The BFC is squarely aligned with the mission of the Gadfly project. But Gadfly must admit that he was not expecting to see the BFC receive City support. His understanding when he joined in February 2019 was that the BFC was drawing its financial base from the membership.

So the only problem raised with the proposed City allocation of CDBG funds at the Community Development meeting Monday night related to the Bethlehem Food Co-Op allocation of $105,000 (it had received another $50,000 last year).

The problem was three-fold:

1) Do the proposed BFC activities fit the criteria for CDBG funding?
2) Since at least 6 of 7 Council members are BFC members, is there a conflict of interest?
3) Should government be funding a private business?

In testimony Gadfly provided to you Wednesday, Dana Grubb, without denigrating BFC but seemingly quoting criteria for CDBG funds, noted that he had heard no argument made for BFC supporting low and moderate income folk, apparently a necessary criterion for CDBG funds.

In her presentation (also provided Wednesday), the City Administrator did not specify criteria against which applications were judged but did say the applications were reviewed internally for compliance.

Gadfly finds thefollowing statement relating to criteria for CDBG funds on the HUD web site:

Over a 1, 2, or 3-year period, as selected by the grantee, not less than 70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons. In addition, each activity must meet one of the following national objectives for the program: benefit low- and moderate-income persons, prevention or elimination of slums or blight, or address community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community for which other funding is not available.

Now Gadfly would assume that BFC’s grant application, which was not made public and therefore not known to Dana, would have addressed this criteria, and BFC’s Kathy Fox said in her comments (yet also provided in Wednesday’s post) that the application “did an excellent job of outlining the local economic, social continuing benefits of food cooperatives,” so she indeed did not specifically address at the meeting the criteria to which Dana referred. Presumably all that was done in the application, which, if Dana had seen, might have made him feel more comfortable.

Bruce Haines — again without rancor, without hostility, and with respect for the BFCers — objected that the market should determine the need for such a food business, that the city-supported BFC would be competing with other private businesses, that BFC members should be footing the bill, and that an important City program — the blight program — was being slighted, receiving only $5000.

Now you can imagine that Haines was not the most popular fellow in the room populated with BFCers for voicing these positions. And the BFC has an army 660 strong! He’d have had trouble getting a “bless you” for a sneeze. He knew what he was in the eyes of that audience, however, the skunk at the garden party. Great image!

  • I hate to be a skunk at the garden party here tonight.
  • I thoroughly support any grants that go to the social service agencies in the City the help the low income and the children that need help.
  • We were funding a business that was essentially a viable private enterprise business.
  • The market place will determine whether there is a need for a grocery store, food service in a certain location.
  • If the demand is so strong the private market for the food and grocery business is a very, very viable market with adequate funding, adequate capital, adequate equity.
  • I don’t think the City of Bethlehem should be in the business for allocating funds to an entity that competes with the private economy.
  • This is really, I think, a misuse of the funds and a misallocation of the funds, and every effort should be made to allocating the funds to the social services and the needs of the needy.
  • To take $105,000 out of blight remediation and blight administration . . . this doesn’t make sense.
  • We need to put money toward the blight program to clean up the City.
  • We shouldn’t be funding a business that’s going to complete with a very healthy, private, vibrant business, and the government doesn’t belong in that business.
  • If the community wants it, then the equity for the construction should come from the community members not the public taxpayer.
  • I’m not here to denigrate any person, I just think philosophically we’re on the wrong path.

But Gadfly felt that, unpleasant and unexpected as it was to this BFC member, Haines’s position was a reasonable one — actually a classic philosophical position — and thus deserving of reasonable answer.

What do you think? Of course, BFC does (will do) good work. But is it ok to fund it this way? How would you lean?

Gadfly always likes to play Councilperson. It helps us understand the responsibility that comes with that job. And the nature of the people we have elected

Councilman Reynolds did respond. We’ll go there next.

The Co-Opers support their $$$$ request

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Bethlehem Food Co-Op

At the Community Development Committee first-step grant giving Monday night only supporters of the Bethlehem Food Co-Op spoke.

Elliott Nolter advised us that the Co-Op now has over 660 members and is close to negotiation for a site.

Kathy Fox talked of the benefits the Co-Op will have on the wider environment, for example, sustainable farming practices and sustainability in general; a chance to aid in the restoration of our soil, air, and water; reducing food waste; providing educational opportunities; and the like.

Nathan Carpenter spoke of the Co-Op as people-focused community development and pointed to economic (the money spent here stays here) and social (addressing the basic question of how do you feed a community from every socioeconomic class) benefits, pointing out his positive experience with such Co-Ops in various other places he has lived.

All good stuff from the Co-Opers — Gadfly, as you know, loves these community voices — but as we will see next, a serious question arose about government financial support for such an organization.

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