From: Robert Abrams <rabrams@igc.apc.org>
Newsgroups: alt.co-ops
Date: 30 Aug 92 16:50 PDT
Subject: Disaster Contingency Plans
Nf-ID: #N:cdp:1337700020:000:6169
Nf-From: cdp.UUCP!rabrams    Aug 30 16:50:00 1992


A Proposal for a NAFC Disaster Contingency Plan  --  DRAFT  --

It has been my experience that disaster preparedness is most
effectively designed before a disaster, and not during a disaster.
Coops tend to live on very tight margins by choice, and have
higher turnover in "ownership" than equivalent commercial
businesses.  These factors make it all the more imperative that
our coops have disaster contingency plans.  Coops also tend to be
unable or unwilling to take such steps on their own.  For all of
these reasons, plus the standard risk spreading reasons, the
Disaster Contingency Plan should be administered by the National
Alliance of Food Cooperatives (hereafter referred to as "NAFC" or
"the Coop Alliance").

The section below details my current thoughts on such a Plan.  I
would welcome discussion of these issues.  Responses can be sent
to me at ZKIX@VAX5.CIT.CORNELL.EDU or 115 Valentine Place, Apt
401, Ithaca, NY 14850.  Please keep in mind that the opinions
expressed in this draft are solely my own, and do not represent
official positions of the Coop Alliance.

Part 1.  National insurance fund.

A National Insurance Fund should be created.  The fund would be
built by charging coops who belong to NAFC $1 per member per year.
All such payments would add to the coop's equity in NAFC.

Any member coop could request a loan from the fund to cover such
natural disasters as fires, floods, hurricanes, and earthquakes,
and unnatural disasters such as unexpected rent hikes.  Financial
mismanagement could also qualify as an eligible disaster to be
reviewed on a case by case basis, especially if the management
which caused the disaster has been removed.

No loan could exceed 20% of the fund.  For this purpose, the fund
would be defined so that outstanding loans would not be included
in the total.

Monies in the fund would be invested in a secure, interest paying
account.  To maximize return while maintaining a sufficient amount
of liquidity, 20% of the money should probably be invested in a
savings account, with the other four 20%s invested in annual CDs
staggered by 3 months each.  The first interest equal to half of
the Prime (1) would be used to support the NAFC itself.  All other
interest would be reinvested in the fund and would be divided as
equity among the various member coops in proportion to their
investment.

Loans from the fund should be offered at 6% over Prime, with a 2%
reduction if the coop requesting the loan has filed insurance
reviews (see Part 2) for at least the past two years, and with a
2% reduction if local banks and/or the National Coop Bank are
loaning at least 65% of the total loan needed.

Part 2.  Insurance Review.

Member coops of NAFC would be encouraged (strongly encouraged,
verging on required) to submit a report on their insurance every
six months.  The member coop would need to show that they have
property insurance to cover 100% of their inventory and equipment,
sufficient business interruption insurance to pay the salaries of
all their staff for a period of 12 months, and a sufficient amount
of Directors and Officers insurance to protect against a variety
of malicious lawsuits.  Coops which file adequate reports every
six months for 2 years would be eligible for a 2% reduction in the
loan rate, should they need to use the disaster fund.  Of course,
adequate insurance would also mean that they would be less likely
to need such a loan.  Coops which file reports but choose not to
meet the minimum insurance coverage would be eligible for a 1%
reduction in the loan rate.  The concept is that if a coop's Board
chooses to underinsure their coop, they should do so knowingly in
a way which forces them and their membership to reconsider the
issue periodically.

Part 3.  A Mechanism to Ensure the Continuous Supply of Food.

NAFC should support the development and maintenance of a network
of food coops which are in relative geographic proximity to each
other and which have reciprocal disaster activated support
agreements which go beyond standard membership reciprocity. (2)

In the event of a disaster, a coop member should not have to drive
more than 3 hours at 30 miles per hour to get groceries.  This
results in an ideal maximum distance between coops of 60 miles.
(A person who lives on the far edge of the affected coop would
have to drive 30 miles to the affected coop and then 60 miles to
the support coop.)

Taken to the geometrical ideal, this principle would result in a
grid of equilateral triangles 60 miles on a side.  The ring of
coops closest to any "fully-protected" coop would form a hexagon.

Where appropriate, we might want to support satellite coops at the
30 mile mid-points of the grid.  This policy would have more to do
with encouraging a pattern of large regional coops surrounded by
smaller affiliated coops who meet the micro needs of the local
neighborhood but who maintain the price advantages of a large coop
by buying from the large coop, than with food continuity in
disasters, but it would make food continuity easier to maintain.

When a coop joins NAFC, they would agree to offer standard
membership reciprocity plus 2% to members of any adjacent coop
which has declared a disaster.  The 2% would be paid directly to
that coop.  This additional obligation would last for a year, at
which time the supporting coop could decide whether to continue
support.  This policy would allow affected coop members to
continue obtaining coop food during a disaster.
 It would bring extra business to the supporting coop and would
provide some income to the affected coop.  In sum, members
shopping at the supporting coop would contribute to the rebuilding
of their own coop.

The affected and supporting coops might also want to consider
temporarily merging their member labour systems, extending the
supporting coops hours or other measures designed to make the
support relationship more effective.

Footnotes:

1)  The last time I checked, the Prime Rate was at 6%.
2)  Standard Membership Reciprocity generally means that a coop
will allow a member of another coop to shop at non-working member
prices or better without requiring investment of equity.