We often refer to seven operating principles which distinguish cooperatively-owned businesses from investor-owned businesses. This month’s Board Report focuses on the cooperative principle entitled “member economic participation” and it goes something like this: “Members contribute equally to, and democratically control, the capital of the cooperative. This principle benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested.”
The reference to “capital” is the Fair Share you paid (or are paying) to become an Owner of Willy Street Co-op. You can’t buy more than one share and your one share entitles you to one vote in Board elections, Owner referenda, etc. Simple, right? This principle gets a bit more complicated in the second sentence. Cooperatives commonly refer to this concept as “patronage refunds” which acts as a give back of the Co-op’s profits in proportion to each Owners’ purchases during a year.
In June 2009, your Board added policy language which enables Willy Street Co-op’s first patronage refund to be allocated for recently completed fiscal year 2010 (June 29th, 2009 to June 27th, 2010). This may seem kind of wonky so let me explain how patronage benefits you. Every Owner purchase is recorded at the registers. When the Co-op is profitable, the Board can allocate the profits earned from sales to Owners as a patronage refund. Your patronage refund amount is based on how much you purchased during the past fiscal year, and will be issued to you as a combination of a store credit and additional equity in the Co-op. The Board and management review plans and obligations, and decide on how much of the profit to retain in the Co-op to meet current and future needs. Since we are about to open Willy West and anticipate a rough 2011 with Williamson Street reconstruction, we opted to distribute 20% as a store credit and retain 80% as equity in each Owner’s name. Over $104,000 will be returned to Owners as store credits and an additional $416,000 will be retained as equity in each Owner’s name. That’s a lot of money!
Another important benefit of your Co-op’s patronage system is tax savings. By implementing patronage refunds, Willy Street Co-op separates profits earned from Owners vs. non-Owners. The Co-op does NOT pay income tax on Owner profits that are allocated back to Owners as a patronage refund! For fiscal year 2010 over $130,000 that would have been paid to the IRS in income taxes instead is staying in our community. Patronage refunds enables the Co-op to build up capital quicker and provide more benefits to Owners.
I hope this short column gives you a sense of how your participation in Willy Street Co-op not only meets your natural food needs, but also helps build a community organization for many years to come.
In next month’s Reader we’ll have an article with all the ins and outs of the patronage rebate. Stay tuned!