Patronage Refund

Emily Williams, Wedge BoD Member

This year we were very happy to have sent out almost $600,000 in cash for patronage refund. In the past five years we have distributed over $2.8 million to our members!

We are quite proud of our financial performance.

As the elected Board of Directors, one of our major responsibilities is to decide what portion of the patronage refund allocation to distribute as cash and what portion to retain as equity.

The Board uses a formula that was developed by the Economic Committee under the leadership of Merle Borchers (who had decades of banking and lending experience, specifically with cooperatives). The formula calls for an analysis of the state of our finances, including current (within 12 months) cash needs and any anticipated extraordinary cash outlays in the coming several years. Based on the Co-op's current and anticipated liquidity (how much cash is spoken for), the formula recommends a patronage refund cash distribution of either 20%, 40%, 60% or 80%.

A number of members contact us every year to ask why part of the patronage refund is withheld (the part that shows up as 'non-voting stock' on the check stub). It is important to understand that both the cash distribution and the withheld (equity) portions are still owned by the membership.

The term used to describe the portion of our business that the Co-op membership owns is "equity." Co-op equity, also known as Net Worth, can be understood as an entity divided into two parts. There is the part which we own together, or the 'ours' part, including the (paid-for) building and all the products and equipment it contains, the cash in the bank and the yearly profit. The part of the equity we own together is expressed as the 'non-cash' (or withheld) part of the patronage refund. This part that is held as "ours" keeps the Co-op running on a daily basis, and helps us plan wisely for both expected and unexpected expenses in the future. The individual distribution of profits that each member receives in cash every year is the "mine" part.

Imagine the Co-op was a partnership, rather than a cooperative. At the end of the year, the partners wouldn't take 100% of the profit out; if they did that, the partnership would not survive many more years or maybe "would be over." It is the same for the Co-op, except that the Board decides, on behalf of all current and future members, how much profit needs to stay in the business.

The Board has the task of being the steward of this wonderful example of community wealth. When we do the job well, we ensure the members the Co-op will continue to operate for as long as the members need it.