Patronage Refunds

In late October or early November, the Wedge Co-op will distribute patronage refunds to the membership. This is one of the biggest financial benefits of owning a cooperative. Here's how it works:

Members are the Cooperative

Co-ops are unique organizations because they are based on member ownership. Member investment (the $80 you paid to join) provides the resources to create the cooperative in the first place.

The co-op finds the best sources of goods that members want and sets prices to cover the costs of providing those goods in a retail environment. It is necessary to set prices slightly higher than routine costs to allow for the uncertainties of the real world. These include such things as fluctuations in food costs, equipment failures, inflation, "economic downturns" and liabilities that all organizations are subject to. A well-run cooperative will maintain the ability to pay its vendors and employees despite inevitable uncertainties. Consequently, most years the cooperative should generate a surplus of income over expenses (profit).

The Surplus from Sales to Members Belongs to Members

Cooperatives enjoy a privileged status and can return the surplus to the members as patronage refunds that are tax free to both the co-op and the members. By law patronage refunds must: 1) be only from member income, 2) be allocated based on each member's purchases (patronage) from the co-op, and 3) be allocated to an individual account in the name of each member. The cooperative can distribute the patronage refunds to each member as cash or retain a portion as additional investment in the business. The board of directors looks at the financial performance each year, considers the co-op's need for the future, and decides what portion to pay out or retain. The cash portion is sent (as a check) with a notice of allocation that also indicates the retained investment (non-voting stock) that is being held in the name of that member.

Who is Eligible

To be eligible for a patronage refund this year, a member must have shopped (as a member) between July 1, 2008 - June 30, 2009. Cash refunds will be sent to members who purchased enough products to have earned at least $2 as a cash portion (otherwise the entire refund will be issued as retained stock).