Patronage refund is the name for the profit that co-ops return to their owners. Essentially, each owner gets back part of the profit from their own purchases, but only the part not needed to keep the co-op in good shape to serve the owners well.
Every autumn after profitable years, the Wedge Co-op distributes a patronage refund to its owners.
Owners Are the Cooperative
Co-ops are distinctive businesses based on ownership. Owners buy eight $10 shares to join ($80 stock purchase), but co-op profit is not distributed based on how many shares are owned. Instead, it is distributed based on how much each owner spends at (or patronizes) the co-op — hence the term "patronage refund."
Our co-op provides the goods that our owners want and sets prices to cover the costs of providing those goods in a retail environment. Prices need to be set slightly higher than routine costs to allow for the uncertainties of the real world, such as fluctuations in food costs, equipment failures, inflation, recessions and liabilities that all organizations face. 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 – in other words, earn a profit.
Surplus from Sales to Owners Belongs to Owners
Cooperatives enjoy a privileged status and can return the surplus (profit) to its owners as patronage refunds that are tax free to both the co-op and the owners. By law, patronage refunds must: 1) be only from owner income; 2) be allocated based on each owner's purchases (patronage) from the co-op; and 3) be allocated to an individual account in the name of each owner.
The cooperative can distribute the patronage refunds to each owner as cash or retain a portion as additional investment in the business. The board of directors considers the co-op's fiscal year financial performance, its overall financial position and its plans for the future, and then decides what portion to pay as cash. The cash portion is distributed (as a check or credit at the register) with a notice of allocation that also indicates the retained investment (recorded as nonvoting stock) held in the owner's name.
Who Is Eligible?
To be eligible for a patronage refund, an owner must have shopped as a owner in good standing for at least some part of the fiscal year in question. The Wedge's fiscal year runs from July 1 to June 30. The cash distribution is made in October or November.
Your cash portion can be issued as a check, if you prefer. Please stop by the Customer Service Desk to request a check. We do not issue patronage refund checks for amounts under $2.00. Generally, your check will be mailed to you within three weeks.
Owners enrolled in the CAP Ownership track will have the cash portion of their patronage refund (if any) applied toward the balance of their common stock until it reaches $80.