2022 Patronage Refund: Benefit of Co-op Ownership

We are pleased to share the good news that the Board of Directors has declared a patronage refund for the fiscal year that ended on June 30, 2022. This is our first patronage refund since 2015.

One of the key differences between cooperatives and corporations is what we do with profit. Broadly speaking, we use profits for similar types of things: paying taxes, reinvesting in the business, and making distributions to owners. That last one—distributions to owners—is where we have the greatest difference. In addition to increased stock prices, corporations distribute profits back to their shareholders through means like stock buybacks and dividends. The more shares of stock one owns, the more profits one receives. In other words, wealth grows more wealth.

As a cooperative, we have a different way of distributing profits: the patronage refund. Every owner of Seward Co-op buys the same $75 of Class A stock to become a member. All Seward Co-op owners own the co-op equally: one member, one vote. So rather than distributing profits based on how much stock someone owns, we distribute profits based on how much someone shopped at the co-op. “Patronage” just refers to patronizing (shopping at) a business, and we are refunding part of the money spent at the co-op.

About the 2022 Patronage Refund

Sales in fiscal year 2022 totaled $39,728,563 — a 4 percent increase over the prior year. Our net income before taxes and patronage refund was $2,020,318. This net income was largely due to $3,139,207 in debt forgiveness income due to the conclusion of the New Market Tax Credit financing we received for construction of the Friendship store seven years ago. Our over 23,000 owner households accounted for over 78 percent of co-op sales, resulting in a total patronage refund $789,565. This accomplishment could not have happened without your support. In this past fiscal year, co-op owners also saved $791,297 through the quarterly 10% discount benefit and the Nourish (needs-based) discount, bring total owner savings to over $1.5 million. We sincerely appreciate your ownership and patronage.

The patronage refund may be distributed to owners in two forms: cash and equity (reinvestment shares in the co-op). By law, the cash portion of the patronage refund must be at least 20 percent, allowing the co-op to retain up to 80 percent as equity. The retained equity portion stays with the cooperative and is used to ensure that our cooperative is here for future generations. As in previous years, the Seward Co-op Board of Directors has elected to distribute 20 percent of this year’s patronage refund as cash, retaining 80 percent as equity.

The board’s decision to retain 80 percent of the patronage refund as equity allows our co-op to build the healthy community envisioned in our Ends Statement. Retained equity gives the co-op the resources to address future needs and to achieve our long-term goals. The retained equity from prior years’ patronage refunds made the Friendship store possible. The Friendship store in turn increased the positive impacts the co-op has on our community. Building locally, buying locally, hiring locally – these are all ways the co-op keeps our money circulating in our community.

Information for Co-op Owners

We will distribute the patronage refund by applying a credit to owners’ accounts in our point-of-sale system. You can ask about the amount of your credit at the registers or Customer Service desk. Each owner can use that credit any time before June 30th of next year (or donate it—see below). You may use this for in-store purchases or redeem it for cash at the registers or Customer Service desk.

The Patronage Refund is a bit like a retroactive discount on your shopping trips throughout the year. Someone who spent about $100 per week will get a cash refund of around $30. The cooperative does not pay taxes on this amount, and because your individual refund is a deferred price reduction on goods you purchased, your share of the patronage refund is not considered taxable income to you.

Donate Your Refund

Owners have the option to donate their patronage refund to the Seward Community Fund (SCF) or the Seward Co-op PTO Pool. The SCF is an endowment fund established by the co-op in 2005 to share our success within community. The interest earned on the SCF is given to nonprofits and/or cooperatives in our community. Each Community Choice SEED recipient finalist receives a $1,000 grant from the SCF Fund. The PTO Pool provides paid time off for staff who have used their PTO hours but have an additional need (medical emergency, etc.).

If you wish to donate your patronage refund, simply tell our staff at the registers or the Customer Service desk. At the end of the fiscal year on June 30, 2023, all unclaimed patronage refunds will be donated.

We hope you are as proud as we are to be part of Seward Co-op and that you join us in looking forward to another great year.

FAQs:

What is the patronage refund?

The patronage refund is the return of the portion of the co-op’s profit that came from sales to owners. This past year, 79.6 percent of sales were to owners, so 79.6 percent of the co-op’s net profit became the patronage refund. As in past years, 20 percent of the patronage refund is distributed in cash, and 80 percent is allocated to individual owner accounts but held by the co-op as equity*.

*Note: in this case equity is the same thing as Class B stock, also called “retained patronage refunds” or “patronage refund equity.”

Why is the co-op retaining 80 percent of the refund?

The ability to retain significant cash, tax-free, builds the commonwealth of our community. Retained equity gives the co-op a significant resource to address future needs and to achieve our long-term goals. This owner equity is an essential piece of our current expansion projects, acting as seed money to leverage additional owner investments and bank financing.

Is the patronage refund taxable?

No. Because the individual refund is a deferred price reduction on goods purchased, an owner’s share of the patronage refund is NOT considered taxable income.

What percentage of total shopping dollars do Owners receive as patronage refund?

This varies from year to year, depending our level of profitability. This year, the cash refund is about 0.4% of sales. This means an owner who spent about $100 per week at the co-op will receive a cash refund of about $30.

How does the refund work with needs-based ownerships?

In the case of a needs-based ownership, the full amount of the patronage refund is used to pay for the ownership (in increments of $3). Any remaining refund will be issued as B stock. Owners requesting a specific amount/percentage of their refund to be applied towards their ownerships (or asking any other detailed questions about this) should be referred to Alex Betzenheimer (abetzenheimer@seward.coop.)

How will the refund be distributed?

As in past years, we are distributing it electronically. Owners may use it for in-store purchases or redeem it for cash at the registers or Customer Service desk.

Can owners donate their patronage refund?

Yes. Owners have the option to donate their patronage refund to the Seward Community Fund (SCF) or the Seward Co-op PTO Pool The PTO Pool provides paid time off for staff who have used their PTO hours but have an additional need (medical emergency, etc.).

What is the Seward Community Fund (SCF)?

The SCF embodies Seward Co-op’s commitment to continue to grow not just as a business, but also as a resource that takes the concerns of our community to heart and to action.

Seward Co-op launched the SCF in 2005, as an endowment fund to which individuals may donate money. Each year, 8 community organizations receive SCF grants and are put on the ballot for the SEED Community Choice vote.

Who do I contact with questions?

Questions regarding your patronage refund or the SCF can be directed to Finance Manager Alex Betzenheimer at abetzenheimer@seward.coop or 612-465-0882.