The June 27 Co-op Budget meeting was surprisingly interesting and enjoyable. I thought Jim Guzewich, our temporary CFO, did an outstanding job of clearly, openly, and truthfully explaining every aspect of the Co-op’s budget and overall financial situation. There was ample time for our many questions; and each one was answered thoughtfully and respectfully, either by Jim or a Board Member. I left the meeting feeling satisfied that I was well-informed and assured that things are moving in the correct direction.
Jim led us through a PowerPoint presentation—showing where the Co-op is financially—and shared what he thought our next steps should be. From the broad scope of the report, it was obvious that he and the Board had spent considerable time and energy listening to Co-op members, staff, and managers; and that they had tried to pull together, to the very best of their ability, a budget that reflected that input. In my opinion, they succeeded.
Here are some of my highlights of the evening:
- Although there is currently a hiring freeze, there will be no reduction of staff on any level.
- An 8% increase in health insurance, including dental, begins January 1.
- All staff will get some kind of a salary hike, based on what sounds like a well-thought-out and detailed performance review process. Staff raises will be weighted towards those making the least amount of money.
- Employee input is sought and accepted in the review process.
- The Board decided to decrease spending in the following areas to save money. This represents a whopping total savings of $475,000! (I especially appreciate the decrease in Consultants, Legal fees, and Strategic Planning.)
Areas Targeted for Savings
Consultants and Auditing
Senior, college and vendor discounts (temporarily reduced from 10% to 8%)
Member-worker discounts (the 24% discount temporarily reduced to 20%)
- Because of our tight (but temporary) financial situation, member-workers getting a 24% discount were asked to take a short-term cut to 20%. The reduced rate has been in effect this quarter (July-September), will return to 24% for the holiday season (October-December), and will again be reduced to 20% from January-June 2017. After that, the discount is expected to return to 24%, pending voter approval. (Member-workers making less than a 24% discount will see no change in their discounts.) As noted in the chart above, this action alone will save the Co-op $145,000.
- Senior, college and vendor discounts will follow the same pattern (8% from July-September 2016 and January-June 2017, and 10% during the October-December holiday quarter).
- The Co-op will be handling a big increase in expenses in the near future. The city has given us a nice break in property taxes so far, but that is about to change considerably. Property taxes will go up to $54,000 this year, and will spike each year, rising to a hefty $380,000 in just four years.
- Surprisingly, some basic equipment, which is only a few years old, is in need of replacement at a cost of $18,000. It will be replaced with more durable versions.
- I learned that the Co-op makes only $1.77 profit for every $100.00 in sales. As small as that seems to me, the Co-op is well in the ballpark for grocery retail. The bad news is that we have a large debt to bring down. But the good news is that with some thoughtful belt-tightening for a few years, the Co-op will be in much stronger financial shape. By June 2021, we will have paid off a major lease, and will have much more flexibility…and peace of mind.
- Jim thanked the shareholders who lent the Co-op money and have generously rolled over their loans for 2 more years. These loans (totaling $90,000) have been extremely helpful.
To me, this budget was a reflection of the huge amount of attention and thought the Co-op leadership has put into listening, learning new information, cooperating with each other, and weighing all options over a period of months. I especially appreciate that, even with the tight financial situation we are in, the Board managed to prioritize employees’ wellness, giving them raises and increasing their health insurance coverage. That goes a long way with me.
A big thanks to Jim and to the Board for all your hard work