Wednesday, December 15, 2010

Peninsula Coop Payment

We have been members of Peninsula Coop for about two years now and we have just received our second rebate.  I thought I would go through it.

First off, the year was from March 29th 2009 to April 3rd 2010, we got our rebate at the start of December, eight months after our last qualifying purchase.

The rebate we got this year was 5.1% on fuel purchases.   We spent $2155.55 on fuel and have been given a rebate of $109.93 though we only received $59.

Peninsula Coop only pays out half of the rebate and retains the half as preferred shares.   The preferred shares get paid out after six years.  We will get our first preferred share rebate in December of 2015 and that will be for $7.26.

We did not spend our rebate last year and so that $32.91 was added to the $54.96 in common shares from this year and a $5.53 GST rebate.   I can not make sense what this GST refund relates to as we would have paid about $107.78 in GST on the fuel we purchased.   $1.49 was withheld as income tax and Sheila can claim this on her income tax return in the spring.

We also did not get the rebate as money, but has vouchers for Peninsula Coop.   So we have $59 in vouchers for the coop - one fill of the car - and the coop is holding another $95.14 of our rebate.   If our purchases continue as in the past, we should have about $360 worth of preferred shares of Peninsula Coop by 2015 when we see our first preferred share rebate.    December 2016 should be the first time we see a refund of over $100.

The retained refunds are acting as an interest free source of capital for the coop.    If there are 55,000 members with an average retained refund of $200 each, this means the coop effectively has a no interest line of credit of $11,000,000.   This not an accurate figure, just a ballpark number to show the scale of the money held by the coop.

So the refund system of Peninsula Coop is not nearly as good as it sounds on the radio adds.   It makes the idea of buying gas at Costco look like a decent deal because the lower price is one we see now and not years down the road and we are left with money in our pocket.

1 comment:

Kevin Anderson said...

The rebate you see on the first day of December is your rebate from the previous fiscal year. The Co-op's fiscal year runs from April 1-March 31. For your first year, your rebate will include the purchases you made from the date where you paid your $27 sign up fee until March 31st of that fiscal year. The reason it takes so long (from April march 30th until the first week in December) is because there is a lot of analysis that goes into preparing the rebates. The rebate process involves printing literally millions of dollars of "co-op cash". It needs to be done carefully and methodically.

The other issue of the "50% that the co-op keeps" is also an issue that causes some confusion for other members. When you buy a membership from the Peninsula Co-op, you are actually purchasing two shares in the company. One is called a preferred share and the other is called a common share and they have traditionally been split 50/50. This is what makes you an owner AND a member. Just like every other company who sells shares, they pay out dividends as they see fit based on the financial situation of the company. The Peninsula Co-op retains the portion allocated to its member’s common shares for 6 years (or 50%) in order to raise capital for growth opportunities such as new sites, which in turn will help the company report higher net savings for its members.

On your 6th year of being a member (or on your 6th rebate cheque) you will see the 50% share that was retained 6 years ago. For example... say you signed up in January of the year 2000. You would see your first rebate in December of the year 2000 from your purchases from January until March 31st. The dollar amount of that rebate would represent your preferred share, which is paid out annually. In the year 2006 you would see your whole years worth of preferred share that you normally see, as well as your common share from the year 2000.

The Co-op is not "keeping your money" they are simply being a responsible business. Cash flow is an essential way to keep business out of bank debt. In essence they borrow from their members to benefit their members by having the opportunity to expand without having to pay high interest rates.

As for income tax, that is a much easier question to answer. Revenue Canada deems any rebate you receive from the Peninsula Co-op that is over $100 to be income, therefore it will charge income tax on it. However, if the membership is not under a company or used for business there is an option for members to give the Co-op their SIN number. This allows the company to issue you a T4A statement with your rebate (if it exceeds $100) and you can claim the tax you have paid on your rebate on your income tax return. If you are uncomfortable writing this information down on the application form (as many people are) then you can feel free to phone the membership department in Central Saanich at 250 -652-5752 and they will be happy to confidentially fill in that piece of info straight into the secure membership database.

I hope that clears up any concerns you may have. If not, feel free to message back with any other issues you may be having and I'll do my best to answer them for you