Report to the Member/Owners, April 12, 2020, by Joe Holtz, General Coordinator, General Manager, and Co-Founder of the Coop
Thank you, our members, for your support of the Coop and the staff. Thank you, our staff, for your exhausting, tireless, dedicated, and excellent work, as we all adjust to life in this time of COVID-19.
Part 1: How has COVID-19 affected the Coop financially?
In a typical pre-COVID week, the Coop sales averaged over $1.1 million, consisting of over 2400 transactions per day. Since March 23, weekly sales averaged less than $600K and approximately 350–380 transactions per day. The reduced sales volume translates to more than $500K less in weekly sales revenue, or $90K less in weekly gross margin. In addition, our increased payroll (see part 3 below) adds about $20,000 in payroll costs, bringing the weekly reduction in our bank balances to about $110,000 weekly. As I stated in an interview in the first-ever digital Linewaiters’ Gazette (see this link: https://linewaitersgazette.com), I have to expect that the social distancing protocols will continue through mid-August. This means a significant drop in our financial liquidity and is not sustainable. But what if this situation goes beyond mid-August?
There is an additional drain on our funds that I did not take into account at the time of the Gazette interview. Typically, we purchase so much food and sell it so quickly that we essentially are in a perpetual state of owing our vendors and farmers about $2,000,000. Due to our lower sales volume, and therefore lower purchases, we now owe our suppliers around $1,000,000 less than we usually do. In recent weeks, I transferred more than $1 million dollars from an interest-bearing account to our checking account, to ensure that we don’t bounce checks. Our cash balance is therefore already depleted before taking into account the weekly losses. We started this year with more than $3.9 million in the bank, so the weekly losses plus owing our suppliers less money would bring our bank balance down to around $500,000 by mid-August. This is not a sustainable amount for running a cooperative of the Park Slope Food Coop’s size.
Part 2: The Coop needs financial help
In order to shore up our cash position and ensure continued operations for the foreseeable future, I have applied for two loans from the Small Business Administration and will be applying for a line of credit from Sterling Bank, the Coop’s primary commercial bank. But we do not know when funds from these sources will be coming in, nor do we know the terms of these possible loans. We do know that one of the SBA loans, if our application is accepted, might convert a major part of the loan into a grant that we would not need to pay back.
What can you do to help address the Coop’s pending cash liquidity crunch?
One option is to donate to the Coop. After the April 9 digital edition of the Linewaiters’ Gazette (https://linewaitersgazette.com) was posted on our website, two members decided to mail in a donation check to support their Coop. Their check is not tax-deductible because the Coop is not a 501(c)(3), but their generous gesture is helpful and appreciated.
Another option is for members to voluntarily increase their Member/Owner Equity Investments (MOEI). Members are required to make a member/owner equity investment upon joining the Coop and most members have made a $100 investment in the Coop. An additional contribution to your member/owner equity investment directly adds to the Coop’s working capital. Since MOEIs are not interest-bearing, there is no cost to the Coop. And, if you find that you need the excess investment back, it can be returned within weeks to you upon your request. It is important to note that donations to the Coop are taxable income to the Coop, whereas increased member investments remain member assets, and are therefore not Coop income. The MOEI can be made at any checkout. Years ago, some members increased their Member Investments as an alternative to lending the Coop money. The restarting of our Member Loan program may take at least three months since we have learned that NYS is now taking longer than usual to approve such programs. We need additional money before that.
Either of these two options (donation or increase in MOEIs) will help us weather this cash crunch as we remain steadfast in keeping the Coop open during these trying times. If you decide to mail in a check, please make sure that you include your name and member number, and clearly state if it is an increase in your member/owner equity investment or a donation. (PSFC, 782 Union St., Brooklyn, NY 11215)
We are learning and will continue to learn many things as we operate the Coop during this pandemic and under restricted conditions. Clearly, the Coop needs to be prepared with more than $3.9 million in cash reserve to withstand any future unforeseeable, catastrophic, events. We already see how quickly our operating funds can be reduced to levels that threaten the Coop’s ability to function financially, in a matter of merely months .
Part 3: Report on various decisions and challenges
In the face of this pandemic, the General Coordinators—and the entire staff as well—are working tirelessly to figure out how to best serve our members, maintain our principles, and ensure economic viability. Over the last six weeks, the General Coordinators, as the Coop’s chief administrative officers, have made many significant decisions regarding how the Coop is run, in response to the public health crisis and directives and recommendations from our local, state, and federal authorities.
On March 22, Governor Cuomo’s New York State on PAUSE executive order, plus health and safety concerns for our staff and members, led us to the heartbreaking decision to temporarily suspend our defining member labor system, and to cancel March and April General Meetings. It is impossible for me to overstate the gravity of these decisions, because I believe that our Coop’s greatest strengths are our participatory member labor and governance systems; the very things our Coop was built upon, 47 years ago.
It is important to keep in mind that in the 1970s, the Coop went 2.3 years without any staff at all. When the Coop decided to hire a staff person (me) it was with the understanding that there was a danger: any staff person who was hired might—rather than working to enhance the member labor system—instead destroy it. My explicit goal was to support and enhance the member labor system, and that has not changed.
We have hired more than 55 members as temporary employees, to replace the labor contributed by Coop members on their work shifts. And we may need to hire even more. For the first time in our history, and in contrast to our mission, the Coop is relying solely on paid staff to do all the work necessary to run the Coop. I want to assure you that the General Coordinators are committed to restoring our member labor system as soon as the pandemic restrictions on New York State are lifted.
I am very concerned that members are waiting a long time to get into the Coop, the result of reducing shopping hours and maintaining six-foot physical distancing requirements inside the store. This directly impacts the number of members allowed to shop at any one time, but is critical to stopping the spread of the virus and keeping staff and members safe and healthy. As much as we regret the length of the line, public health concerns are our higher priority. The GCs and the entire staff are constantly considering additional ways we can serve more and more members, while always maintaining high levels of cleaning and safety measures.
I thank everyone who has been able to help keep the Coop going, whether by shopping, or working, or expressing kind words of support. I want to assure you that I have great confidence in you to help preserve our wonderful, unique cooperative.