How are electric co-ops financed? Do they pay taxes? The Minnesota Association of Electric Cooperatives answered these and other questions in an early chapter of a 1962 book titled “The Night They Turned on the Lights.”

Six fictional charactersa co-op director, a farmer, a hardware store owner, a banker, a grocer and a barber—are having a conversation over lunch in a hotel dining room. The barber has been ribbing the director about the sweet deal the co-op gets from the government.

“Here you have a tax-free outfit getting all the money you want from the government without paying a cent of interest. Wish we could run our businesses that way” he teases.

When this comes up again, the director has to stop himself from pounding the table with his fist. “Makes me so dad-burned mad when I hear people making that statement,” he bursts out before explaining that the co-op does, indeed, pay interest, and pays off its loans on schedule.

The director then informs his barber that the co-op has already paid back $900,000 of its $1,570,000 federal debt. “So, when someone says that Uncle Sam is making a no-strings-attached gift of money to the cooperative, he’s either getting awfully careless with the truth, or he doesn’t know what he’s talking about.”

The banker asks about taxes? As not-for-profit businesses, co-ops do not pay federal income taxes as long as “85 percent or more of the income consists of amounts collected from members for the sole purpose of meeting expenses,” the director informs him.

The grocer circles back to taxes later in the conversation. “Cooperatives pay all the taxes which their competitors pay, with minor and trivial exceptions,” including “school taxes, excise taxes, social security taxes, property taxes” the director tells the group.

“Quite often you’ll find cooperatives are the largest taxpayers in the community,” he adds.

What do co-ops do about margins? At the end of the fiscal year, after all expenses have been paid and a reserve account has been funded, patronage refunds (sometimes called capital credits) are made to the member-consumers. “Those who buy a lot of electricity get a bigger refund than those who use only a small amount,” the director explains.

Early in the conversation and then later, the hardware store owner and the farmer want to hear more about the federal government’s relationship with electric co-ops. Why do people say co-ops are socialistic? the farmer wonders. Because “they’re more willing to listen the yakkety-yak of misinformed people than they are to the truth,” the director says testily.

The hardware store owner wants to know why electric co-ops serve rural areas of the country when profit-making utilities could have borrowed from the Rural Electrification Administration at low rates to extend their lines outside cities and towns.

“In fact, that was the idea right from the start...” But the utilities had conducted surveys that led them to believe “farmers were not ready for electricity.” And it wasn’t good business to make large capital investments for loads that were too small and too scattered to be profitable.

“Are you sure of that,” the banker challenges.

“It’s in the records,” says the director.

Near the end of the chapter, the director turns philosophical about the misinformation electric co-op members walk around with in their heads. “I sometimes think the biggest weakness of cooperatives in general is that they do such a poor job of telling their own story. It’s a wonderful story

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