NORTHVILLE TOWNSHIP, Mich. – What does a league do with nearly $26 million in capital it didn't expect to realize? That's the enviable dilemma the Michigan Credit Union League finds itself in as a result of the sale of its stake in the NYCE electronic funds transfer network. League President/CEO David Adams said the league is considering several options on what to do with the money – the $25.8 million is currently part of the league's capital- and the league board of trustees has approved a concept draft that lays out basic ideas of how to use the money. These include a reduction in league dues; allocating part of the money for product and services development; investing the money in other credit union-owned ventures such as Service Centers Corp. and CU Village.com. But the league's plans may be at odds with some CUs' ideas. The league has 425 members. Before receiving the multi-million dollar windfall, it had $17 million in equity. "I know there are some credit unions that believe all the money belongs to the membership and should be returned to them," said Adams. " It's human nature in a cooperative environment that some credit unions will want as much capital back as possible, but it's not as clear cut as that. It doesn't work that way from a practical standpoint. Still others think the money should be put into products and services. We're listening to everyone, considering both extremes and everything in between. Whatever decision is made, one thing that's guaranteed is the value of membership will be up as dues go down and products and services are enhanced." Adams said the league's initial $40,000 investment in the MACHA switch from Magic Line in June 1979 was not done " in the spirit of making dividends." Instead, said Adams, "It was a way for us to support and take advantage of the opportunity to be part of developments in an ATM network from the ground floor. We knew that service delivery would be beneficial to all financial institutions." By September 1989, MCUL quickly realized a dividend of more than $20,000. In March 1993, the league had the opportunity to sell its stock for $1.3 million and gain a board seat for five years. "In today's terms, that would be a nominal amount," said Adams. The MCUL Board decided against selling its stock since it would have meant that after five years the league wouldn't have a voice on the Magic Line Board. By the time Magic Line was acquired by NYCE in April 1999, the league's stock was valued at $9.5 million. Faced with the opportunity to cash-out up to 50% of its investment, the league opted to cash our $325,000, retaining 97% in story necessary to maintain its investment and board seat. This past June NYCE received a bid from First Data Corp., and MCUL had the opportunity to cash out at value of $26 million while retaining a seat on the NYCE Oversight Board. It decided to take the offer. Adams said MCUL would like some type of return from the capital to reach credit unions by the first quarter 2002. There are several ways the money could be returned to CUs: directly to them as a rebate; a permanent reduction in the league's dues formula; a year-end annual rebate; or a one-time distribution of capital. It's not an easy decision to make, he said. The league is also studying tax laws and IRS regulations to assess if there are any restrictions on the way the money can be distributed. The league has also been garnering input from members and holding town hall type meetings, chapter meetings and Web casts. Credit unions Credit Union Times spoke with had their own words of advice and thoughts on what MCUL should do with the windfall. Several CUs have argued that MCUL-one of the wealthiest leagues in the country-should do as other credit unions that have come into similar windfalls have done and return at least 90% of the windfall profits to League affiliated CUs who are the member/owners of the League. Just as CUs have been there for the League when it needed their assistance, the credit unions argue that considering some CUs' operational losses, the member CUs deserve and need to share in the $26 million. JoAnne Fillwock, president of $56-million Financial Health CU in East Lansing said her primary concern is that the league doesn't use the money to build a larger league infrastructure. "I was around years ago when the Michigan league had a large infrastructure. Credit unions didn't get the best value for their dues monies at that time," Fillwock said. "I think there's a tendency to believe at times like this that there should be a bigger infrastructure. I hope the league takes the time to assess and absorb the enormity of the windfall before it decides what to do with it." Fillwock hopes some of the money will come back to the credit unions "in some fashion," preferably as a dues reduction. "That would be the simplest way to do it," she said. Adams said this is one of the options being considered. Dues are currently based on CUs' asset size. "We're listening and considering all credit unions' concerns and suggestions," said Adams. -

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