CU Tax `Inevitable,' Predicts Retiring CEO Onesta

DUBLIN, Calif. – Forget about credit union platitudes, talk about the “people helping people” credit union philosophy and reasons why credit unions are different from banks and shouldn’t be taxed. That’s some of the advice longtime credit union leader William (Bill) Onesta gave on one of his last interviews before he retired at the end of 2003 after 16 years as president and chief executive officer of Operating Engineers (Local Union #3) Federal Credit Union. Onesta, who started his career in 1965 as an auditor with the California Credit Union League, went on to found the auditing firm which later became O’Rourke, Sacher & Moulton and is now RSM McGladrey. He was with the auditing firm from 1969 to 1983, then worked for four years as a consultant to the credit union industry before joining Operating Engineers FCU. Under his leadership, the credit union grew from a “plain vanilla” institution with 25,000 members and $170 million in assets to a full-service operation with approximately 74,000 members, $700 million in assets and branches throughout northern California as well as in Nevada, Utah, Hawaii and Oregon. Onesta said his decision to sign on with Operating Engineers was simple. “My degree was in management,” he said. “I wanted to see if some of the principles I used to talk about in the credit union industry actually worked. I decided to give it a try.” Onesta said one of those principles involved getting to know each of his employees. “I’m a firm believer in management by walking around,” he explained, noting that included having lunch and breaks with employees and sitting and talking with them at their desks. “I’m a strong believer in that,” Onesta said. “I try to have a personal relationship with all my employees. That’s worked very well for us.” Building such relationships proved especially valuable at Operating Engineers, he said, since the employees are all union members. Rather than taking any grievances directly to a union representative, they often felt comfortable with approaching Onesta with their concerns, he said. Onesta reflected on the changes he has seen in the credit union industry – including expanded fields of membership, better educated management and technological advances – and offered some predictions about what may be ahead. Among those predictions was that credit unions will eventually be taxed, that the credit union philosophy is not being passed on to new generations of management, that competition will diminish cooperation among credit unions and that very few credit unions will survive with a single field of membership. “I think it’s inevitable,” he said of the taxation issue. “I don’t know that it’s right around the corner,” he added. “What will happen first is there will be a lot fewer credit unions and most that survive will be community (chartered institutions). When that happens – it might be 10 or 20 years or it could be a lot less – then I think there will be less reason for them not to be taxed.” Onesta said he already sees little difference between community chartered credit unions and community banks. “There’s not that much difference between them (community chartered credit unions) and a community bank in reality,” he said. “They might say there are volunteers, volunteer services and that kind of thing and that is different. But we offer the same services. We serve everyone.” As more credit unions convert to community charters, Onesta said there will be less and less cooperation among them. “I think credit unions in the future probably will be less cooperative with one another because of the fact they’re going to see each other as competitors,” he said. “There’s a lot of overlapping.” Onesta said he is already seeing that lack of cooperation at conventions, conferences and other gatherings. When he started in the industry in the 1960s, Onesta said “the atmosphere was a lot different than today. They (credit union leaders) still acknowledge each other. But they don’t the share ideas as much as they used to with one another. That’s changed dramatically because they are competing with one another. They know that. They know they’re sitting across the table from a CEO of a community credit union that’s taking their members.” He compared today’s credit union gatherings to a “banker’s convention.” “They’re cordial to one another. They have common interests and they work together on those things that they all have an interest in. But they also know they compete with one another and there are certain things that they don’t share,” he said. For small credit unions, especially those with a single field of membership, the situation is even more difficult, he contended. He said he believes that “very few” single field of membership credit unions will survive. “I think most credit unions will be forced to go and expand their fields of membership to community (charters) just to stay in competition with all the other institutions out there,” he said. “It’s one thing for a credit union to compete against a bank or another financial institution, but it’s extremely difficult for a credit union to compete against another credit union that has more resources than they have,” he explained. “For the smaller credit unions that find themselves involved in those situations it’s very difficult for them now. If you’re in an area that has five or six community credit unions and you’re a small credit union trying to serve one employer and your members can join any one of those other credit unions, it’s extremely difficult for you to compete with them.” Despite his predictions, Onesta still remained upbeat about the future of credit unions and said he plans to remain active in the industry even in retirement. “Things change,” he said. “What`s good today is not good tomorrow. Today’s success is tomorrow’s dinosaur. That`s the biggest problem credit unions have, to keep from becoming a dinosaur.” -