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SAN JUAN, Puerto Rico – On the eve of accepting the community development credit union industry’s highest honor, Bill Myers, a founder and CEO of the $46 million Alternatives FCU, headquartered in Ithaca, New York, took some time to defend his credit union. Critics have alleged the award-winning Alternatives got a “sweetheart” deal from NCUA on its new building and that the credit union relies too much on grants from foundations and government sources for too great a percentage of its income. Over breakfast on the day before he would accept the National Federation of Community Development Credit Union’s Annie Vamper award for his years of service to Alternatives and other CDCUs, Myers said he could understand the criticism but said that the credit union’s critics suffered from an inadequate understanding of both the background of the new building and the role that grants play in Alternatives’ work. “The notion that we somehow got a special deal from the NCUA about the building is really silly,” Myers said, “an understandable misunderstanding but still silly.” Critics had suggested that NCUA had somehow gone inappropriately easy on Alternatives in the evaluation of its waiver request that allowed it to invest roughly 7.5% of its assets in a new headquarters building. But Myers pointed out that the regulation under which Alternatives had to seek the agency’s fixed asset waiver, which required credit unions to seek a waiver if they wanted to invest more than 5% of their shares and retained earnings in fixed assets, had been one which had been included in NCUA Reg Flex regulation. “If our timeline for the building had been just a little delayed, or if we had delayed it for some reason, we would never have had to apply for the waiver,” Myers pointed out, “so this whole discussion would have been moot.” As it was, Myers said, the quest for a new building had already taken years and had involved the NCUA at many stages along the way. The problem had been finding an appropriate site for the new building in a location which would both give the credit union room to grow and be convenient to its members. Myers related that Alternatives had actually made offers for sites which had fallen through for one reason or another, including once where a landlord, who was a member of the credit union, had held out for a price for his property that the credit union could not pay. The whole process had taken a toll on the credit union as well, Myers said, because each offer had to be brought before the board for debate and approval, a process which tended to both take time and energy as well as build hopes which were eventually dashed. Still, Alternatives felt justified in having taken so long because the site that it eventually obtained stood at the corner of the county’s main north-south and east-west traffic corridors and lifted the credit union’s profile in the community, resulting in a 40% increase in new members, Myers explained. But there is still the cost. Although Myers pointed out that the credit union had forecast losses in the short term because of the building’s additional expenses, he could understand how someone looking in from the outside might have been alarmed at the string of losses that, in its most recent NCUA filing, the credit union estimated on an annualized basis to be almost $1 million. “First of all we aren’t losing a million dollars this year,” Myers said, “and second, we had planned to use some of our earnings for this purpose. The board decided that there might be some things worth spending a little money on and this new building is one of those things.” Myers said the additional costs for the new building had come from additional utilities and from contributions the credit union had made to its other non-profit entities in lieu of local property taxes that Alternatives had felt constrained to make for reasons of local politics and to keep good will with the county. Critics have also questioned the amount of Alternatives’ income that comes from grants, suggesting that grant income is somehow less worthy or proper than other sorts of credit union income and suggesting as well that if grant income were subtracted from Alternatives’ bottom line the credit union would be in a hazardous position. But Myers pointed out that other sorts of credit union income could be subtracted from other credit unions’ bottom lines and this would leave them in precarious positions as well. “Suppose car loans dried up for a credit union, or mortgages,” Myers asked, “and you had to subtract those from their bottom lines, they would be hurt too.” Myers pointed out that while grants might lack the regular and predictable characteristics of car loans, they can still fund different aspects of a credit union’s mission, like financial education, that did not directly relate to a specific product or service. The credit union also has the ability to modify its activities to reflect its income situation, he explained. Recently the Small Business Administration had re-organized the way that it provided funds that Alternatives used to fund a micro-enterprise lending program in a way that effectively cut the credit union’s grant. While Alternatives fights the recalculation and looks to find other sources of funds for the program, Myers said the credit union was prepared to lay off staff associated with the grant program should the funding not be restored or otherwise found. “The fact is that there are no products or services or grants that are guaranteed,” Myers said. “They all take work, they all take marketing and they all take effort and there are no guarantees, but that doesn’t mean they aren’t worth doing.” -

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