Credit unions in North Carolina, South Carolina, California andNevada will see their league membership dues increase in 2016 – andCEOs in those states interviewed by CU Times said theysupport the change.

Next year, the Carolinas Credit Union League is moving to a square rootformula to calculate dues, which shifts a greater portion of thetotal dues to members with large assets and lowers dues for creditunions with small assets, according to John Radebaugh,president/CEO of the Carolinas Credit Union League.

About 25 of the league-affiliated credit unions in NorthCarolina and South Carolina with assets of $180 million and abovewill see their dues increase in proportion to the amount of duesthey manage. Some are expected to see an increase as low as 1%, butothers will see their membership dues increase by as much as 20% or30%, Radebaugh said.

However, a few of the seven league-affiliated, billion dollarcredit unions in North and South Carolina will see their duessubstantially increase by more than 30%. For example, the $1.1billion Sharonview Credit Union in Fort Mill, S.C., will see itsmembership dues skyrocket by 64%.

But that doesn't mean all of the billion dollar credit unions inthose states will see a dues increase of more than 60%, accordingto Radebaugh.

“For the larger credit unions, it depends on which state theyare from,” he said. “The North Carolina and South Carolina leagueshad two completely different ways to calculate dues. The SouthCarolina credit unions paid less in dues than the North Carolinacredit unions.”

For example, the $1.1 billion Allegacy Federal Credit Union inWinston Salem, N.C., which is roughly the same size as SharonviewCU, will see a 31% increase in dues while Sharonview CU will see alarger increase, he said. So, the increase varies even though theassets are equal or close. This new formula puts everyone on thesame level. For instance, Allegacy FCU and Sharonview CU will bepaying close to the same dues, Radebaugh said.

The Carolinas league board also recently agreed to cap themembership dues at $125,000, which would only affect the $30.8billion State Employees Credit Union in Raleigh, N.C. if it were tore-affiliate with the league.

For about 140 Carolina cooperatives with less than $180 millionin assets, their dues will decline by 2% or 3%, and up to 50% forcredit unions with assets of $1 million or $2 million, according toRadebaugh.

Out west in California and Nevada, credit unions will see theirmembership dues increase by an average of 3.97% in 2016, followinga five-year freeze on dues, cost cutting of league operations anddeclining revenues from partnership sources, according to DianaDykstra, president/CEO of the California and Nevada Credit Union Leagues. In addition, theleagues set a 5% cap on membership dues for next year.

So why are credit union CEOs OK with the membership duesincrease?

Even though the Carolinas league's new square root formula willsubstantially increase membership dues for Sharonview CU, President/CEO Bill Partin said it's well worth it.

“We are seeing an increase of about $15,000, from $25,000 to$41,000,” Partin said. “After my Hike the Hill visit in July ofthis year and working more closely with the league on politicaladvocacy, I am OK with the increase based on the value we arereceiving from the league and CUNA in the political arena. ProjectZip Code, the Member Activation Program and the day to day work inthe trenches by the league in trying to persuade Congress to voteon bills that will positively impact credit unions makes mecomfortable making that statement.”

In addition to paying dues for advocacy and other leagueservices, Radebaugh believes the larger credit unions are willingto pay more because it helps reduce costs for small credit unionsthat are facing greater challenges and, in some cases, some of thelarger credit unions feel the membership dues are an immaterialamount of money.

“They also understand that the overall amount of dues we arecollecting hasn't changed,” Radebaugh said. “It's just that thedistribution of dues has changed.”

He expects the total amount of membership dues the Carolinas league will collect in 2016 will equal $1.6 millionor less, the same amount that was collected by the North Carolinaand South Carolina leagues before the organizations merged in2013.

“We want to make sure that we have enough funding to do the jobwe need to do for our credit unions, and this square root formuladoes help mitigate the mergers we are seeing, especially among thesmaller credit unions,” he said.

In California, Keith Sultemeier, president/CEO of the $3.6billion Kinecta Federal Credit union in Manhattan Beach, supports themembership dues increase and pointed out that the California andNevada leagues struck a good balance of helping to facilitate thebusiness needs of smaller institutions while also representing theadvocacy needs of the larger cooperatives.

“Most of the larger credit unions are primarily interested inadvocacy from the league, and I think they do a pretty good job onthat,” he said. “We're never thrilled to hear of an increase inoperating expenses, but there's still value there. Are we willingto pay a little more to keep that value? Yeah, we are.”

Kinecta FCU paid $102,054 in membership dues this year. In 2016,its dues are estimated to increase by approximately $4,000.

Wally Murray, president/CEO of the $553 million Greater Nevada Credit Union in Carson City, said Dykstra andher predecessor Bill Cheney did a “tremendous job” of reducing duesburdens during the Great Recession and holding the line on them forseveral years.

“With respect to the impending increase in league dues, weconsider it reasonable and are supportive of it,” Murray said. “Weunderstand that the recent impact to the leagues' revenue model bya key industry partner have made it necessary to seek themembership dues increase, but remain more than satisfied with theoverall return we receive from that investment.”

He credited the league for key advocacy efforts that helped passlegislation that enhanced the lien priority status for Nevadacredit unions that lend on properties that are part of ahomeowner's association.

Ed Turk, president/CEO of the $197 million Heritage CommunityCredit Union in Sacramento, is of the same mindset as Murray andsupports the dues increase.

He said he believes the cooperative movement has the collectiveduty to support the league system because organized voices ofcredit unions are stronger than any singular credit unionvoice.

“The cost to credit unions of bad legislation or regulationwould easily cost more than the amount of dues we pay,” Turk said.“We must have the best lobbying efforts possible. We can't do itunless all credit unions do their part.”

Although Turk also said political advocacy is the most importantbenefit for his credit union, he is concerned that all the creditunion trade state and national associations will become distractedby complex business ventures and non-member dues revenue.

“I fear this may come at the expense of political and regulatoryadvocacy which we desperately need as a movement,” he said. “Ibelieve consolidation of the national credit union trades as wellas state and regional trades needs to accelerate to ensure a strongtrade association presence is guaranteed for the long term.”

In a letter to credit unions, Dykstra explained that a duesincrease was necessary because the trade organization continues toendure earnings pressure from some of its key business partners(i.e. CUNA Mutual) and credit union mergers.

“In just the past two years alone, we have experienced adecrease in annual revenue of nearly $1 million, and we areexpecting an additional significant decrease in revenue in 2016,”Dykstra wrote in an Aug. 10 letter to credit union members.

Additionally, Dysktra noted since the fourth quarter of 2014,the leagues have cut operating expenses by $948,000. About $661,000was realized by “reducing headcount,” Dykstra wrote. The tradegroup also saw a savings of $116,000 from its back office collaboration initiative with other leagues, otherwiseknown as Plexcity. The organization's lease costs also werereduced by $171,000.

She also pointed out that over the last 10 years, the leagueshave reduced operating expenses by 7%, which, when adjusted forinflation, equates to $4 million or a 29% reduction.

Dykstra's letter explained that for 2016, the dues calculationwill be changed by lowering the square root of assets factor from1.80 to 1.70. The 2016 dues formula also places a 5% cap on dues,which means membership dues for California and Nevada credit unionswill not increase by more than 5% from the dues they paid in2015.

The dues increase will generate a total of $240,000 inadditional revenue.

“We are extremely cognizant and respect the fact that the moneywe generate in dues isn't our money, but your members' money andevery day we strive to provide the value that in the end allowsyou, our members the opportunity to grow and better serve yourmembers,” Dykstra wrote.