Your cooperative is "current" with regard to paying back deferred patronage refunds to estates and stock to inactive members. As a result, your cooperative could legally pay cash patronage refunds to current members in excess of 20 percent if the board chose to do so. However, for the past several years, the board has opted to stick to a 20 percent cash patronage refund policy in order to free up more funds short term for other purposes, especially the purchase of new equipment that will enable the cooperative to provide more timely, cost effective, and technologically advanced services for the cooperative's members. Included in these purchases have been some new floaters and anhydrous ammonia tanks.

The board seems to be receiving more requests from members to increase the cash patronage refund to 35-40 percent of the total refund. These requests are most frequently coming from some of the younger members who seem to be a little more financially strapped for cash, primarily due to these members having higher debt loads. Some of the older members also point out that they would like to see higher cash patronage refunds in order to help them pay for the income taxes associated with these refunds. Many of these members are threatening to quit the cooperative and take their business elsewhere if something isn't done soon on increasing the level of cash patronage refunds. The board also realizes that if it increases the cash patronage level to 30 percent, it may have to postpone purchasing some much needed "global positioning system" equipment. The board believes that the cooperative will need this equipment to remain competitive with some of the competing businesses in the area.

Your board is to recommend one of the alternative courses of action listed below. In addition, your board may recommend a different course of action.

1. Keep the cash patronage refund at 20 percent.

2. Raise the cash patronage refund to 35 percent.

3. Borrow more money from the Bank for Cooperatives which will enable your cooperative this year to pay 30 percent cash patronage refunds and purchase some of the desired "global positioning system" equipment. This may help the cooperative in the short run but not in the long run.