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Profile: Digital Credit Union
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The egregious $5.2 million Digital Credit Union naming-rights deal on the former Worcester Centrum sports and entertainment complex in Worcester, Mass., cost individual taxpayers $2 million when you consider that 40 percent of the cost was savings accumulated from not paying taxes. Put another way, the $5.2 million cost was totally covered by its $26.7 million in non-taxable profits in 2005. |
Digital Federal Credit Union has
assets totaling $3.1 billion as of December 31, 2005. It conducts business in four almost
completely non-contiguous states – Colorado, Georgia, Massachusetts and
New Hampshire. It was established in 1979 for the employees of Digital
Equipment Corp. Although Digital went out of business in 1998, Digital the
credit union lives on.
Digital Credit Union’s net income or profit for 2005 was $26.7 million. It
now holds accumulated profits, otherwise known as retained earnings,
totaling $202 million. According to its Web site, Marlborough,
Mass.-based DCU is the largest credit union headquartered in New England
as measured by assets and among the top 23 nationwide. (Source: NCUA)
Digital may be the “poster child” example of the large credit union that
policy makers should consider taxing. According to Callahan &
Associates, a credit union consulting group, DCU has been the fastest
growing credit union in America from 1996 to 2001. DCU has been chosen
as the credit union for more than 500 companies and organizations and
serves almost 270,000 members in all 50 states. Where is the “common
bond” that is supposed to characterize credit union members?
According to Digital's Website, there are several ways to qualify for
membership in DCU:
1) Eligibility by family relationship to a current DCU member;
2) Eligibility by company you work for or retired from;
3) Eligibility by organization you belong to;
4) Eligibility by community.
Digital Credit Union has experienced phenomenal growth. In the period
from 12/94- 12/05, the number of employees has almost quadrupled. Employees increased from 180 in December of 1994 to
649 in December of 2005. At the same time, membership has quadrupled from
67,029 to 269,709 in that same time period.
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During the same time period of 12/94
– 12/05, assets of DCU increased eightfold from $344 million to $3.1
billion. Total deposits had a comparable increase from $311
million to $2.8 billion. (Source: NCUA)
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(Source: NCUA) |
In addition to its growth in
deposits and assets, DCU has considerably increased its amount of member
business loans outstanding from $8 million in 1994 to $181 million in
2005, an increase of almost 2200 percent!
Still not convinced Digital should be taxed? Read on:
- DCU is in the midst of an expansive campaign to open new branches, seemingly without regard to geographic restrictions.
- Recently, DCU advertised on exceptionally expensive Red Sox television broadcasts and invested in other forms of aggressive, far-reaching and costly advertising.
- The real stunner: recently DCU announced that is investing $5.2 million for the naming rights to the Worcester Centrum sports and entertainment arena. (If you take into consideration the notion that if the standard 40 percent combined state and federal tax rate were applied to Digital, that’s more than $2 million dollars of the cost of those naming rights coming out of tax-paying consumers’ pockets.)
This is a not-for-profit institution deserving of a tax exemption?
Digital avoided paying $10.1 million in income taxes last year alone. To
say the least, small community banks that operate much like credit
unions but pay taxes, have a difficult time competing against the likes
of Digital Credit Union, and individual taxpayers are subsidizing its
competitive advantage.
Digital Federal Credit Union is the poster child for what's wrong with
large credit unions in America. In addition to not paying state and
federal taxes, it no longer adheres to a traditional "common bond" provision to
serve only a homogenous group of members or people of modest means.
