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The Bisman Community Food Co-op is located in the former Snoopers Tons of Fun building at 711 East Sweet Avenue in south Bismarck. Tom Stromme / Bismarck Tribune

Financial issues at food co-op leaves Bismarck area farmers unpaid

BISMARCK — The Bisman Community Food Co-op was opened with the premise of giving shoppers a place to buy healthy, locally grown foods — but a plague of financial issues has left regional growers unpaid.

As of Oct. 16, the co-op was more than 90 days delinquent on more than $70,000 worth of bills. In total, the co-op, 711 E. Sweet Ave., owes vendors more than $236,500, with $42,550 of that owed to local producers, according to a financial report made at the cooperative's Oct. 16 board meeting.

"It's financially devastating," said local grower Brian McGinness of the farmers' situation.

The McGinnesses, who operate Riverbound Farm south of Mandan, have been members of the co-op since its inception. They helped in grant applications and it's their barnwood that decorates the walls.

"So we care about it," McGinness said.

"I wish we could pay it all right now," said Glen Philbrick, the co-op's board president, adding that the funding isn't there.

The co-op had $343 in its checking account Oct. 16 after paying as many bills as possible. Also a local producer, Philbrick has the longest-standing debt owed him, $2,730 that is almost a year overdue.

"It is that tight. There's no wiggle room at all," said Carmen Hoffner, who took over as general manager on Oct. 8.

Sales are going well, according to Hoffner, who said the co-op saw $291,000 above projected sales from July 2016 to June 2017. Hoffner attributes the co-op's difficult financial position to overstocking and other mismanagement practices.

Hoffner is cutting costs, making calls and setting up payment plans, with a number of local vendors already receiving payments.

Big bills to the store's main supplier, KeHE Distributors, which accounts for 90 percent of the goods sold and includes items that can't be sourced locally, were paid first in order to keep deliveries coming. Money owed to local vendors ranges from less than $100 to a few thousand dollars each.

Financial tribulations

As the co-op was preparing to open in May 2016, the board thought the venture was in good shape financially, according to Philbrick.

By August, vendors were raising concerns about emails and phone calls not being returned. In November, a stack of invoices was found that had not been recorded. That was when the board realized cash flow was going to be tight from overspending, Philbrick said.

And things would only get worse.

The board would run through three sets of general managers it felt were not doing the job. From the board's point of view, there were issues with high labor costs and overpurchasing that resulted in products spoiling.

From March to May under interim management, the co-op was operating $208,000 over budget, Hoffner said.

After his resignation, Reese Martin, the co-op's third interim co-general manager, conceded there had been over ordering but he had been working to correct the practice.

As for unpaid vendors, Martin and former interim co-general manager Troy Ricciardi contended the vendor bills had been caught up in May.

"Up until I transitioned into the prepared foods department, we were basically current on everything 90 days or newer and had automatic payments for our major vendors, including any balance owed," said Ricciardi, who expressed frustrations with board members who also were vendors and overreaching in their interactions with staff.

A report to the board in May reads there was $106,000 in bills older than 60 days and $71,843 payable.

The co-op's first general manager, Randy Joersz, declined to comment for the story. Facebook messages sent by the Tribune to the other two managers, Desiree Uttke and Darby Smith, went unanswered. A phone message was also left with family of Uttke. Phone numbers listed for Smith were disconnected.

A consultant was brought in to get the books back in order before Hoffner was officially handed the reins this month.

Hoffner says she is making progress and has been able to mend fences with a number of local vendors.

"These are real people who have families to feed," she said.

Hoffner said, despite the hardships, many have said they will stay with the co-op due to the demand in the community and the outlet for sales it provides.

But some will not.

The McGinnesses are now receiving payments on what is owed them but have decided they aren't going to sell at the co-op next year and thought that put them in a better position to say something.

"We really care about the viability of small local agriculture. From that perspective, we just wanted to offer some tough love," McGinness said.

Despite a contract with the co-op this past year, the McGinnesses ended up only selling a third of the food agreed upon. They were not paid for the food they did sell to the store for many months.

Along with the stress of dealing with this year's drought, "that's very difficult," said McGinness, adding there was no communication and not knowing when payment would be forthcoming made the situation more uncomfortable.

McGinness said he understands the need to pay the main supplier to keep the store operating, calling the decision to do so "legit." However, he can't help but feel the co-op has strayed from its core values and more transparency is needed.

In response, the board now has a book with all minutes and financials available for member viewing in the store.

"I wish the whole thing hadn't happened," Philbrick said. "We have an opportunity now to get on good footing."