“Turning Concept into Reality” – City Issues Draft Plans to Create Public Bank
SAN FRANCISCO — As the city navigates a path toward post-pandemic economic recovery, a potentially game changing tool – the creation of a publicly-owned municipal bank – took a major step forward today, with the City’s Reinvestment Working Group (RWG) announcing detailed draft plans.
The plans focus on the tangible benefits that a public bank will provide, including financing for affordable housing, small businesses and green investments, as well as cost projections and timelines for implementation. The RWG’s announcement includes draft business and governance plans for creating a publicly owned municipal financial corporation (MFC) in the near future, and for converting the MFC into a full San Francisco Public Bank within 3-5 years.
“As we continue to chart a path to economic recovery, we must include reinvestment, and a public bank is one of the best ways to ensure that our city dollars are used to reverse inequities, not perpetuate them,” said Supervisor Dean Preston. “The draft plans are a huge step forward in turning the public bank concept into a reality.”
The need for a City-owned public bank, with a mission to promote an economy that upholds equity, social justice, and ecological sustainability, stems from the historic failure of traditional financial institutions to equitably serve the needs of low-income communities and communities of color.
Notably, the documents prepared for the RWG by HR&A Advisors, with support from Gary Steven Findley & Associates and Contigo Communications, model $20 million in capital and $50 million in funding for the MFC and $50 million in capital and $188 million in funding for the public bank by their third year of operation. The plans recommend a minimum upfront capitalization of $50 million for the public bank to satisfy regulators. Notably, the HR&A Team memo shows that a public bank would reach fiscal stability in its third year. The drafts also provide a detailed analysis of the staffing and oversight needed for success. Over the next three months, the RWG will solicit community feedback on these drafts and incorporate changes to refine these documents. The RWG aims to have the MFC plans complete by the end of March and the public bank plans by the end of May.
There has been significant interest across the country in creating locally owned public banks, as was done successfully at the state level in North Dakota over a century ago, a model that proved essential in that state during the pandemic. With the release of the RWG’s draft governance and business plans, San Francisco is now on a path toward making a public bank a reality at the municipal level.
“As the Reinvestment Working Group discovered in this process, the slow small business recovery from COVID and the enduring grips of the affordable housing crisis and the climate crisis have shown that San Franciscans and community development financial institutions would greatly benefit from low-cost loans provided by a public bank,” said Jackie Fielder of the San Francisco Public Bank Coalition.
These plans include the elements required to transform the municipal finance corporation into a state-chartered public bank, lending priorities, a governance and regulatory structure for the Public Bank, and the RWG will suggest modifications to the City laws and regulation as well as a recommendation on whether the City should partner with another local agency in the establishment and operation of a public bank. Under California Assembly Bill 857, cities and counties in California can create a publicly-owned bank.
The draft governance plan was submitted to the FDIC and California Department of Financial Protection and Innovation (CDFPI) for initial feedback. That feedback has been incorporated into the draft plans the RWG received.
For more information on these draft plans, visit https://sfgov.org/lafco/reinvestment-working-group
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