San Francisco’s budget may not be what it used to be, with major budget cuts due to COVID-19 and the ensuing economic fallout. But the city government remains a multi-billion dollar organization, larger than many U.S. states. As it awaits allocation and spending, much of that money is held by Wall Street banks. Those banks, in turn, invest and earn interest on the people of San Francisco’s tax dollars, sometimes turning a profit in ways the people wouldn’t be too happy about.
A new proposal by Supervisor Dean Preston, and co-sponsored by at least five other supervisors, would chart a new path for the city’s finances. On Tuesday, Preston, fellow supervisors, and community activists announced legislation that would begin the process of creating a public bank for San Francisco, which would be the first municipally owned bank in the nation. Its goal would be to leverage city funds to invest in affordable housing and green infrastructure, while providing financial services to people and businesses that have historically lacked access to banks.
“During a global pandemic when San Franciscans are facing massive unemployment, rent debt, and financial insecurity, billionaire wealth has surged,” said Supervisor Dean Preston in a statement. “As we chart a path to economic recovery, we must ensure that our city dollars are used to correct the inequities in our city. I am excited to take this next major step alongside the San Francisco Public Bank Coalition to establish the nation’s first municipal public bank.”
Even after this legislation is passed, there will be a long road ahead, and many details to be worked out. The legislation creates a working group, consisting of financial experts, community leaders, and city government representatives, who will present a business and governance plan for the bank to the Board of Supervisors within a year. It will likely take about three years for the bank to receive the proper governmental approvals, and five years to be operational.
This law represents a major victory for the San Francisco Public Bank Coalition, which emerged in 2017 as part of the push to get the city to divest from the Dakota Access Pipeline. That effort, led by former state Senate candidate Jackie Fielder, took a major step forward in 2019, with the passage of AB 857. The state law from San Francisco’s assemblymember David Chiu paved the way for the creation of public, municipal banks across California.
In other cities, public banking efforts have highlighted the opportunities for the cannabis industry, which has often been barred from traditional banks due to federal regulations. In San Francisco, the bank’s emphasis is on investing “public funds in a manner that aligns with the values and interests of the City,” the legislation reads. That includes financial services for underserved communities as well as investments in affordable housing, climate adaptation, and small businesses.
The plan calls for the bank to be capitalized with an initial $300 million, which could come from the General Fund, budget surpluses, or the Treasurer’s investment pool. From its first year in operation, the bank must be profitable. The bank could also support other community financial institutions like credit unions.