By Sydney Johnson for KQED | SEPTEMBER 8, 2023

Photo: A Muni bus passes by City Hall in San Francisco on Aug. 8, 2023. (Beth LaBerge/KQED)

After years of pressure from financial equity advocates, San Francisco supervisors this week unanimously approved a plan for the city to begin the process of creating the nation’s first publicly owned municipal bank.

“We’re thrilled, this is a big milestone,” said Misha Steier, an organizer with the San Francisco Public Bank Coalition, which for years has been lobbying city leaders to launch a public bank. “We’re really optimistic that this is something that’s going to cut across the typical bipartisan divide in San Francisco of the progressives versus moderates. We’re seeing folks from all camps interested in this.”

Tuesday’s vote carves a path for San Francisco to form a new agency to oversee the creation of the bank, with the goal of building a public alternative to the private banking systems that now manage the millions of dollars the city receives from taxpayers. The bank could finance housing for lower-income residents, small businesses and other projects beneficial to the community that private lenders often shy away from. And under this model, unlike most conventional financial institutions, most of the profits generated from loans and money-handling would be reinvested in the bank, rather than going to private shareholders.

In 2019, California lawmakers passed Assembly Bill 857, which enabled local governments to charter public banks. In April 2022, San Francisco launched a working group to study the idea, made up of community leaders, bankers, financial experts and small-business owners.

With the approval from the Board of Supervisors, the work of building the bank from the ground up begins.

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Next, the city has to pass an ordinance that would create the publicly-owned financial corporation. After a few years of operations and investments, the corporation would then apply to be a FDIC-approved bank.

Currently, residents won’t be able to open up a checking account with the bank — although that could change in the future. Instead, the plan involves working with other local banking institutions, like credit unions, to begin investing in the coalition’s three main areas of focus: green infrastructure, affordable housing and small business.

“Perhaps you won’t be able to go to the public bank to get a mortgage, but your local credit union will have the capacity to make that mortgage cheaper now that they’re partnering with us to get that cheaper credit,” said Steier.

Advocates with the San Francisco Public Bank Coalition, who have been organizing since around 2017, want the public bank to refrain from investing in sectors like fossil fuels, prisons and weapons, and instead support land trusts and community-benefiting needs. Actual investments and programming however will be up to professional banking staff once the agency has opened.

The bank would be independently run by professional bankers and have public oversight. But an exact timeline for when the bank will roll out is not yet clear.

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