Los Angeles Advances on the First Municipal Public Bank in the United States
By David Jette
The Los Angeles municipal bank would be the largest publicly held municipal bank in the nation. It will create a socially responsible and publicly accountable source of capital for investment in public goods, small businesses, and green infrastructure.
LOS ANGELES, California — The Los Angeles City Office of the Chief Legislative Analyst (CLA) released a Request for Proposal (RFP) seeking consultants to author a viability study and business plan for a proposed Los Angeles public bank. This RFP issuance represents the culmination of a historic effort to realign the city’s financial infrastructure with its values and the pressing needs of its nearly four million residents. Once complete, this plan will outline next steps for Los Angeles to establish a public bank via a state-issued charter.
The City is seeking proposals from organizations with knowledge of municipal finance and modeling social finance entities and experience engaging directly with stakeholders to set the priorities and principles of their financial institution. The RFP directs applicants to propose how they would evaluate the existing banking market in Los Angeles, including the current federal compliance of local banks and performance in banking City funds. Applicants will assess a public banking model along financial, risk, operational, and business lines, estimating startup and staffing costs, governance structures, capitalization, strategy and financial projections. In a second phase, applicants will develop a statement of purpose for the bank and complete an application to the Department of Financial Protection and Innovation (DFPI), the state’s banking regulator and chartering agency.
Los Angeles City Council voted on October 5, 2021 to direct the CLA to issue the RFP after the council’s Economic Development and Jobs Committee chaired by Los Angeles City Councilmember Curren Price, ratified the amended motion originally proposed by Councilmember Herb Wesson. The motion expanded the Request for Proposals to include requirements described in Assembly Bill 857, the California Public Banking Act, a 2019 state law permitting the chartering of public banks by cities and counties to support community economic development and address infrastructure and housing needs for localities.
The motion also requests the City Attorney work with the chosen consultant to devise the formal governance plan and constitutional orientation of the bank to existing city offices, and to ensure no conflicts of interest or perverse incentives are built into the bank’s organizational structure. The plan formed by the consultant will constitute the city’s application to the state for a bank charter, thereby eventually authorizing the formation of the Los Angeles public bank.
Public banking allows for low-cost lending at a local level to support the resurgence of restaurants and small businesses, particularly those owned by historically disadvantaged and underrepresented people of color. A public bank will lay the foundation for a more equitable local economy. It will finance projects in local public infrastructure, renewable energy, affordable housing, a local Green New Deal, and more — carried out by well-paying and union jobs. A public bank will provide access to capital and credit through partnership with credit unions, banks, and Community Development Financial Institutions (CDFIs). The Los Angeles public bank will provide an indispensable tool towards building intergenerational progressive social change and wealth transfer.
After the historic Measure B campaign that saw over 430,000 Angelenos voting yes on a Los Angeles public bank, California Public Banking Alliance sponsored and spearheaded the landmark Assembly Bill 857, empowering California cities, counties and regions to form their own public bank. Such banks will be wholly accountable to local communities and state regulations, not Wall Street profit mandates. AB 857 was made law and cleared the way for Los Angeles to start a bank without a ballot measure. Public Bank LA’s work focuses on the City of Los Angeles and the broader LA area.
Los Angeles City Councilmember Herb Wesson,
“I remember when I first introduced this motion. I had the people of Los Angeles top of mind. Equity matters in this city. And this motion is a perfect example of how to best connect underserved communities to the financial tools and opportunities they need to flourish. The LA public bank will not only help support our local business, but support economic community development. When our community thrives, we all thrive.”
Los Angeles City Councilmember Curren Price,
“With the release of this RFP, we’re reaching yet another milestone and getting one step closer to a future public bank in Los Angeles. We need a banking institution that will serve and put the needs of the residents of LA and small businesses first while helping to address some of the most pressing issues facing the City like housing affordability and climate change. I am excited for our vision to become a reality.”
Assemblymember Miguel Santiago (D-Los Angeles), author of the California Public Banking Act,
“A Los Angeles public bank means we can invest in public schools, public housing, and green technologies in our communities. That’s why I’m excited about the news around the RFP, especially as the author of AB 857 (allowing cities in CA to create public banks) and AB 1177 (bringing California closer to a statewide public banking option).”
Trinity Tran, lead organizer Public Bank LA and California Public Banking Alliance,
“The current financial system doesn’t have an incentive to better our communities, and a public bank can do better. Wall Street banks are motivated by profit — pursuing deals where the most money can be made, engaging in predatory lending and providing money for fossil fuels. There’s a real social objective to creating an institution that doesn’t exploit people— where profits return back to the public ensuring that everyone sees benefits from economic growth.”
Prince Osemwengie, Policy Associate, Inclusive Action for the City,
“It’s crucial the City of Los Angeles utilize its public bank to prioritize the needs of small businesses equitably. Traditional financial institutions prioritization of big businesses and risk aversion to local small businesses has created significant challenges for small business owners to access capital, i.e. business loans and credit. Without access to capital small businesses are left vulnerable to predatory loans, and are unable to grow, expand operations, and hire/train employees, which could ultimately lead to business closure. The Los Angeles Public Bank has the opportunity to strengthen local small businesses and right some of the historical wrongs of lending in low-income areas and create inclusive systems for capital deployment.”
Jyotswaroop Bawa, Chief of Organizing and Campaigns, California Reinvestment Coalition,
“Traditional banks have failed to provide fair access to capital to meet the needs of BIPOC communities for decades. A public bank infrastructure is the kind of innovation Los Angeles needs to meet the requirements of a city grappling with an unprecedented affordable housing shortage, for example. With a public bank, the city can effectively employ taxpayer dollars in service of urgent and essential needs of its beloved communities.”
Public Bank Los Angeles (PBLA) is a grassroots initiative to create a socially and environmentally responsible municipal bank for the City of Los Angeles.