PUBLIC BANK LA: INVESTING IN LA'S FUTURE
The Los Angeles Public Bank is a city-owned and operated financial institution with a public mandate to prioritize the needs of the community. This bank provides a sustainable, community-controlled financial solution that empowers residents and directs funding toward local priorities. By leveraging its deposit base and lending power, the LA Public Bank can offer affordable housing, small business loans, and funding for modernizing public infrastructure, among other critical community needs. The LA Public Bank plays a key role in promoting economic development, community investment, and financial stability for the city and its residents. Los Angeles taxpayers currently pay a hefty sum to Wall Street banks.
Each year, over $340 million in fees and $1.3 billion in interest are paid to private banks, while over $2 billion of city funds are invested in petrochemical and multinational banks, prioritizing profit over the public’s needs. A public bank empowers our City to redirect these funds away from megabanks and the harmful activities they finance, such as fossil fuels, and towards projects that align with community priorities, like regional development and environmental sustainability. A public bank enables the city to take control of its finances and make decisions that genuinely benefit our communities.
The Los Angeles Public Bank will focus on social and environmental responsibility, serving the needs of marginalized and underserved communities. Keeping public funds within the community and returning profits and interest to the city supports LA’s long-term economic health. As a publicly governed bank, it supports democratic oversight and transparency in handling public funds, ensuring accountability to LA communities and responsiveness to the people, rather than private shareholders. This approach results in more customized service at a lower cost, while keeping our money local and our values front and center.
Our Money. Our Values. Our Bank.
ADVANTAGES OF THE LOS ANGELES PUBLIC BANK
- Cost Savings — A public bank enables the City of Los Angeles to borrow from its own municipal bank, significantly lowering borrowing costs and generating more revenue for community-focused priorities. By eliminating the necessity for costly bonds, the City will have increased funds to invest in essential public services such as education, healthcare, and infrastructure improvements.
- Access to Credit for Small Businesses — California public banks will partner with community banks, credit unions, and Community Development Financial Institutions (CDFIs), enhancing their cash flow so they can provide low-cost loans and affordable credit to underserved communities or businesses that might not meet the qualifications for loans from conventional banks.
- Streamline Funding for Affordable Housing — A public bank simplifies the intricate affordable housing financing system by consolidating funding sources. This centralization supplies affordable housing developers with the essential capital to swiftly and efficiently acquire, preserve existing housing, and build new affordable housing alternatives.
- Strengthens Local Economy — The LA public bank will keep money in the local economy instead of directing it to distant shareholders. It will prioritize lending to LA businesses and vital infrastructure projects, promoting sustainable growth and development in the community. Loan repayments benefit the community and generate interest revenue for the bank.
- Transparency and Accountability — Public banks, owned by local governments and under democratic oversight, provide transparency and community accountability. Their democratic control allows them to prioritize local businesses, individuals, and government agencies’ needs over profit motives, ensuring community interests are at the forefront of their operations.
THE PUBLIC BANK OF LOS ANGELES WILL:
- Strengthen Our Community — The Los Angeles Public Bankwill leverage funds up to 10 times to maximize its impact. With a capitalization of $150 million, it will have the capacity to provide $25,000 in loans to 10,000 small businesses and funding for the development of 50,000 units of affordable housing, using a ratio of a $1 million predevelopment loan per 50 units. By investing in local businesses and housing, the public bank will help to build local wealth and support economic stability in the community, while providing flexible, low-interest loans to affordable housing developers to quickly acquire and preserve existing affordable housing.
- Invest in a Sustainable Future — The Los Angeles Public Bank will ensure that the city’s financial resources align with its values and priorities, through targeted, long-term investments in sustainable infrastructure such as green transportation networks. This will also enable large-scale goals like the development of 50,000 affordable housing units by providing efficient and streamlined financing options. Additionally, the bank will help to multiply local wealth across generations through public pension funds that are invested in the local community.
- Bake-in Democracy and Equity — The Los Angeles PublicBank will be a democratically controlled institution, with a governance structure that prioritizes the needs of low-income communities and communities of color in its operations and long-term strategy. Through transparent, public platforms for guiding the use of city funds, the LA public bank will provide a powerful tool for civic engagement and participatory budgeting, allowing community members to have a direct say in how public money is used, and promoting accountability and transparency in decision making.
BUSINESS AS USUAL IS NOT WORKING:
- The City of Los Angeles spends more than $2 billion of city funds to invest in petrochemical companies and multi-national banks. Our City is supporting private profits at a public cost.
- Municipal bonds are historically considered safer investments compared to even triple-A-rated commercial debt, as rated by agencies such as Moody’s. By issuing and purchasing its own debt, the City of Los Angeles can save up to 50% on debt-related expenses, compared to exporting taxpayer money to large corporations. By investing locally, the City can ensure that public funds are directed toward the benefit of its residents and fulfill its fiduciary duty to invest in the best interest of the community.
- Affordable housing developments in the City of Los Angeles often require multiple sources of capital to purchase and construct a site, typically from various local public agencies. This complex financing process can make affordable housing more expensive and regularly cause delays in the project.
- Small and micro-businesses, particularly those owned by people of color, face barriers in accessing loans and financial services, compared to larger businesses. These businesses are often neglected by traditional banks due to a lack of incentives from federal and state regulations to serve the needs of low-income and marginalized communities.
- The City of Los Angeles currently lacks a direct banking relationship with the federal government, making it fully dependent on commercial banks to finance its operations. This can lead to higher costs and less predictability, particularly in times of crisis. A public bank, such as the LosAngeles Public Bank, would provide a reliable and cost-effective alternative, by creating a public financial infrastructure that the City can rely on.
NEXT STEPS FOR THE LA PUBLIC BANK:
The California Public Banking Act, signed into law by Governor Gavin Newsom in 2019, enables cities and regions to establish public banks. The process involves conducting a viability study and creating a business plan for the proposed bank, which must be approved by the state’s regulatory agency before a public bank charter can be granted.
The Los Angeles City Council is expected to award the winning bid for its public bank Request for Proposal (RFP) in 2023. The RFP, which was released in June 2022, sought consultants to conduct a study and develop a business plan for a proposed public bank in Los Angeles. This action followed a unanimous council vote in October 2021, which authorized the study and planning for a public bank. As per the legislation, the consultants selected by the city will be required to actively engage with community members to establish the priorities and principles for the proposed financial institution. The resulting business plan will be utilized as the city’s application for a bank charter from the state, which is a crucial step in the formation of the Los Angeles Public Bank.