New Mexico One Step Closer to a Public Bank

In September 2014, a well-attended public banking conference in Santa Fe, New Mexico, which the Public Banking Institute helped to organize, ended with a call to action for the city to explore the feasibility of a public bank. Speakers at the conference included Mayor Javier Gonzales, Richard Wolff, Ellen Brown, Gwen Hallsmith, Thomas Keidel, Alan Webber, Mike Krauss, and Craig Barnes.

Now, the city is moving forward.

Today's city council meeting will include a decision on awarding a contract to Building Solutions, LLC to study the creation of a public bank.

According to the Santa Fe Reporter:

The proposal to award the contract to "investigate the business, financial and economic feasibility of a public bank initiative for the City of Santa Fe" cleared the five-member Finance Committee on Jan. 20 with votes from councilors Chris Rivera, Signe Lindell and Joseph Maestas.

During the campaign, Mayor Javier Gonzales based part of his economic platform on pushing for a publicly funded bank that would award low-interest loans as a way to diversify Santa Fe's economy, which is heavily reliant on tourism and government jobs.

Further details from the Santa Fe New Mexican:

...the firm would investigate the business, financial and economic feasibility of a public bank in the following five phases:

Phase 1: Create a consensus document with the finance and economic development departments, which can be used to evaluate the "free cash flow," unrestricted cash, and debt capacity and other resources that the city could dedicate to a public banking initiative.

Phase 2: Meet both formally and informally with potential collaborators with the city in the initiative, including the Santa Fe Community Foundation, Impact Network Santa Fe, one or more community banks and CDFIs, and others as identified by the city and/or the contractor. Prepare a presentation to the city, which outlines the initiatives, their history, successes, issues, and potential for contribution to the city's plans.

Phase 3: Develop one or more 'straw man' approaches to the investment of public funds to stimulate and fund investments which can increase the economic and financial security of the city of Santa Fe. Discuss the risk vs. reward tradeoffs encountered. Develop a set of issues to be addresses in Phase 4. If necessary reduce the scope of the 'straw man' in order to move forward with a more focused analysis.

Phase 4: Work with a broad array of technical experts and community members to minimize risks identified in Phase 3 and to address concerns in either the city or among community members. Develop a report that clearly identifies the risks and mitigants of the chosen strategy, as well as follow-up work which must be accomplished to implement the strategy. The contractor shall provide a written report on the strategy, including, if possible, interim steps that might pave the way for the longer term strategy implementation. However, implementing the recommended strategy isn't part of the contractor's scope of work.

Phase 5: Engage Arrowhead Center in the review of the economic impact anticipated from the chosen strategy. If more than one strategy is still under consideration, Arrowhead shall try to include its opinion on how the alternatives might affect the economic and/or fiscal impact of the city.

Cities that can establish public banks can be unique beneficiaries of the benefits of such banks. As I wrote in 2013:

Of all the public entities that have fallen victim to the big bank-induced economic downturn, cities have the most compelling stories of being burned. If “all politics is local,” this is even more true for economics, at least where people’s ordinary lives are concerned. City budgets contain the life blood of communities. School districts, contracts with utility companies, waste services, and street repairs all filter locally. City social services are often the first line of response for people in need. City councils also fund soup kitchens, domestic violence shelters, and animal shelters.

We eagerly await further news from Santa Fe.

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