The City of Santa Fe’s nine-member Public Bank Task Force, appointed by Mayor Gonzales and the Santa Fe City Council, held a Public Forum this week and invited input from the general public.
Public Banking Institute Board Member Nichoe Lichen was among those presenting and gives this report:
On Nov 20th, the City of Santa Fe’s Public Bank Task Force hosted a 2 1/2 hour public meeting to share their findings at the mid-point of a very intense, six-month process, and to listen to the public’s vision for what a Public Bank could do for Santa Fe. The public was also asked to respond to the idea of an Altruistic Bank, where the public could deposit their private funds (the German Sparkasse model).
Chair, David Buchholtz opened by summarizing the Legal questions identified in the thorough legal memorandum prepared for the City, and reported that while some legal issues like the anti-donation clause may need further investigation, none appeared to be insurmountable.
The Capitalization sub-committee reported that they have identified public funds that might be invested to capitalize the bank, but noted that the funds’ oversight boards would require a formal investment prospectus before they could consider investing in a public bank. Since the 2015 feasibility study, the City now has quite a bit less cash on hand after paying off excessive bond debt.
The Regulatory sub-committee has met with NM Licensing and Regulations Division (responsible for issuing bank charters) who has expressed strong concerns about the anti-donation law, and stated that they would not issue a bank charter if any public official sat on a governing board of the public bank (a good thing – the firewall we want).
The Governance sub-committee has interviewed many experts in the field of open governance and drafted several potential models for consideration that would provide transparency and accountability to the public. The Bank of North Dakota model of governance is not a good fit for a municipal bank.
Members of the public stood to speak about the potential benefits to the community of a public bank. Former bankers and business people spoke knowledgeably, both for and against the financial feasibility of a municipal public bank.
The Brass Tacks Team submitted their new Six-Year Model suggesting that a public bank could be started by refinancing existing bond debt, funding shove-ready infrastructure and a smaller portion of partnership lending for things like affordable housing and economic development. Most banks anticipate operating at a loss during the first two or three years because it takes time to develop a profitable portfolio.
A Public Bank that starts by refinancing existing debt can start with a full portfolio and make a profit in year-one. Like the Bank of North Dakota, this model emphasizes KISSS values. Keep it simple-stick to what you know, start small, be successful, and don’t compete with the community banks.
Task force members asked helpful questions about the model, relating to operations and regulatory constraints. We hope to spend more time with task force members to learn where the model could be improved.
All who participated in this first public bank forum left having learned something about the strengths and challenges of establishing a Public Bank.
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