LOS ANGELES—The Los Angeles City Council took a step toward creating a public bank Oct. 5 by unanimously voting to authorize the Chief Legislative Analyst (CLA) to seek contractors or consultants to develop a business plan for the bank.
“The opportunity to form a public bank in the City of L.A. is extremely important as the city begins to recover from the COVID-19 pandemic. This matter before us now just sets the ball in motion, retaining a consultant to advise us on the pros and cons and the particulars of creating such an institution,” Councilman Curren Price, who chairs the Economic Development and Jobs Committee, said before the vote Tuesday.
Public banks are intended to focus local investment by offering business loans and could be used to finance public supportive housing among other projects, according to proponents of the system.
The council members proposed the motion soon after Gov. Gavin Newsom signed AB 857, which allows statewide establishment of public banks.
The California Bankers Association opposed AB 857’s signing, saying public banks are risky and that they could undermine the financing of future municipal projects. Earlier this year, the association also opposed AB 1177, or the California Public Banking Option Act, which the Los Angeles City Council voted to support.
The California Public Banking Option Act, which was signed into law by Newsom on Monday, will explore creating a “BankCal” program to be the first statewide program in the United States to offer residents access to a no-fee, no-penalty bank account, including a debit card, automatic bill pay, direct deposit capacity and infrastructure for the account holder to build credit.
The vote comes nearly two years after former City Council President Herb Wesson introduced a motion aimed at establishing the city’s first public banking institution. That motion—introduced on Oct. 11, 2019—was seconded by Councilmen Mike Bonin and Paul Koretz and passed 14-0 on Dec. 4, 2019.
“A public bank is a huge and essential step to building back better from the COVID crisis and from the recession,” Bonin said in a statement.
“With a public bank, we can invest in our neighborhoods, promote affordable housing, help struggling small businesses, support a just transition to a green economy, and advance equity. This is an exciting opportunity to create a system that champions people and not special interests, and I appreciate the opportunity to discuss it with my friends, colleagues and neighbors.”
The motion advanced out of the Economic Development and Jobs Committee on May 11, with unanimous recommendations from the committee members.
According to a report by the CLA, the city should seek voters’ approval before forming the bank, though it is not required by state law.
In 2018, before AB 857 was signed into law, L.A. voters denied the city the authority to create a public bank in a ballot measure, with 44 percent voting in favor of establishing a public bank and 56 percent opposing.
The motion approved Tuesday authorized the CLA to draft and release a request for proposals in 60 days to seek services needed to create a public bank serving Los Angeles. The selected consultant or subcontractor would have to have a history of working for and studying public banks or other mission-based financial institutions, as well as have experience facilitating community stakeholder consultations.
The public bank’s business operations would include:
—credit access for small businesses, particularly those owned by or employing residents in neighborhoods deemed socioeconomically disadvantaged;
—affordable and social housing finance;
—climate change mitigation and green energy investment, governance and accountability; and
—transformative credit programs for preserving and developing economic growth and worker and tenant ownership.
The CLA will also report back to the City Council on the timeline for establishing the public bank and necessary funding for studies into the project.
