San Francisco voters will be asked in November if the city should be allowed to set up a public bank and become the first in the nation to do so.
Proposition B would amend the city charter to authorize the establishment of a Municipal Finance Corporation and Public Bank, which supporters say would allow the city to tap into low interest loans to fund certain city projects like affordable housing and small business development.
The measure would not create the public bank but rather provide the governance framework and go-ahead needed for city legislators to set up a Municipal Finance Corporation, or MFC, which acts as a government-owned nonprofit entity.
MFCs can make loans but do not take deposits. After three to five years of profitable operation, an MFC can transition into a fully regulated public bank that makes loans and also takes deposits.
With a public bank, the city would be able to store its own tax dollars and reserves in-house. Everyday citizens would not be able to set up their own checking accounts through the bank.
If the city moves forward with establishing an MFC and subsequently a public bank, finance professionals would help manage operations. A banking board made of members chosen by San Francisco’s treasurer, controller, city attorney, mayor, and Board of Supervisors would make hires for the bank’s operations.
Oversight commissions would also be established to provide direction and act as a liaison between the Board of Supervisors and the MFC or public bank.
Idea has support from several supervisors
The measure was introduced by Supervisor Chyanne Chen, but Supervisor Jackie Fielder has been pushing for the idea of a public bank for many years. Fielder co-founded the San Francisco Public Bank Coalition in 2017, a group that has been organizing and advocating for a public bank.
The Office of the Controller assessed that if the measure passes and the city further moves to establish an MFC and subsequently a public bank, “costs would be significant,” the office wrote in a letter to the Department of Elections.
Costs were evaluated by the Reinvestment Working Group, which was established by the Board in 2021 to develop a governance plan and evaluate the viability of setting up an MFC and a public bank.
Supporters say that a public bank will allow the city to have local control of public money instead of funding coming out of commercial banks.
The group prepared a report in 2023, which found that the establishment of an MFC and public bank could cost the city at least $300 million over the first eight years in the process. Costs to capitalize and fund an MFC could cost roughly $26 million in the first year and increase to $30 million annually, totaling around $90 million by the third year of the MFC’s operation.
In an official proponent argument submitted to the Department of Elections, a list of supporters wrote that the measure “will ensure that a San Francisco Public Bank is fiscally responsible, independent from political influence, and serves San Francisco’s priorities.”
Supporters say that a public bank will allow the city to have local control of public money instead of funding coming out of commercial banks. It would also allow the city to unlock low-cost loans for affordable housing developments, small businesses and green infrastructure projects.
Additional supporters of the measure include supervisors Shamann Walton, Myrna Melgar, Bilal Mahmood, Matt Dorsey and Board President Rafael Mandelman.
The argument also notes that the proposition would not raise taxes to help fund the MTC’s creation, a claim put forward by the official “NO on Proposition B” campaign.
The MFC would only be established if there is sufficient funding available. Those costs would likely come from city grants and forgivable loans which “are unlikely to be repaid,” reads the Controller’s letter.
Opponents cite associated costs
A few residents submitted an argument opposing Prop. B, raising concerns over the expense to set up and run an MFC and public bank and the measure not having a dedicated funding mechanism to support the financial institution.
“We cannot afford another ambitious, underfunded experiment,” the argument reads. “It creates a new politically appointed entity with the power to take significant financial risks using public resources. The City’s own working group previously estimated hundreds of millions of dollars would be needed to capitalize such an institution. Proposition B provides none of that capital.”
Other opponents are Mayor Daniel Lurie and supervisors Stephen Sherrill and Alan Wong. Local groups against Prop. B include the San Francisco Chamber of Commerce, the Bay Area Council business association, and SPUR — the San Francisco Bay Area Planning and Urban Research Association — a public policy organization.
“Creating a new institution, rather than investing those resources directly in housing, small businesses and other critical needs, is irresponsible,” Lurie said in a statement from the “NO on Proposition B” website.
Voters in San Francisco can expect their ballot packets to arrive in the mail in early October. Residents can check their voter registration status on the city’s portal.
