A new independent report indicates that a San Francisco Public Bank would not only be financially sustainable long term, but would also create thousands of new affordable housing units, guarantee more than $60 million in small business loans, and allow the city to meet its climate goals.
The report also indicates that the public bank would be millions of dollars cheaper than private institutions.
San Francisco’s voters have a chance to take the initial steps towards a public bank if Prop B passes on election day. If so, it would create a Municipal Finance Corporation, which could be capitalized as the nation’s first city-owned public bank.
“Prop B creates a democratic governance structure, identifies priority areas of lending such as affordable housing, local enterprise, and climate sustainability, and establishes prohibitions on lending to ensure it doesn’t finance sectors such as fossil fuels, detention centers, or weapons manufacturing,” Supervisor Chyanne Chen, who authored the charter amendment, said in a statement.
Researchers Thomas Hanna, Tom Sgouros and Halah Ahmad modeled 1,000 ten-year simulations based on a 2023 business plan to create the report. The results were astounding.
Across all models, the bank was shown to support 5,000 to 6,000 affordable housing units, 1,200 small business loans and return roughly $2.3 million back to depositors. Additionally, the model indicates that on average, over the ten-year time frame, the bank would be able to provide $607 million in housing bridge loans and $331 million in green energy loans. Compared to a revolving fund — that is how municipal financing is currently structured and is reliant on unsavory financial institutions like Bank of America which currently controls much of the city’s $12 billion general fund — a public bank would generate five times more local lending.
This modeling only considers the first ten years. But the transformative potential of a public bank would extend help to San Franciscans for decades.
“The San Francisco Public Bank will be a successful legacy institution like our Airport or Public Utilities Commission that provides value and security for generations of San Franciscans,” said Misha Steier, San Francisco Public Bank Coalition Spokesperson.
The comprehensive report, authored by The Climate and Community Institute, a progressive climate and economy think tank, breaks down the current state of public banking, the local situation following the 2023 public bank business plan and presents an updated impact report.
In the spring of 2023, the city commissioned outside consultants to put together a business plan for an MFC. The business plan outlined a “large gap in the local financial market” especially among the city’s low-income communities and communities of color. This billion-dollar market gap results in less affordable housing development, difficulty meeting the city’s Climate Action Plan and tens of millions of dollars in undistributed small business loans.
San Francisco’s Climate Action Plan, which aims to get the city to zero emissions by 2040, will require $21.9 billion in additional funding and, with a $1.2 billion budget shortfall looming in 2029, that goal will not be attainable without a public bank. Particularly as federal funds for climate initiatives are depleted or demolished wholesale, increased municipal control over funding allows for the continued pursuit of equitable ecological initiatives. As described in the 2023 business plan, the MFC has the potential to be a “green bank” that “uses public funds to make and incentivize green investments.”
Beyond just meeting those lofty climate goals, a core principle of the public bank movement from the outset has been the institution’s potential to revitalize San Francisco’s small business. Community Wealth Building, as it’s called, presents a transformative opportunity to provide communities “direct ownership and control of their assets.”
What that looks like in actuality would be a revolutionary change for communities that have been left behind by San Francisco’s tech booms.
“In practice, this means developing community-based institutions (such as cooperatives, community land trusts, community development corporations, social enterprises, etc.), connecting them with local public and nonprofit institutions, and integrating both into wider efforts to create more democratic, sustainable, and equitably prosperous local economies,” the report reads.
Reinvesting the city’s municipal funds back into the community, rather than into an institution like Bank of America, would allow officials to address the various housing and affordability crises plaguing the city.
The public bank could provide the capital to address the climate infrastructure goals and the affordability crises, while wresting financial control from predacious institutions that drain city coffers to increase profits.
“What this report’s analysis confirms is that San Francisco has the ability to deliver a mission-driven public bank that is both financially profitable and socially transformative,” Chen said. “Along with hundreds of successful, fiscally sound public banks across the globe, San Francisco’s Municipal Finance Institution will be set up for success to make a real difference in San Franciscans’ lives.”
Increasingly, San Francisco is pricing out its working and middle classes. This public bank presents an opportunity to create a lasting institution that benefits regular San Franciscans, not billionaires.
“What the report shows is that this is a long term plan to support generations of working class San Franciscans to come,” Tom Sgouros said in a statement. “This only models the first ten years of a public bank. By year ten San Francisco will not only benefit from the additional 6,000 affordable housing units and 237 million watts of green energy it’s projected to provide on the investment, San Francisco will also own a fully capitalized and operational public bank that is capable of delivering benefits like these decade after decade.”
