Santa Barbara County Interested in Studying Feasibility of Central Coast Public Bank

Noozhawk – May 29, 2021

The Santa Barbara County Board of Supervisors passed a resolution this month expressing interest in participating in a viability study that would determine the feasibility of establishing a public bank with the five Central Coast counties.

“At least studying this as a possibility is a responsible decision in light of the hedging of risk and diversification as a way to minimize risk and at least have the possibility or returns,” First District Supervisor Das Williams said at the May 4 meeting. “I think it would be a responsible decision to analyze that, to analyze the possible benefit for the taxpayer and for the county. And if there is no benefit, then you don’t move forward.”

California Assembly Bill 857 created a process for local agencies to create a public bank, which is defined as a corporation organized for the purpose of engaging in the commercial or industrial banking business that is owned wholly by a local agency, local agencies or a joint powers authority, according to a letter filed to the board.

Before forming the bank, the bill requires the local agency to conduct a study to assess its viability.

Santa Cruz County Supervisor Zach Friend sent a letter requesting statements of interest in participating in the study to the five Central Coast counties: Santa Cruz, Monterey, San Benito, San Luis Obispo and Santa Barbara.

The study must include a discussion of the purposes of the bank, including achieving cost savings, strengthening local economies, supporting community development, and addressing infrastructure and housing needs for localities.

A fiscal analysis of costs associated with starting the bank and financial projections for the first five years of the proposed bank also must be included in the study. The financial projections should include an estimate of the time period for when expected revenues meet or exceed the expected costs and an estimate of the total operating subsidy that the agency may be required to provide until the proposed bank generates sufficient revenue to cover its costs, according to the board letter.

The study also must include an analysis of how the proposed governance structure of the public bank separates from unlawful insider transactions and apparent conflicts of interest.

The majority of board members were interested in participating in the study and thought the proposed bank offers an opportunity to reinvest money locally, reduce taxes or provide a major new source of income.

“This offers an opportunity to reinvest money that we are already collecting in taxpayer revenue and invest it locally,” Third District Supervisor Joan Hartmann said. “My real interest in this is that it could reduce the cost of public infrastructure projects by 35 to 50%.”

Williams said that a huge position of advantage would be if cannabis was part of the study’s analysis because the bank’s lending opportunities are fewer.

“I would imagine that there is at least a possibility of a competitive advantage on a public bank that is really looking to financing, borrowing or investing via that industry simply because we would not be shackled by the same federal prohibitions that most lending institutions have,” he said.

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