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Municipal Bank Idea: Investing in One Philadelphia

What Is A Municipal, or Public, Bank?


Public banks are not retail banks and do not compete with the local banking sector.
They do not have branches, ATMs, or depository accounts. Instead, they use the
significant funds that cities currently deposit in big banks to extend credit into the local
economy by partnering with community banks and credit unions.
Public banking is an alternative means of generating revenue for the city. Right now,
there are four ways of getting more money for local priorities: raising taxes, cutting staff,
cutting programs, or borrowing. Public banking is a fifth and powerful tool for cities like
Philadelphia to put its own money to work for its own citizens.
Public banking is good stewardship of taxpayer dollars. Rather than depositing money
in Wall Street banks, Philadelphia can use its deposits to invest in growing local
entrepreneurship.
Where are Public Banks?
The City of Philadelphia had a very successful public bank - first in the Americas - which
made money on its loans that took the place of taxes. Philadelphia needs to look no
further than North Dakota to see how successful a public bank can be. The head of the
North Dakota Banking Association, certainly not a liberal group, considers their public
bank to be a useful tool to expand access to credit during tight fiscal times. The City of
Pittsburgh is considering a municipal bank, as well as San Francisco.
What Can a Public Bank Do for Philadelphia?
Keep the money of the people of Philadelphia at home and at work in the local
economy.

Provide a more secure bank in which to place city deposits.

Work with local banks, credit unions and financial institutions to focus on
neighborhood-based economic growth by increasing access to capital.

All profits received from bond issues or loans returns to the citys general fund as
non tax revenue.

Provide immediate, low cost disaster relief funds.

Why a Public Bank Can Work For Philadelphia


Access to Capital for Small Businesses: Philadelphia is 15th out of 15 cities for
entrepreneurial development. It should be using its money to extend credit to local
businesses that create neighborhood-based economic growth. A municipal bank can
drive local economic development by providing liquidity to those who create local value.
Dedicated Funds for Pressing Local Needs: Public banks can have dedicated
portfolio funds set aside in their charters to lend only for specific purposes which fill a
need in the community. This is an incredibly powerful tool: rather than having to raise
revenues for a program, the city can simply create a designated fund that provides
capital for the project such as disaster relief.
Support Homeowners in Transforming Neighborhoods: Increased liquidity allows
homeowners to cash-out the equity in their homes. Public banks buy loans originated by
community banks and credit unions. This gives these local banks access to liquidity.
This is a great solution for long term residents in rapidly changing neighborhoods: the
city would be lending these residents money to pay their increased property taxes by
leveraging the newly created equity in the home.
Lower Cost of Capital for the City: Public banks can lower the costs of debt service
and bond issuance by 35-50%, by cutting out the middleman that is large depository
banks. Public banks can be a reliable buyer of municipal bonds without requiring fees or
escalating returns. Public banks can even refinance existing municipal debt at lower
interest rates.
How Does Public Banking Become A Reality in Philadelphia?
As Mayor, Tony will host community sessions with small businesses, and create a
commission with mayoral and City Council appointees to decide on the core issues
surrounding public banking: mission, capitalization, deposit base, governance,
management, transparency, and accountability. Once the commission has studied the
needs of a public bank in Philadelphia, City Council would need to make an application
to the Pennsylvania Banking Department for approval of the banks charter.