LAFCO reviews plans for a Municipal Finance Corporation and public bank; working group votes to forward plans

At its May meeting the Local Agency Formation Commission heard final business and governance plans for a proposed Municipal Finance Corporation (MFC) and a public bank and was told the Reinvestment Working Group voted to forward both plans to LAFCO and the San Francisco Board of Supervisors.

HR&A Advisors, the consultants to the working group, described a two‑stage approach: establish an MFC quickly to begin community‑focused lending and transition that entity into a larger public bank after about three years if regulators and the city agree. "We project that it would have nearly $40,000,000 in capital and $50,000,000 in funding," the presenter said when summarizing early capital assumptions. The consultants also presented eight‑year projections showing the joint entity could reach roughly $60,000,000 in capital and $250,000,000 in funding and nearly $320,000,000 in total assets under a base scenario.

The presentation stressed that the MFC would concentrate on participation lending with community financial institutions, affordable housing, small business and green investments, while the eventual public bank would have larger lending capacity and a broader governance structure. The consultants emphasized regulatory steps required to convert an MFC to a public bank, including revising plans based on state and federal regulator feedback, passing city legislation and securing capital and deposits.

Kristen Evans, chair of the Reinvestment Working Group, told the commission that the nine‑member working group (nine members, eight present for the final vote) "voted unanimously to submit both the MFC plan and the public bank plan to the LAFCO commission and the board of supervisors." Evans also said a majority of the working group adopted a separate motion recommending that the proposed Public Bank Oversight Commission possess certain appointment and removal powers "to the extent that is allowable by regulators."

Commissioner Dean Preston and Vice Chair Jackie Fielder both praised the plans as a practical tool to advance affordable housing, climate and small business goals that private lending has not met. "I think it's a game changing proposal," Preston said, framing the public bank as a mechanism to help close financing gaps for large local priorities. Fielder cited the 2019 state legislation AB 857 as having created a framework for municipal public banks in California.

Executive Officer Jeremy Pollock and commissioners discussed related studies and next steps: LAFCO will not take action on the working group materials at this meeting; the working group materials and consultant reports were submitted for further consideration by the Board of Supervisors. Preston said that if the item moves forward it will go to the Board of Supervisors for hearings, likely in July in the Government Audit and Oversight (GAO) committee, and will require coordination with the city attorney, treasurer and controller on legal and capital matters.

Pollock also used his executive officer's report to outline priority follow‑on work that would inform a municipal finance effort, including a proposed battery storage study (RFP targeted for June, with consultant on board in July and a first‑phase completion in October) and a Green Bank financing study to identify potential funding sources such as Inflation Reduction Act programs and pilot lending opportunities.

Public comment included remote callers who urged a focus on community benefits, renewable energy and environmental impacts. A caller, Francisco de Costa, said, "This land, all of it, was stolen from the indigenous people," and urged that new financing options be tied to broader community projects and infrastructure investments.

There was no formal LAFCO vote on the MFC/public bank plans at the meeting; the record shows the Reinvestment Working Group's vote to forward materials and LAFCO's acceptance of those materials for referral and further review by the Board of Supervisors and city offices. Next procedural steps identified by commissioners include staff work with the city attorney and financial officers, Board of Supervisors hearings and additional regulatory submissions for state and federal approval.