San Francisco committee backs working group to pursue public bank; treasurer warns against using investment pool

Supervisor Dean Preston on Thursday presented the "Reinvest in San Francisco" ordinance to create a working group tasked with producing business and governance plans for a Municipal Finance Corporation (MFC) and a future depository public bank. He said the measure aims to direct public capital toward pandemic recovery, affordable housing and small‑business lending and to address racial inequities exacerbated by the pandemic.

Budget and Legislative Analyst Fred Brusso summarized three BLA reports and two models the office studied: a non‑depository MFC that would make wholesale loans through partner institutions, and a full depository public bank. Brusso said the BLA’s preferred phased approach would start as a non‑depository MFC using city resources to subsidize early lending, then consider a depository after several years. “We recommend a phased in approach,” Brusso told the committee, outlining pro formas that assumed about $136 million in capitalization over three years and lending scale that could reach a roughly $1.25 billion portfolio by year 10 under one scenario.

Sushil Jacob of the Lawyers’ Committee for Civil Rights and the Public Bank Coalition emphasized the legal pathway provided by AB 857 and urged the city to begin with an MFC to realize immediate lending benefits without waiting for state licensing and FDIC insurance required for a depository.

The treasurer’s office put a critical point on the record. Amanda Bridal told the committee she believed "absent an appropriation by the board or the mayor, the investment pool is not a legally viable source of funds for a municipal bank" and that California law is prescriptive about how pooled funds may be invested. Chair Preston said the legal issues will continue to be reviewed with the City Attorney as the work moves forward.

After brief debate and three technical amendments—shifting some administrative responsibilities from LAFCO to the Clerk and clarifying supervisor appointment procedures—the committee adopted the changes and voted 3‑0 to forward the ordinance as amended to the full Board with a positive recommendation.

Why it matters: Proponents say a public‑bank model could lower loan rates and direct capital to affordable housing and community investment, while opponents and treasurer staff flag legal and governance constraints associated with using the investment pool and the need for careful capital safeguards. The next step is a Board of Supervisors hearing where the working group structure, funding sources and legal analysis will be more fully weighed.

What’s next: The ordinance will go to the full Board of Supervisors. City staff and the BLA will continue to refine the working‑group membership and legal analysis, including whether and how city pooled funds could be used.

Sources: Committee presentations and public comment at the June 3, 2021 Government Audit & Oversight Committee meeting: Chair Dean Preston; Fred Brusso, Budget & Legislative Analyst; Sushil Jacob, Lawyers’ Committee; statement from the Treasurer’s Office.