Public Banks: helping municipalities meet local needs and prepare for the future
The COVID-19 pandemic has left tax revenues down and municipal budgets stretched thin. Municipal leaderships is working 24/7 to establish new best practices to ensure that the community institutions that residents depend on, including schools, first responders, senior centers, libraries, and recreational facilities, are there to meet public needs. Cities and towns are sharing new ideas, programs, and procedures to meet the challenges of these times.
Public banks are a cost-effective, efficient and flexible way of helping to meet financing needs. Public banking is new to Massachusetts but not to the US: the Bank of North Dakota has been working with municipalities, the business community, and small banks in that state for more than a century, with impressive results. Public banks are flourishing in other countries as well.
A public bank doesn’t replace commercial banks. A Massachusetts public bank will not take deposits from individuals or businesses, it will have no branches or ATMs, and won’t compete with private banks, credit unions, or CDFIs, though it can participate in loans at their request.
The interest paid to a state infrastructure bank stays in-state, increasing the bank’s lending capacity. Because the bank works for the people of the Commonwealth and not for private investors, it has the flexibility to set interest rates and repayment terms with the public welfare in mind.
A Massachusetts public bank will have an independent and transparent governance structure. Legislation creating the bank calls for annual audits and the creation of an independent public advisory committee to ensure that the bank always works for the good of the people of Massachusetts.
Interested in knowing more? We welcome the chance to speak to municipal leaders in cities and towns of all sizes. Contact us with questions or to arrange a presentation.