The text of our bill: what and why?

Below is the text of the bill, “An act to establish the Massachusetts infrastructure bank.” You can also read and download .pdfs of the Senate bill online. Our version here will give you some FAQs as you read, so that you’ll be able to learn more about the public bank concept and how we’re adapting it to a particular state need.

SECTION 1. The General Laws are hereby amended by inserting after chapter 40W the following chapter:-

Chapter 40X.


Section 1. For the purposes of this chapter the following terms shall, unless the context clearly requires otherwise, have the following meanings:

“The Massachusetts Infrastructure Bank” or “the bank,” a state-chartered financial institution able to accept deposits from public and quasi-public entities, accept, keep safe, and pay interest on deposits, and make loans and float bond issues to protect and expand the quality of life and economic prosperity of all Massachusetts residents.

That is, municipalities or state agencies that fund infrastructure projects may choose to deposit funds in the bank, but it is not a requirement; if towns already have a good working relationship with a local or community bank, or even a large bank, that won’t change. The bank will not accept deposits from private individuals or businesses, so it’s not going to be a competitor in those markets.

“Infrastructure,” includes capital projects; public buildings, structures, and public spaces and land; local roadways, bike paths, and pedestrian walkways; public services such as police, fire, emergency health and disaster-related systems; adaptation and resiliency in the face of climate change; farmland preservation; public land management; modifications of public buildings and spaces for differently-abled residents; unless clearly indicated otherwise or as defined by the board of directors.

We are defining infrastructure broadly—not just roads and bridges, but potentially schools, recreational and public safety facilities, incubator space for small business, improvement of access to public spaces, creation of publicly-owned alternative energy facilities or retrofitting public buildings for energy efficiency and savings—to be a source of financing for as many kinds of local projects as possible. 

How do we get this bank to avoid financing infrastructure that people don’t want to see built? This bank is not designed or funded to be a lending source for private industries involved in building controversial, for-profit structures, whether pipelines, powerlines, or big residential or commercial developments. But even on smaller projects, oversight depends greatly on involved citizens. In decisions on borrowing and spending that are made at the town meeting or city council level, engaged voters will still have to make the case for or against a particular project. 

Section 2. (a) There shall be a Massachusetts infrastructure bank, wholly owned by the commonwealth, to supplement the currently available sources of infrastructure grants, bonds, and loans to meet the urgent infrastructure and safety-related needs of commonwealth cities, towns and state agencies by offering stable, competitive financing, improved transparency, and timely public input, thereby enabling on-going, accurate and cost-effective planning by municipalities.

(b) Once the bank is established and profitable, the board of directors may elect to develop financing programs for other significant state and municipal financing needs determined by it to be in the commonwealth’s vital interest and which are not being met cost-effectively, in a timely manner, or without compromising public assets or the tax base. Such needs might include, for example, disaster relief or student loans.

Our hope is that this bank will be a success, and can take on additional projects. While many public bank proposals include funding for different purposes, especially small business or affordable housing creation, we want to start with a very well-defined need and a client base that will borrow conservatively and be in a good position to repay what they borrow.

(c) The bank will uniquely serve the unmet infrastructure needs of municipalities and towns and the state and may work cooperatively with other state agencies and quasi-public agencies which finance different aspects of infrastructure for developers, non-profits, or special sectors of the economy through grants, bonds based on projected-revenues or future job growth; these include Massworks, MassDevelopment, the Mass Housing Investment Corp., Mass Ventures, Mass Clean Water Trust, and the Mass Growth Capital Corp.

Again, our clients will be cities and towns, and we’ll be working cooperatively with existing programs and agencies designed to provide a portion of project funding. What we have found in our research is that most municipalities can safely borrow more money than they already do, without default or greatly increasing a debt burden passed on to residents and local businesses. Our goal is to give them a more economical source of financing than the existing private market. 

Section 3. The bank shall be governed by a 9 member board of directors, appointed by the governor, the Senate President, and the Speaker. Members shall serve 4 year staggered terms. The membership shall be made up of representatives of municipalities of all sizes and representatives of as many regions of the commonwealth as possible. The membership shall be experts in community economic development, education, community banking, civil engineering, labor, sustainable agriculture, open space planning, transportation, and renewable energy. The board of directors shall determine their own chair.

Section 4. The board of directors will receive advisory input on the general direction of the bank from an 11 member board of advisors that will meet with the board of directors and the management at least quarterly. The board of advisors shall be appointed by the governor, the state treasurer, the speaker of the house of representatives and the senate president. Board members shall have experience in environmental policy, municipal management, regional planning, community economic development, community banking, civil engineering, labor, sustainable agriculture, open space planning, transportation, and renewable energy. The board of advisors shall determine their own chair and members shall serve 4 year staggered terms. Meetings shall be open to the public and meeting minutes shall be posted publicly. The Advisory Board may elect to hold public hearings or determine how best otherwise to receive a broad range of resident input regarding the bank’s policies and procedures.

Our goal is to get as many different kinds of expertise on these two boards as possible, as well as create ways for the public to have input into the bank’s activities. The bill leaves determining the mechanisms for public input up to the Advisory Board. The public also has input into bond and loan policy; see below.  

Section 5. Bond and loan policy, including interest rates, fee structure, underwriting criteria, bond and loan size, and portfolio management shall be developed by the board of directors after input by the public and the board of advisors. The board of directors shall conduct an annual review of its policies, processes and criteria. This review shall be undertaken after consultation with the board of advisors.

Section 6. The bank shall undergo an annual, independent audit that shall include an independent valuation of the loan portfolio. The audit report and valuation will be made directly to the board and will be public information. The outside auditor shall be a different firm every 3 years. The books and records of the bank shall be subject to an annual audit by the auditor of the commonwealth.

The more oversight, the better! It’s our money, after all.

Section 7. The senior management team shall consist of a president with banking and municipal finance experience, a senior vice-president with similar experience, and a chief financial officer. This senior management team will be assisted by an administrative staff with sound accounting and computer system capability. The president shall be appointed by the board of directors, serve at will, and shall be responsible for hiring all other staff. The president shall provide monthly financial reports to the board of directors including a report of all loan or bond requests, a pipeline report, reasons for declinations, and those projects approved for closing and financing. Management will prepare policies and procedures for the engagement of outside consultants, including bond counsel, for approval by the board of directors.

This is the part of the bill that specifies that the day to day operations of the infrastructure bank will be managed by experienced professionals. And below—another way that the public, including town and city managers and elected officials, can connect with the bank and follow its activities.

Section 8. Management shall ensure that information and outreach events regarding the bank’s programs and loan and bonding capacity are made available in all regions of the commonwealth at least quarterly.

Section 9. The Massachusetts infrastructure bank will accept deposits from public and quasi-public entities, make loans and float bond issues and is chartered as such by the State of Massachusetts. The bank will not compete for retail, mortgage or commercial loans with any other Massachusetts-based banks or credit unions, nor will it accept individual or commercial deposits. Accordingly it will neither advertise to the general public nor will it establish branches or offer any individual retail or commercial products to the general public or maintain ATM’s or other public banking services. Under policies, criteria and procedures established by the board, the bank may participate in loans originated by Massachusetts-based banks, if requested by the originating bank.

This section lays out the limits of the bank’s activity in more detail, including a cooperative relationship with existing commonwealth commercial banks.

Section 10. (a) The commonwealth or its agencies shall capitalize the bank and accept deposits only from state and municipal entities to put taxpayer funds to work for the Massachusetts economy and expand the bank’s lending capacity.

(b) The commonwealth shall provide an initial investment of capital in the range of $50,000,000 as an equity investment from a direct appropriation or another public source.

(c) The commonwealth shall deposit an amount of current cash, cash equivalents, or short-term deposits to aggregate from $350,000,000.

Is this money at risk? No. Municipal bond defaults are extremely rare—there have only been three in the last twenty-five years. Our cities and towns are a very safe investment, thanks in many cases to citizen oversight and to state caps on the amount towns may borrow; in fact, that cap was just raised last year. The issue is the cost of borrowing. If a state bank can make additional money available at a lower rate, then that means that municipal funds go further in supporting local projects to improve the quality of life and put people to work.