Signed by Governor Gavin Newsom

Vote Smart's Synopsis:

Vote to pass a bill that authorizes cities and counties to establish public banks.

Highlights:

• Defines “public bank” as a corporation, organized under the Nonprofit Mutual Benefit Corporation Law or the Nonprofit Public Benefit Corporation Law for the purpose of engaging in the commercial banking business or industrial banking business, that is wholly owned by a local agency, local agencies, or a joint powers authority formed pursuant to the Joint Exercise of Powers Act that is composed only of local agencies (Sec. 16).

• Authorizes the lending of public credit to public banks, as well as the public ownership of these public banks through partnerships with local financial institutions, like credit unions and local community banks, without competing with these institutions (Sec. 1).

• Specifies that all provisions of law generally applicable to corporations will apply to non-public banks (Sec. 5).

• Specifies that all provisions of law generally applicable to nonprofit corporations will apply to public banks (Sec. 5).

• Specifies references to shares, shareholders, or stockholders to mean memberships or members within the greater organizational structure of the public bank, in regards to corporations organized as public banks (Sec. 6).

• Prohibits counties from giving or loaning its credit to or in aid of any individual or corporation that is not a public bank (Sec. 10).

• Authorizes a local agency that is a county, a city and county, or other local agency that pools money in deposits or investments with other agencies, to invest in commercial paper with the following concentration limits (Sec. 12):

• More than 40 percent of the local agency’s money may not be invested in eligible commercial paper; and

• More than 10 percent of the total assets of the investments held by a local agency may not be invested in any one issuer’s commercial paper.

• Authorizes the governing board, or a committee of the governing board, of a public bank to meet in closed session to decide on (Sec. 14):

• A loan or investment decision;

• A decision of the internal audit committee, the compliance committee, or the governance committee; and 

• A meeting with a state or federal regulator.

• Requires public banks organized as nonprofit mutual benefit corporations to include the following purpose statement: “This corporation is a nonprofit mutual benefit corporation organized under the Nonprofit Mutual Benefit Corporation Law as a public bank. The purpose of the corporation is to engage in the commercial banking business or industrial banking business and any other lawful activities which are not prohibited to a public bank by applicable laws or regulations” (Sec. 16).

• Requires public banks organized as nonprofit public benefit corporations to include the following purpose statement: “This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for the public purpose of engaging in the commercial banking business or industrial banking business as a public bank” (Sec. 16).

• Authorizes public banks to receive local agency money (Sec. 16).

• Authorizes public banks to engage in (Sec. 16):

• Local agency banking;

• Infrastructure lending;

• Wholesale lending;

• Participation lending; and

• Retail activities without partnering with a local financial institution, if those retail activities are not provided by local financial institutions in the appropriate jurisdiction. 

• Requires local agencies that are not charter cities and that wish to submit an application for the creation of a public bank, to conduct a study for assessing the viability of the proposed public bank (Sec. 16).

• Establishes that the motion to approve an application by the local agency will be subject to voter approval at the next election held at least 180 days after the vote of the governing body (Sec. 16).

• Prohibits the Commissioner of Business Oversight from issuing more than two public bank licenses in a calendar year (Sec. 16).

• Exempts public banks from all taxes and licenses, state, county, and municipal, imposed upon a public bank, local utility user taxes, sales and use taxes, state energy resources surcharges, state emergency telephone users surcharges, motor vehicle and other vehicle registration license fees, and any other tax or license fee imposed by the state upon vehicles, motor vehicles, or their operation (Sec. 17).

Full Bill Text

Vote Smart's Synopsis:

Vote to pass a bill that authorizes cities and counties to establish public banks.

Highlights:

• Defines “public bank” as a corporation, organized under the Nonprofit Mutual Benefit Corporation Law or the Nonprofit Public Benefit Corporation Law for the purpose of engaging in the commercial banking business or industrial banking business, that is wholly owned by a local agency, local agencies, or a joint powers authority formed pursuant to the Joint Exercise of Powers Act that is composed only of local agencies (Sec. 16).

• Authorizes the lending of public credit to public banks, as well as the public ownership of these public banks through partnerships with local financial institutions, like credit unions and local community banks, without competing with these institutions (Sec. 1).

• Specifies that all provisions of law generally applicable to corporations will apply to non-public banks (Sec. 5).

• Specifies that all provisions of law generally applicable to nonprofit corporations will apply to public banks (Sec. 5).

• Specifies references to shares, shareholders, or stockholders to mean memberships or members within the greater organizational structure of the public bank, in regards to corporations organized as public banks (Sec. 6).

• Prohibits counties from giving or loaning its credit to or in aid of any individual or corporation that is not a public bank (Sec. 10).

• Authorizes a local agency that is a county, a city and county, or other local agency that pools money in deposits or investments with other agencies, to invest in commercial paper with the following concentration limits (Sec. 12):

• More than 40 percent of the local agency’s money may not be invested in eligible commercial paper; and

• More than 10 percent of the total assets of the investments held by a local agency may not be invested in any one issuer’s commercial paper.

• Authorizes the governing board, or a committee of the governing board, of a public bank to meet in closed session to decide on (Sec. 14):

• A loan or investment decision;

• A decision of the internal audit committee, the compliance committee, or the governance committee; and 

• A meeting with a state or federal regulator.

• Requires public banks organized as nonprofit mutual benefit corporations to include the following purpose statement: “This corporation is a nonprofit mutual benefit corporation organized under the Nonprofit Mutual Benefit Corporation Law as a public bank. The purpose of the corporation is to engage in the commercial banking business or industrial banking business and any other lawful activities which are not prohibited to a public bank by applicable laws or regulations” (Sec. 16).

• Requires public banks organized as nonprofit public benefit corporations to include the following purpose statement: “This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for the public purpose of engaging in the commercial banking business or industrial banking business as a public bank” (Sec. 16).

• Authorizes public banks to receive local agency money (Sec. 16).

• Authorizes public banks to engage in (Sec. 16):

• Local agency banking;

• Infrastructure lending;

• Wholesale lending;

• Participation lending; and

• Retail activities without partnering with a local financial institution, if those retail activities are not provided by local financial institutions in the appropriate jurisdiction. 

• Requires local agencies that are not charter cities and that wish to submit an application for the creation of a public bank, to conduct a study for assessing the viability of the proposed public bank (Sec. 16).

• Establishes that the motion to approve an application by the local agency will be subject to voter approval at the next election held at least 180 days after the vote of the governing body (Sec. 16).

• Prohibits the Commissioner of Business Oversight from issuing more than two public bank licenses in a calendar year (Sec. 16).

• Exempts public banks from all taxes and licenses, state, county, and municipal, imposed upon a public bank, local utility user taxes, sales and use taxes, state energy resources surcharges, state emergency telephone users surcharges, motor vehicle and other vehicle registration license fees, and any other tax or license fee imposed by the state upon vehicles, motor vehicles, or their operation (Sec. 17).

Full Bill Text