The Facts

Voters backed Proposition B with about 53% voting yes, but San Francisco’s public bank remains years away. The measure provides no funding, and the Controller estimates capital and operating costs of $310 million to $460 million over eight years if the City proceeds, with substantial uncertainty.

There are a number of barriers standing in the way of an actual public bank:

1. Appropriations. Prop B created a pathway without funding it. If the Mayor and Supervisors don't fund it and no outside money appears, then it doesn't happen.
2. Operate for at least three years. After three continuous years of operations, the Municipal Finance Corporation's (MFC) board or oversight commission could initiate the public-bank transition. If MFC operations begin in 2027, that transition couldn't begin until 2030, followed by regulatory approvals. Funding delays push that date back.
3. Timing. California's seven-year licensing window expires in 2028 before the MFC could finish the three years of operation Prop B requires. Even an MFC that opened tomorrow wouldn't qualify until late 2029. Unless the Legislature extends the window, the state can't license San Francisco's bank.
4. Another Board vote. State law requires Supervisors to approve a viability study and vote, by majority, to move forward with a bank application. The Board accepted a viability study in 2023, but it has not voted to apply, and by the time an application is possible, that study's financial projections will be over seven years old.
5. The FDIC is unlikely to insure it. The bank needs a state banking license and federal deposit insurance. The Federal Deposit Insurance Corporation's published policy says applications from government-owned banks "will be reviewed very closely" because political control raises concerns about management stability, business purpose, and the ability to raise capital. The only two government-owned banks in the United States, the Bank of North Dakota and the Territorial Bank of American Samoa, both operate without FDIC insurance, and the FDIC has told American Samoa's bank it won't take an application while the government controls it.

The Context

The first institution would lend money, but could not hold deposits. Under Prop B’s two-stage structure, the lending corporation would finance housing, small businesses, and environmental investments before potentially becoming a deposit-taking bank. Its initial governance includes a nine-member oversight commission and a five-member corporate board; the bank would have a separate, larger governance structure.

Taking City deposits would bring another financial constraint. California generally requires banks to pledge collateral worth 110% of public deposits secured by eligible securities, with different requirements for certain collateral types. That protects taxpayer money, but limits how freely a public bank could use City deposits to fund loans.

The GrowSF Take

We opposed Proposition B, and we remain unconvinced that running a bank is a good use of City money. San Francisco should focus on delivering basic services within a reasonable budget.

Supervisors should decline startup funding until the Treasurer establishes a workable licensing path—or demonstrates that the lending corporation alone would justify the expense.