In the upcoming elections, voters in Berkeley, California, will make a crucial decision regarding the approval of a new property tax aimed at generating startup funds for the establishment of a public bank. This public bank is intended to facilitate long-term investments in affordable housing, renewable energy, and small businesses.
The proposal, known as Measure Z, outlines that the public bank will operate as a nonprofit entity, managing the functions typically associated with a commercial or industrial bank. It will be fully owned by one or more local institutions or joint powers authorities comprising various local agencies. The proposal emphasizes the need for the public bank, stating, “Large corporate banks invest our public tax dollars outside our communities, whereas a public bank will allow funds to circulate within the community, providing financing for a variety of projects and creating stronger, more resilient localities that align with our core values.”
The proposed property tax would be levied for a duration of six years, imposing a fee of $0.06 per square foot on residential improvements and $0.09 per square foot on other types of properties. It is expected that the tax rate could increase annually. Furthermore, the proposal mandates that all funds collected through this tax must be subject to review, allocation, and approval by the city council.
According to city attorneys, this property tax could raise over $58 million within the six-year timeframe, commencing on January 1, 2027. A key aspect of this initiative is that, unlike private banks, the City of Berkeley will own the public bank. Residents of the community will have a voice on the bank’s board of directors, thereby enabling them to scrutinize bank accounts and directly influence how funds are utilized. The Coalition to Keep Berkeley Money Local states on its website, “Moreover, once the bank becomes profitable, the revenue will return to Berkeley instead of flowing to shareholders on Wall Street.”
The coalition asserts that the bank’s board will be comprised of elected officials, financial experts, and community members who will be responsible for setting policies and prioritizing loans. Daily operations, however, will be managed by professional bankers who have the technical expertise necessary to run the institution effectively.
Opponents of the proposal express concerns that the funds generated might not solely benefit Berkeley but could also be utilized to lend to the greater East Bay region. The website opposing Measure Z, StopMeasureZ.com, articulates this worry by stating, “This is not a bank that only serves Berkeley; it is a regional institution funded by Berkeley’s money.”
A report from the citizen organization Within Our Means Berkeley reveals that early supporters of a public bank initially envisioned it as a regional institution shared among multiple local governments to distribute costs and rewards equitably. However, the Z proposal deviates from this vision by requiring Berkeley to solely fund this regional bank, which some critics argue is inequitable.
The report highlights, “The proposal places the financial burden of initial capital fundraising squarely on Berkeley while allowing the bank to serve a wider East Bay area, creating a ‘free rider incentive structure’ that undermines the principles of cost-sharing and proportional benefit distribution, which were the original goals of this policy.”
Moreover, the public bank will need to secure a license from the California Department of Financial Protection and Innovation and obtain deposit insurance from the Federal Deposit Insurance Corporation (FDIC). According to the stipulations of Measure Z, should the planned bank fail to acquire the necessary licenses by June 30, 2033, any funds already collected can still be allocated for similar purposes, such as supporting green energy projects and affordable housing.
In addition, StopMeasureZ.com cautions, “If the public bank fails to open its doors, the city would still retain these funds and ‘could’ utilize them for lending, similar to the ongoing work of the Housing Trust Fund.”
The passage of this proposal is contingent upon receiving support from a majority of voters. Since 2020, California has permitted local governmental entities to establish public banks. The California Department of Financial Protection and Innovation can grant permits for a maximum of two public banks annually, with a statewide cap of ten such institutions.