San Francisco May Create First Municipal Bank

San Francisco is again moving toward a public bank, after years of studies, hearings and draft governance plans. Supervisor Chyanne Chen said this month she plans to introduce a charter amendment to establish a municipal finance corporation, a city-owned lending vehicle that supporters see as the first step toward a full public bank. The proposal does not create a functioning bank immediately. It would set up the legal structure for a non-depository lender that could later seek a state public-bank license, according to city documents. ### What is San Francisco actually considering right now? Chyanne Chen said in a May 2026 television interview that she wants San Francisco to create a municipal finance corporation as a precursor to a public bank. The city’s Reinvestment Working Group was set up in 2021 to study exactly that two-step path: first a non-depository municipal finance corporation, then a state-licensed public bank. (occupysf.net) The Reinvestment Working Group’s mandate was to submit business and governance plans to the Board of Supervisors and the Local Agency Formation Commission, known as LAFCo. SF.gov says the group voted on May 18, 2023, to forward both a municipal finance corporation plan and a public bank plan, and LAFCo submitted the final package on June 22, 2023. ### Why start with a municipal finance corporation instead of a bank? A 2021 memo from the Board of Supervisors’ Budget and Legislative Analyst laid out the distinction. (occupysf.net) A depository institution would function as a traditional bank and face state and federal banking oversight, while a non-depository municipal finance corporation would not take customer deposits and would fund lending through borrowing and partnerships. (sf.gov) Fred Brousseau, the Budget and Legislative Analyst’s policy director, wrote in that memo that the city should consider starting with a non-depository institution “at least initially” so it could build a loan portfolio gradually and keep operating costs lower. The memo said the city could later consider converting that entity into a depository institution as assets grow and its financial position strengthens. (sf.gov) ### What kinds of projects would the city-backed lender finance? A 2023 public bank viability study prepared for San Francisco said the proposed institution would focus lending on affordable rental housing, affordable homeownership, local enterprises including small businesses, and green investments tied to environmental justice. The same study said the bank would work with community lenders and other partner institutions rather than try to replace them. (sf.gov) A related 2023 city document on small-business lending said San Francisco projects affordable housing development will require more than $400 million a year through 2030 beyond funds already committed. That document also said small businesses underserved by traditional banks could need tens of millions of dollars in annual lending. ### Would this be the first city-run public bank in the United States? (media.api.sf.gov) California created a legal pathway for local governments to charter public banks when AB 857 became law in 2019, according to San Francisco’s 2023 public bank study. Supporters of the San Francisco plan have described it as a bid to create the first municipal public bank in the country, though the city has not yet chartered one and the current step is still the precursor corporation. (sf.gov) The distinction matters because San Francisco’s own documents separate the municipal finance corporation from the later public-bank stage. The municipal finance corporation would be wholly owned by the city but would not take deposits, while the later bank contemplated by the plan would need a state license and additional approvals. ### What are the main unresolved questions? The HR&A Advisors plans submitted in 2023 said capitalization and funding plans had not been endorsed or approved by the Board of Supervisors. (media.api.sf.gov) The consultant also said its documents were not legal advice and that only the City Attorney could advise the city on legal issues tied to municipal banking. Those caveats leave several decisions for city officials: how much money to commit, what governance structure to adopt, what oversight rules to impose and whether the city should partner with another local agency. (sf.gov) SF.gov says those questions were part of the Working Group’s assignment when it sent its recommendations to the Board and LAFCo. ### What happens next in San Francisco? May 2026 is the latest public step, with Chen saying she intends to bring forward a charter amendment to establish the municipal finance corporation. (sf.gov) Any charter amendment would have to move through the Board of Supervisors and then go to San Francisco voters if placed on the ballot. The formal record the city already has is the 2023 package submitted by the Reinvestment Working Group and LAFCo. (sf.gov) The next concrete milestone is whether Chen files legislation and whether the Board schedules hearings on the charter amendment in the weeks ahead. (occupysf.net)