they would be like bank of america now, which has money in their account from the city, and they can loan that money out. it would be the same operation, just on a smaller scale. the second option that we present is expanding existing city programs. there are programs in place to help community development efforts. we mentioned a couple of city agencies. the office of economic and workforce development, the office of small business, the human rights commission have programs in place and address some of those concerns. the level of funding is the key question. the disadvantage is it would require more funding to expand them. the have programs in place. perhaps they have dedicated funding already from outside sources and some city funding. but to expand them would require an additional appropriation. on the plus side, there is no

need to change laws. the programs are in place and could be enhanced, subject to approval by the board of supervisors. two other programs highlighted, the kindergarten through college program is a public-private partnership were certain children of a certain age receive a $50 check to put into an account so they can be earning interest until the time they're able to go to college. and the bank on sf program. a third option that we presented is city funds for loan programs. this would be not creating a bank but appropriating city money so that loans can be made to small businesses that can obtain credit from larger financial institutions or from

homeowners who are attempting to get out of their foreclosures situation or community institutions that cannot receive loans from larger banks as well. the idea of this is that rather than creating a bank, create a program, appropriate city money that you can run out of an existing city agency -- supervisor avalos: it would be based on a certain amount of money inappropriate for that? >> yes, and on the extent to which loans are repaid, new revenue would be generated. it could be used for other loans as well. but it would still require an appropriation. and that would avoid this city law -- excuse me, state law limitation in our interpretation so that funds could be loaned but it would not be operated as a bank. it would not be all city funds at risk. it would be appropriated in that

way. supervisor avalos: and we already have examples of that? >> yes. i am is skipping 2 option 5. the last one was three. four, we're not including any longer because that was a state bank concept in which the government vetoed the legislation pertaining to that. our recommendation has been to endorse the legislation or put the city efforts behind supporting it. i will move on to the regional public bank option, option 5. this is an idea that has been promoted. there's an advocacy organization typically for public banking called the public banking institute and has initiated contact with other bay area jurisdictions about this idea of creating a network of banks or a regional bank, involving as many jurisdictions

as possible. the advantages are that there is an organization already working on it. costs and risks associated with creating a bank would be shared. it would drive the opportunity to access stable and lower-cost credit. by that, i mean that as a bank, the city or the banking entity would have access to low- interest loans through programs like the federal home loan bank that all the banks have access to now. they obtain the money for home loans that way and make those loans to homeowners but charge intake in a fee off the top. if the city were to create its own bank or join forces with others, it would have access to that sorts of funds, and there would not be the fee in place in the same way that the banks' ter charged that now. on the disadvantaged side, this

gets back to the state law question. so person in this option, whether it is this city alone or in conjunction with other jurisdictions, it would require a change in the state law prohibiting making loans from a public entity. also by joining forces with other organizations. policies and goals may be different for other cities or counties that may be part of the effort. that would have to be negotiated with the city of san francisco and the other entity. of course, the revenue generated would be shared with the other jurisdictions. so it would provide a new revenue source for all the entities involved for the city of san francisco. finally, the sixth option pertains to the creation of a public bank that would be a san francisco-only public bank. some of the same concepts apply here. obviously the big advantage, the

profits that the bank name -- make stay with the city. the bank will be able to access lower-cost credit and make that available. there's the possibility of the new revenue -- revenue stream to the extent profits are to marry did. that becomes a revenue stream for the city. and the city would have the policy goals. it would be a city decision alone into how the money would be used. on the disadvantaged side, there would be some risks associated with creating a new institution of this sort. there is only one in the country at this time, the bank of north dakota. it does require a change in the state law, so there would be some effort required by the city to make that change or to facilitate that change occurring at the state level. there are startup and operational costs. cretan the bank of this skill is not a minor effort.

so it would take some initial investment. although, because it is a business like opportunity and a depressed, it means return down the road. it takes cash and resources at the outset to get the enterprise going. there is a 10% capital reserve requirement that would apply, a federal reserve requirement that would apply to the city bank. that means some funds cannot be used for city operations or loans, as is true of all banks that currently do this, private banks and credit unions, etc. you mentioned the partnership bank model. i want to touch on that. the advantage and disadvantages and what would need to be done apply in either case. the partnership bank, which is the model used by the bank of north dakota, is not too involved in the retail activity

of the banks. they largely loans to smaller local banks, who then in turn do more of the retail operations. we understand the bank of north dakota does have some direct deposits and some retail customers as well, but it is a pretty small portion of their business. a little bit more on the bank of north dakota, how they're came to be just one in the country. it was started in 1919, part of the populist movement, and it was to make funds available to a lot of small towns and farm communities. those who were not able to access craddock through traditional banks. they're called a partnership bank, because they have about $40.3 in assets. 100% of the state funds are required the best north dakota state puns are required to be deposited in the banks, and deposits are returned to the state. they did turn a profit in 2010

for the seventh straight year. they made a $61 million profit. i believe about half of that goes to the state general fund. they are a member of the minneapolis federal reserve bank, so the operate like neither bank would in north dakota, subject to the rules and regulations of the federal reserve. they're not ensured by the federal deposit insurance corporation, but instead the state provides the guarantee for the deposit and depository. that may have been a choice on their part so that they could have control of more funding, because otherwise there would be paying some sort of feet. supervisor avalos: with the fdic around when they got started? >> i do not know if it was. that may have been part of the reason for it as well. what advocates of the bank of north dakota and public banking have pointed out is that the state of north dakota has a low unemployment rate, 3.2%, and

they achieved budget surpluses during the last couple of years. the recession starting 2008. and then have been able to extend credits after 2008 when we saw the credit freeze on the part of private banks, affecting public agencies and many small businesses and other enterprises. finally, and last point, related initiatives. this gets to be rfp question. there was some discussion about it, including a requirement in the rfp being prepared by the treasurer and tax collector's office for banking services and whether or not the city could make a requirement or provide extra points in scoring bidders if they're providing a higher level of investment for the local community. and there is some concern, and the city attorney has expressed

an opinion on that it may not be allowed under state law. however, our conclusion, after talking to the city attorney, if it is a voluntary activity that the banks are asking simply to present that information, it is not a requirement for operating in the city or having some of the banking business. it might be a legally different interpretation, therefore could be something the cities would ask for. that is an issue that would have to be resolved with the city attorney. supervisor avalos: ask for an rfp? >> right, something that is not a determining factor of what they have to do, that can possibly be a way of evaluating the extent to which they're doing it, but it would not be the primary criteria for the collection process. there is different interpretations on that. i am pointing at the the city

attorney has raised some concerns about that, and i think it is still an issue to be researched further. supervisor avalos: separate from the rfp, there probably other ways we could apply at the city. i do not know what they are yet. >> but on this topic, and this is the last slide, legislation in the city of boston. a city council member there has introduced what is called invest in boston legislation, establishing municipal banking communities. the purpose of the commission is just this, to analyze financial institutions that want to do business with the city and to evaluate them in terms of the extent to which they're providing community-oriented business and services, and these are the criteria that they are including. residential loan modifications

made by the bank, small-business loans in the city, personal loans, a community reinvestment activity, and the average of their credit expanded. other proposals are being considered. we saw something in the last week or two, the city of los angeles reintroduce the notion of creating a public bank or exploring the option. i think it is in response to the occupy l.a. movement. they reintroduced legislation to look into that. the city of long beach in the city of davis in california and the city of mesa, arizona is exploring this option, as well as i think about 12 states that have legislation pending or research under way on the topic. so it seems to be a subject that is increasingly of interest to

public entities. katie, who works on this project with me, is here as well. we will be happy to answer any questions or respond to any comments. supervisor avalos: great, thank you. i really appreciate the report. also, it is ironic how it has come up with exterior demonstrations and protests going on around the world with the occupy movement. i think it is very interesting. there are a lot of other states and municipalities that are looking at these public banking models and ways of leveraging public dollars. there is a lot of suspicion or frustration with the current financial institutions not doing enough at the local level, and i see that dramatically in my district where a lot of small businesses are suffering. it is actually all around san

francisco. the goal really is to try to see where we can give greater investments at the local level. so this is a great step of the process. we are going to be having ongoing work and dialogue to make sure we're moving forward on something that could be beneficial. i think the models that exist elsewhere are going to be important. i know the north dakota is a very different in terms of san francisco, but there are certainly a lot of parallels that you could draw into how the processes worked. i appreciate your work on this. >> one note on bank of north dakota, i think the state's budget is comparable to the city of san francisco. it is a much smaller state. so there was some similarity in skill, but obviously very different. it is not quite as intense either.

supervisor avalos: we're getting more farmers in san francisco though. works well in a number of ways. we're probably going to get a lot of questions from public comment. that is something i can address to you afterwards or perhaps in the middle of public comment as well. thank you for your presentation and your work on this. we can go ahead and open up for public comment. i have a list of names that i wanted to read off. i have a couple courage here, too. the list of names are going to come -- because that was part of the presentation as well, for these folks to speak first. i have some partners like the california revisit coalition, ace, the environmental impact, responsible lending, the small

business commission, lots of folks to participate. i want to acknowledge of the ideas the canfor were prior to this hearing. kevin, grace, michelle, david, karla, and tonya. >> thank you, supervisors. good morning. my name is kevin and i am with the california reinvestment coalition. we are a statewide advocacy group advocating for increased access to financial services and investment in low-income communities and communities of color throughout the state. we appreciate your efforts in being able to come and testify before you. i was a former member of the city. the board appointed a fair lending working group a few years ago. i would note that a lot of the recommendations that came out of that board-appointed task force were not acted upon.

discouragingly, it may be that financial institutions are less responsive to day in our communities than there were a few years ago. the main point i would want to convey today is that we believe that banks are really not setting up residence in communities in san francisco to succeed financially. we are very supportive of efforts to try to bring some responsiveness and accountability. for the city, i know a number of issues and ideas were floated. but the thrust of trying to leverage the city's resources to bring better resources and support for residents in the city, we fully support. in general, we believe that a strong strategy, and one that we would urge you to continue to look at this, working with the treasurer's office, we consider a divestment or linked banking strategy with the city or county

could tie its -- [bell rings] supervisor avalos: could you tell me more about divestment, please? >> yes, thank you. this most closely follows the invest in boston presentation that the analyst made. a number of communities in this state and throughout the country have tried to tie their banking business, be it deposits or contracts, to bank performance. we think that is a very positive model. in some sense of the treasure is right. [bell rings] it is in your conversation, but there have also been programs like this for many years. i got involved in these issues over a decade ago in an east palo alto when they try to develop a similar strategy to attract a bank account. that was a strong effort in pulling together the city, the school district, the sanitary district, churches, local

businesses, all kind of agreeing that they would move their money to the institution that was best serving the town. that is the general idea. supervisor avalos: your examples of other places that have had the divestment strategy, what institutions did they end up working with? >> i guess it depends. i think of it as kind of a land banking strategy with the locality will set up a process, so the rfp is a good example, and we know what the committee wants from the institution and see which institution can best meet those needs. again, within the parameters of safety, liquidity, and yield, which we do not think needs to be a major barrier. i guess this city of oakland recently moved its funds, and the city of san jose recently, through the great work of the pico network, so there's a lot of stuff happening. different communities may disagree as to who is better to

serve their -- better able to serve their needs, but the thing to do is to begin the process and to identify -- i had a list of things the city could look at. it was very much like the list that was on the fly -- on the slide four invest in boston. there's a lot of harm being imposed on people by financial institutions, with for closure being a strong example, but even fees that are being charged for people better low-income, because they're using their debit cards, because they have the audacity to want to have the bank account with the financial institution, and some of these harms of being opposed by the financial institutions that the city and county have relationships with. in terms of the general suggestion, we would urge the city to be aggressive in outlining its needs and desires, that'd be as expensive as possible so that in every way in which money is earned by

financial institutions at the hands of the city and county, that there be some thai so that you do not think too narrowly about what funds may be in play. the treasurer spoke of the different pots of money. but there are a variety of pots and a variety of institutions and a variety of fees that there are collected. the more expensive the cities can be, perhaps the more fun that play, the more effective policy can be. because this is about time to get some accountability. supervisor avalos: do you have a sense of what other municipalities around the state might be using for the transaction work for the institutions? in san francisco, bankamerica primarily, wells fargo, union bank. >> the the largest institutions historically have been the institutions that have been the banks for municipalities. i think the recent efforts to

rethink that are a result of frustration, a growing frustration that you and others have pointed out around issues like for closure. those happen to be the same institutions that are the biggest for closures. i think there is a move towards moving the money out of those institutions. then there reasonable question is, where would the money go? supervisor avalos: kenny talk briefly about your work with the fairland and working group? >> as no, that group was set up by the board, the treasurer, says a reporter, and supervisor maxwell urged the board to set up this working group, which comprised of representatives from banks, credit unions, mortgage brokers, realtors, community foundations, and a few nonprofits. there was a report that came out of it. a large number of recommendations were made. again, most of them were not

implemented. there were a couple the kind of speak to the issues being raised by the hearing. the four broad categories of recommendations revolved around preserving homeownership, avoiding for closure, preventing predatory lending in the future crisis, protecting tenants during and after for closure, and for prioritizing affordable housing opportunities. one of the key specific demands was that banks be more accountable to the city with regard to for closure prevention, and more specifically there was interest in negotiating more loan modification, maybe like the invest in boston. supervisor avalos: but have used in any change based on this? >> there was an effort by the city to reach out to institutions. my understanding, and cities that would be better able to answer, is that a letter was sent highlighting some of the concerns, and it was more less

ignored by maybe all of the financial institutions. there may have been a non response the response by one. so generally, no. our office is a periodic survey of housing counselors from san francisco and throughout the state, asking which institutions are doing a good job helping people avoid foreclosure and which are not, and the results of these days are no better than the results two and a half years ago when we started doing this, and the institutions that the city has banking relationships with are among the most complained of and rate fairly poorly when it comes to helping people with for closure. supervisor avalos: thank you. we can talk later so i can get a copy of that report. we will see what we can enact in the coming months. >> great, thank you very much. >> the next speaker, please. grace, then the shell, david, carla, and tonya. >> good afternoon couldn't i

have a copy of the report to. my name is a great speaker i am an organizer with ace peter i am is speaking on the report that we released earlier last month with crc about the impact of foreclosures in our local city. at this point, at the end of the year we will see 2.1 million for closures in california, and one- third of all the homes in california are under water. in san francisco, we have lost an estimated $42 million in city funding because of the erosion of the property tax base and the impact of services. the for closure cost to local

governments, typically for every for closure, it costs about $20,000 because of the extra needed services and police do to blighted property, and it has shown that it has increased crime in our neighborhood. this cost is estimated to be about $73.4 million. supervisor avalos: is that simply by multiplying 20,000 by the number of foreclosures? >> exactly peter i am about to go into that. can we have the overhead? supervisor avalos: can we have the overhead, please? we will extend your time. >> this is the breakdown by zip code of all foreclosures since 2008. these are houses that have already been foreclosed on. and those in default will

probably lose their homes by the end of the year. the total number in san francisco is 12,410 homes. half of those are in district 10 and 11. just to show a map and probably show the supervisors this before i show everyone else -- [bell rings] this is an example of 94124. there are about 15 foreclosures in this district, the second- highest by zip coe. 94112 has about 2,000, that is district 11. for every foreclosed home and how this impacts other homeowners in the city, it brings the property value down by 0.9%. so we are urging that we need to leverage a real -- really leverage these banks and compel them to do the right thing and keep our families in our homes.

supervisor avalos: thank you very much. next speaker, please. >> hello, it is an honor to be here today. i am michele chan, and i direct economic policy programs that friends of the year. we have about 15 years experience in sustainable banking. many of my colleagues today are going to talk about the impacts of this on an immigrant tenants in san francisco but also talk about the environmental impacts. i will talk about two examples involving the financial institutions. first example, wells fargo. since 2003, wells fargo has provided over $5 million to companies that develop the oil sands, the tar sands. for those who do not know it, tarzan's is a high carbon type of fuel that is stripped mind from underneath canada's royal forests