incentives as a bonus structure that would award a contract to someone that would hire more women or based on race, things like that. so what we've done as a city, is try to partner with monitoring and developed the l.b.e. program, which was once a race-and-gender-based program. it has evolved into a local program because of of the passage of 209. i can tell you, as our office, and i know it's something that's being looked at by -- in the l.b.e. program to see if it's time to go back and revisit the ordinance and so if re can incorporate race and gender into certain segments. i know it's being looked at as it relates to -- not to these

contracts, but as it relates to a proposed project labor agreement for the city and, again, this office would be open to that as well. but as the laws are written right now, we're not able to incorporate that into these contracts. i can tell you that breaking things up into tier 1, 2, 3, was done with the intent to try to get more of our local businesses involved and reasons we have to be more specific because they can go up to a maximum of $10 million. they will get their bid discount. when you get into the larger contracts, the current code does not allow the bid discount to apply. so we didn't want to consolidate the contracts, say, into one tier, because it would be great for the bigger firms, but it

would make it really hard for the small and mid-sized firms to compete for those dollars. and that's something that this office -- it would be easier for us to work with a smaller group of contracts, but we're talking on that work, because we know it's the right thing to do. and, again, i would fully support if we wanted to go back as a city and revisit the notion of trying to expand a program. >> supervisor fewer: actually, it's a plan that i am looking again at that and revising it. couldn't we do something to push them to -- that these are companies that are prioritized, we say, choose from this list, but that they're working also with some guidelines around our oewd work force task force? we're not saying specifically. we're not saying you ha of to hire this many of this or this

many of that, but we are saying that we would expect that there would be a pathway or there would be -- i just feel like, yeah, i know, 209 is horrible, but the thing is, if we don't broaden the door, if we don't kick open the door, even to the conversation of a pathway of consciously planting that seed into these companies, that you can't get money from us. look, this is what we believe in as a city and we expect you to believe in that a little bit also if you want to do business with us. so this is that -- i just want to know, how far can we push? and i think we should be pushing more. and i also wanted to say that all the national rhetoric about immigrants talking away jobs from people. immigrants are not taking away jobs from people. technology is taking away jobs from people. so we want to actually include a lot of people who, quite

frankly, technology has taken their job. but they can get into technology and this is the new job market. i would be happy to work with you on how we can actually make a pathway with oewd's work force, because when you look at the jobs that tech is able to place, those are living-wage jobs. in a hotel, hotel worker, other jobs, they're not living-wage jobs, but in tech, they are. i appreciate it. i just felt like hi -- i had to say it because there is so much money on the table. and there's an opportunity and i feel like we need to insert ourseou ourselfselvou ourself selves and part of the vetting process is the companies that are working with the communities, formerly incarcerated, people recently out of work, women who have been

out of the work force, too, or people of color. these are -- so we don't have to say specifically about a race or a gender, but we can say about aligned with work force development. i know i've gone on a long time and i also want to thank you for also having a special conscience around all this money that is city money earned off the backs of hardworking san franciscans. >> i'll be brief, but there are ways that we can push it a bit more, in the envelope, and be clear, too, with these contracts. these are large sums of money. i'm not going to tell you that they're not, but the processes that we're doing now, we basically prequalified the firms. so we're going to give these firms a contract today or at least i hope we approve to allow us to move forward, but there is

no work yet. it's not until a department approaches our office and says, i need to do this project and then we will work with that department and that department will still need to incorporate a process who of the firms will get the work. that process could incorporate some of the things you talked about, what are you going to do to partner with departments within the city to work with certain communities and things like that? that's really open and it's something that our office can work with your office and the other stake holders in the city to try to push the envelope. >> supervisor fewer: thank you. if there's an opportunity before they get on the qualified list that this is a part of what makes them qualified, i just think we should try to push it, but thank you. let's work on this together in the new year.

thank you much. >> so really briefly, i'm going to talk about the selection process and how we got to these companies. we issued an r.p.f. 21 proposals came in. 19 met minimum qualifications and were allowed to proceed to the stage where we looked at their proposal and they had to go through an interview process. we used a panel to score the proposals and they determined that all 19 were qualified and received the points and we selected all 19 of tier one contract of $20 million and these right here are those 19 contracts. they're 19 companies that offer a variety of skills, expertise

and product offerings to city departments. together they provide with what we hope to be, you know, anything they would need in terms of i.t. some of these are specialists. they specialize in a certain product line, but most are generalists, meaning they can do a lot for city departments. together we believe they are a robust and hopefully a fruitful group of products for departments to use when they have a need for an i.t. purchase whether it's services or products. any other questions? >> president cohen: colleagues, any other questions? none? okay. thank you very much. let's go over to b.l.a. >> the 19 pieces of legislation approve 19 contracts for i.t. services and products. each product is $20 million not

to exceed. each is for three years, with two one-year options to extend. the way these work is part of the technology marketplace, that city departments have funds in their budget appropriated by the board for i.t. products. if the products are less than $2.5 million, they can solicit competitive quotes from any of the 19 vendors. if it's more than $2.5 million, they have to go for a separate r.f.p. process. any increases that you saw, some contracts increasing $5 hundred,000 will have to come back to the board. we recommend all 19 resolutions. >> president cohen: thank you. we'll take public comment on items 8-26. if you would like to speak, please come. >> wow.

8-26. how many millions of dollars the city is giving away to tech companies? let me speak a little bit. would have time, but i want the documents that you have here, because ace is on the doggone case. the thing about it, people say, ace, how can you do all this by yourself? that's the question i want to ask. the tech companies, have to drop a few hundred thousands and put it in our coffer so we can watch y'all and watch oewd. my name is a-c-e. i'm so flabbergasted. i'm appalled. even though y'all look at me and say, he has the audacity and don't even have the capacity. i do have the capacity. i've been monitoring the city for over 20 years, all by myself, with the help of god. and right now, hold up, you are getting into big figures here. you are giving away $20 million

a whop. on the streets, $20 for crack like that. you are giving away $20 million just because they techs. this is a new world, new era. we don't have no time for errors, y'all. so it has to be a mechanism from the community, from the constituents, that we monitor these people close. in order to do that, we need funding ourselves and that's why i'm introducing a group called community assistance service enterprise, case. and it will replace ace, because i can't do it all. i'm going to have surgery here, surgery here. i don't know how much longer i will be here, but with what's going on in this city by the bay, there must be activists that are going on. and i like, supervisor, what you are doing. but we need more than that to watch every penny and dime that

comes from this city. >> president cohen: any other member of the public like to comment on 8-26? thank you. public comment is closed. thank you. we're going to accept the b.l.a.s recommendation as well as the presentation from the department. thank you. we approve items 8-26, send it to the full board with a positive recommendation. supervisor fewer, thank you for your comments. without objection. thank you. okay. please call item 27. >> clerk: item 27, hearing to review the findings of the municipal bank task force and recommend implementation and strategies to improve transparency and investment and local control of san francisco finances and authorize treasurer and tax collector report. >> president cohen: thank you. we've got amanda free from

treasurer, that will make a presentation. i would like to offer a few remarks before we get started. first, i want to say thank you for hearing this item. as the municipal bank task force wraps up their work with the final meeting in january, office of treasurer and tax collector -- my purpose for calling this hearing, is to get -- get to a point in time, a check on the municipal bank. our city's task force report. i want to take an opportunity for them to provide their own input on what's being reflected. i am not going to be here for the final report in january. so that's why i'm calling the hearing today, so i can get an update on the status, framework you've been implementing. i would like to hear some comments from task force

members, if you could reflect that in your presentation. in particular, i'm interested in three original questions. what can and should the municipal bank do in san francisco? and i want a realistic picture of what we're talking about timelines. if you have numbers as to how much it would cost us to do, to implement this, i would love to hear what the figures are. how could we capitalize on such a program? and with that, i would like to turn it over to amanda freed from the office of the treasurer and tax collector. thank you. >> good morning, supervisors. thank you for having me here today to provide an update on our work on the municipal bank feasibility task force. president cohen, i just want to say -- we started working together in this building 15

years ago, i think, so it's an honor to be your last hearing that you call to present on this one. >> president cohen: thank you. >> for brief background, thank you for the introduction. a public and municipal bank is a bank run and owned by a city, state or country. the idea for municipal bank in san francisco has been percolating around for decades. and there's always similar and parallel efforts on the state level and around the country. based on president cohen's request and advocacy, a task force was convened to look at the viability. the task force has experts from various fields. we have the green lining institute. california reinvestment coalition. we have attorneys that specialize in bank formation. we have the bankers in the

public interest and beneficial state bank. we have several government partners as well. we began meeting in february. as you heard, our final meeting is scheduled in january. i want to say up front that i recognize that the time frame has expanded from the last time we were here. we intended to have a final report in fall, 2018, and we issued a draft executive summary in august to build in ample time for feedback from the task force and the public. in december, we got specific, substantive feedback. this is very much a public process, a task force process. in order to honor the feedback we received and adjust the models to more accurately reflect the will of the toss being for -- task force and now have a final report. the task force has taken a huge policy question and dived into

the details with tremendous amount of expertise and openness. we've had incredibly active members of the public. you can see many here today, who weighed in substantively and constructively on each proposal. and i believe that the final report will be better for the deep public engagement. we will, of course, come back to this body to report on the findings. but i want to thank president cohen for calling this hearing so we can share our work to date and preview the questioning and get your feedback as we draft the final report. as you know, there's a robust body of work outlining the potential benefits of a municipal bank. for those wishing to get up to speed on this body of work, we've compiled a literature review, which is available on our website. and we've been, with the help of our senior analyst, been doing calls with other jurisdictions

looking at community banking including representatives from los angeles, washington state, seattle, etc., but to date, there's been little or no quantitative analysis for how much a bank would cost to create, run, or how long it would take to break even. so the treasurer has approached this process from a rigorous financial perspective. what you can expect in the final report is concrete financial models with enough specifics to guide policy decisions about whether or not to go forward with the bank. in order for each of you to determine if the bank is a good policy depends on what you would like to see the bank accomplish and whether the benefits outweigh the costs. there are a myriad of problems a municipal bank could be formed to address. in order to narrow it down, which was the first task we had as a task force, we listened at the hearings carefully to all of

the ideas and proposals that came forth. and we asked members of the task force to prioritize based on what we heard as all of you as members of the board and members of the public. once we had that master list narrowed down to five, we asked the task force to prioritize again using two different methods. in most instances, the rank was the same. affordable housing. small business lending. infrastructure. 1 and underbanked. cannabis. our staff took these general marching orders and spent time to identify lending models filling gaps in the marketplace. a good example of this is a financing mechanism for a.d.u.s, homeowners that don't have enough equity to get a home

ebbing -- equity loan. we have a look at products costs, financial predictions. the three primary scenarios are as follows. number one, divestment. two, reinvestment. three, a combination of both. the report will have the costs, benefits and outputs with one another and well as other communities, for example, existing expanded city programs. the goal is to have analysis with enough detail that policy makers and the public can understand what will need to be put into a public bank and what it can provide.

an outline of what we think as of now is and isn't included in the models. if there are priorities listed below the line that you would like to understand further or advocate for inclusion, i would love to hear your feedback. please note that the equal products and services of a bank necessarily change over time. we did our very best to model based on the priorities of the task force, but we also looked at many, many different products and services. if you don't see it here or you see it below the line, chances are good we thought about it, so let us know and we can provide more information. in addition to the models, there are a lot of big questions around bank funding and operation that the task force has tried to answer. capitalization. how much will be capitalized? where will the money come from? deposits? how much will the bank hold in

deposits? break even. how long will it take for the bank to break even and what subsidy will be required and for how long? what is the opportunity cost? in many cases, the task force has not been able to find sources of funding other than the general fund. we'll discuss the reasons for things the report. and, lastly, there are some real thorny, tricky questions around the bank's structure and governance. how would a bank entity be structured? would it be owned by the city directly? what is the tax status? how will the board be structured? and probably most importantly -- how can the governing structure keep it true to its mission while insulating a bank from politics? here you will see a timeline for the final report and what's to come and i hope that gives you a solid preview of what you can expect from us. we look forward to coming back

before you with a final report and sharing our findings and recommendations with the board. thank you. >> president cohen: all right. thank you very much. i have some questions i want to ask ms. molly about for the modelling. if you can go to the mike -- i want you to talk to us about different scenarios, reinvestment and combination, because i think it's probably the crux of the presentation. can you drill down a little bit more and share with us your insight and your analysis? thank you. >> sure. first of all, thank you for having us here and being such an advocate for this process and appreciate your patience. we really want to give it to the respect and time it deserves. we're looking at three main

models. we have the divestment model, takes over the commercial banking. >> president cohen: into the mike, down closer. >> this is the model most expensive for the city to pursue because the city's current banking relationships provide us with a lot of services that are expensive to replicate, but it's the model that for some people is the most salient. reinvestment is a model that focuses on community lending and community investment. this model is cheaper up front, but the lending will receive less of a return because we're doing necessarily below-market lending to spur investment in areas of concern for the city. the final is the combination model. and this will being doing both divestment and the banking functions with community reinvestment. so it's the slowest to achieve -- to break even because it's spending and significant costs

to do citibanking services and receiving below-market rate. >> president cohen: can you tell me some of the estimates. i heard along the line that there were staggering numbers. hold on. i want you to be respectful and not get too far ahead 7 the task force that hasn't signed off on the final report, so i want to say thank you for accommodating my request for this hearing, so thank you for honoring that. i'm very grateful. if i'm not mistaken, divest was $30 million? >> we did present some draft models to the task force. because it's a task force work product, we'd feel more comfortable coming back with specific figures once they've

weighed in. each time we presented interim models, we've gotten substantive feedback about interest rates and time frames and so it does feel premature to present those figures today. >> president cohen: all right. so you said something in your presentation -- i wrote it down -- commercial loan funds, that that sounds like it may be viable and tangible that we could see in the mid- to near-term future. can you expand on that? >> sure. the task force was really primarily focuses on creating a municipal bank and honor our charge the majority of our work to date has been looking at what it would take to create a municipal bank and how long would it take to break even, etc. we as staff recognize that for policy makers to balance the

benefits, it would be helpful to give alternatives. one of the things we have spoken about at the task force and anticipate having in the report is the opportunity in the interim, either as you work to develop a municipal bank or otherwise, to think about ways to structure the city's loan portfolio in a different way to become a commercial lender. it's easier administratively and doesn't require a bank charter. but it also does not adhere to the specific goals around divestment. so it is a different opportunity. >> supervisor fewer: yes. thanks for the report. i also think since the state of california doesn't have a public bank charter, whether or not -- and this new governor has said that he's open to a public bank.

what what you are presenting today be dependent on if the state of california begins to have a public bank charter? >> yes. setting up the bank requires some legislative changes at the state. and we've seen a lot of interest both in the cannabis realm and others about creating a pathway for a public bank charter. it doesn't exist right now, but we don't see it as a major obstacle. it's a legislative change that doesn't appear to have significant opposition, just the creation of the charter itself. >> supervisor fewer: so we could have a public municipal bank under the commercial bank charter? >> i think there are ways to creatively structure. the way we're framing the report is that it would be predicated on a change in state law to create a public bank charter. >> supervisor fewer: my next question was going to be, when we look at scenario 1, 2, 3, we would be able to do all of these things if we had a public bank

charter. is that correct? >> we would need to have a public bank charter to do any of those, yes. >> supervisor fewer: are there any scenarios that we can do without a state public bank charter? >> not of the specific models that we're showing. commercial loan fund wouldn't require a change in state law that i'm aware of, but any formation of a public bank would require that. b.l.a.s on your behalf did an excellent report that outlines that, so we will not rehash their analysis. it still stands about what legislative changes we'll need. >> supervisor fewer: so that's a state legislative change. >> correct. >> supervisor fewer: so state officials would have to champion that. got it. thank you. >> president cohen: i have a couple of questions specific to the slides, if we can go -- well, slide 2, slide for background information. i was wondering if you spoke with anyone outside of

jurisdictions outside of san francisco, thinking of oakland, l.a., they've been articulating a desire, berkeley as well. >> yeah, when we first started this work, we recognized that work was happening all over the place. so molly organized a monthly call for jurisdictions to come together and has been leading that call as an opportunity for jurisdictions to share their reports and what they're hearing and legislative changes. we've had a lot of robust changes with jurisdictions around california and also other states as well. >> president cohen: great. maybe i can hear from molly. maybe you can characterize for me what the conversation has been like on the call. how long have you been on the calls? >> they started last spring, so probably nine months or so. calls involve about 10 to 12 jurisdictions. we'll frequently talk about douche -- we'll talk about -- >> president cohen: are they

primarily from the state of california or across the u.s.? >> primarily california. >> president cohen: are they in the banking and finance field or a mix of everything? >> government officials, legislative staff to executive staff to consultants that are hired on. >> president cohen: anyone from the state treasurer's office? >> yes. we have a representative from the state treasurer's office that joins the calls and is very thoughtful and helpful. >> president cohen: who leads the calls? >> i do. >> president cohen: great. tell me about the calls. >> so the calls are wonderful. we spend a fair amount of time updating people on what the latest goings on are in various jurisdictions. los angeles just had measure b. oakland put out their municipal bank or public bank feasibility report. seattle put out a report. so a is aing -- significant

amount of time is spent discussing. and we discuss legislation. so legislation that supervisor fewer was talking about on the state level. we have a couple of people that joined from the state legislative bodies that can provide their perspectives. >> president cohen: in terms of the state of california -- scratch that, san francisco. we have legislators, lobbyists that are lobbying on our city and county's behalf in sacramento. have we indicated to them that this is a priority for us and we want them to be supportive or pushing the legislation that supervisor fewer referenced forward? >> yes the california association of treasurer and tax collectors has been active and we've been working on it and then we've also -- there isn't legislation put forward yet, but it's moving through the process. so we will be bringing a position to the state legislative committee, which i

sit on, to put forward a position for the city and county. we've been waiting for a legislative sponsor and other information to come. >> president cohen: have we contacted our representatives and asked them to consider sponsoring? >> we haven't, no. >> president cohen: so i'm thinking about this strategically, you know. we're moving as much as we can on the local level, beginning the conover -- conversations, building a coalition, but we need to also, i think, be smart and strategic about our friends and representatives in sacramento. so i would encourage you to reach out and brief senator weiner's office and our assembly members that represent san francisco. if you have any other time left over, do the entire nine bay area county legislative teams,

so they're aware of how serious we are about moving this on a statewide level and we would like to have their support and most importantly, i think, to the best of my knowledge, i don't know if they've been educated, but i do want them to know how much work we can do and it can happen within the first quarter of next year once the report is complete. so that we can get our representatives all on the same page. thank you. thank you for characterizing what the calls are. is there anything else? okay. thank you. my other question -- going back to what i was saying. so l.a. and oakland, we're talking. how does our proposal or our study or where we are in this conversation compare to the two other jurisdictions? >> i think to our knowledge, it will be the first report to

present financial models. east bay report and other jurisdictional reports have done a good job of foundational analysis of potential benefits, but we're trying to put some numbers to the ideas and show what it would take financially. where we could get the funds. how long it would take to break even and we're not aware of any other analysis that includes those models. >> president cohen: that's good. i think that's something to be proud of. that we are living up to our san francisco motto of being a leader and pushing ourselves. sometimes the conversations can be uncomfortable. these are huge numbers, long timelines, but i believe that in order for us to get there, we have to start today, even if the start is incremental. as you know, we've worked for san francisco for 15 years, so we've seen how things have started and they've snowballed

and encouraged other jurisdictions. i'm hopeful that you promote what we know and not be bashful about it, understanding it's not perfect, not a perfect analysis, not a perfect model. there are probably many things we didn't take into consideration or things that we overconsidered. but i think we should be moving in that direction if we're going to see public banking and municipal banks m popping up across the state. i think that's important. i want to go to slide 3, the slide that says, what's taking to long? good things happen to those that are patient. but i want to be sure that we're diligent, smart, not wasting time spinning wheels. do you feel like you're resourced? does this body need to provide more money in your budget? we have one woman operating the show. i was just saying, perhaps

consider in the next budget cycle if there needs to be more money or a part-time researcher or contracts that need to be entered into, think about that. the mayor's office gave budget directions yesterday, if i'm not mistaken, so think about that as we go early on to the budget priorities for this department. this is a great opportunity for -- i don't want to say finish his career, but it would be a complement to his career and the things that he's established here in san francisco. all right. what specifically -- if you could talk specifically about what the task force has requested you to model. >> sure. in the beginning, as i mentioned, we went through this prioritization and it's a challenging exercise, as the treasurer will tell you. anyone that comes up and talks

to him about a municipal bank has a different idea about what a municipal bank is and what it can do. we knew if we were going to do this financial modelling, we had to have concrete services of the bank and understand the skeleton to put some costs to it. we had to start somewhere. we had to do that. we had to look at products and services and model them. when we presented them to the task force and public, it was a public document. we got a lot of substantive feedback. number one, that the models were too small. the bank wasn't big enough. >> president cohen: that we were thinking too small? >> yes. that we were thinking too small and, i think, there's a -- i think there's a healthy tension between thinking big and pushing the idea forward versus practical implementation,

step-by-step approaches. so those are two different ways to approach a problem. and when we had that september meeting, we would like to see banks modeled that are bigger and do more and banks that are taking over the city's banking functions, commercial banking functions. so thinking about our portfolio that's contracted with bank of america and how can we take those services in-house. the challenge them for us was nobody has created a bank from scratch that can immediately operate at a scale we would need it to operate in in san francisco. so trying to figure out how much it would cost to create a bank that would do things to make sure we get paid on time, etc.

so that took some time. and i want to commend molly, because she spoke with everybody to large banks, small banks, advocates, partner banks, to figure out how to do this and how much will it cost? so that will be included in the final model. that accounts for some of the delay. >> president cohen: supervisor fewer, do you want to -- >> supervisor fewer: there is only one public bank in the country, bank of north dakota and they invest in everything that's horrible that we as san francis franciscoans would not invest in. but they work with credit unions. the credit unions in north

dakota are strong and stable and robust. and i'm wondering, does this model look at a shared sort of relationship with our credit unions? >> yeah. we have a member from a credit union on our task force. we've been working with credit unions in san francisco for quite a while.

>> do we know why they didn't apply cloth. >> yes, we do. the reason was that businesses were too big. even when we break out particular services, at the time the feedback we got was even if we just took this one component of the business, it would sink our operation period we don't have the bandwidth or the capacity and we don't want to build to that point. other jurisdictions, los angeles had an r.f.p. where they broke up specific lines of business into smaller pieces and so we are waiting actively to see if

that turned out any differently. that will be really indicative of our future success. >> did you get a chance to review l.a.'s r.f.p. caught their budget is much larger. >> significantly. we have been working with them significantly to understand the r.f.p. and the process. >> really quick, when will you have any indication about los angeles? just seems like there's lots of open questions. perhaps if you had more staff working on this, we may have more answers. >> that is an l.a. staffing question in terms of when they will make their results public from the r.f.p. but we have been actively involved with them through the process. it is not a staffing question on our side. >> how many people staff this? >> molly is the primary person doing the analytical work. i put in a significant amount of time.

>> hold on. she chairs, you probably are filling in and doing a lot of stuff. have they been community meetings around this? >> every one of our meetings is public and open to the public. >> we are not leaving the building, we are not going out into the community? >> yes. >> do you see that happening in the future? >> we are open to that. the expertise is the financial peace of this. how can we put money into what people are saying? if the board board has future direction on which policy direction to provide, and you would like public feedback, we certainly would be open and available to doing that. i don't think we see our role as making the decisions at this point, but rather to provide you with specific so you can make good decisions. >> i want to go back to slide four, report goals, because i want to say that i agree that there are two primary goals of the report.

i really want us to think of the bank of the tool towards specific policy goals. i have on george outlined what i would like to see my policy goals as local control, transparency, and financial empowerment. i'm curious to know if the task force has identified any of their own goals. >> yeah. in the very beginning, i think our first meeting, may be our second meeting, we took everything we heard today to, everything from the hearings and individual meetings with supervisors and members of the public, we covered the walls in room 305 in the conference room. we have everything we could think of. and the task force numbers could add their own ideas to that. after that we did some work to group of like-minded suggestions together, categorize them a bit and continue to finesse and massage those. after that meeting we had surveying in case folks felt like that was overwhelming. there are so many and we want to give people a chance off-line to

comment. i feel confident that we've really put forward every idea that we've heard into that initial scan. >> i think the port should really highlight how a bank moves us toward those goals. the ones that i talked about about financial empowerment, transparency and most importantly, local control. how these goals does have a bank moves them closer to the goals rather than solely discussing the cost of the bank as a policy goal in and of itself. so what i am looking and hoping to provide direction on to the task force continue to exist should the board of supervisors deem it appropriate, there needs to be a framework for how we, as policymakers, how we, on this body, can evaluate whether a municipal bank is right for the

city, and i suspect that it is likely. i suspect that it is, it is right. right now i'm unclear as to what the right form would be. and what that is looking like. do we start small and grow big? do we start with a smaller element of business and then grow over time? i think there needs to be a framework for how we figure that out. i haven't heard that yet. i'm trying to listen for that. the decision obviously needs to include what the costs are and we have spoken around it and you will be presenting it through once the task force has had a chance to finalize the report. but what are the costs, but also how the models do or do not move

as to our stated goal and again, i'm still unclear how my goals differ from the task force's goals. i'm imagining there is some nuance in the space, but i hope the report will help us understand the models and how the models will move us, or perhaps they hinder us from these particular goals. i want to dose you have any comments? >> is a great suggestion. i appreciate it and it is something we will incorporate. >> i don't want your work to go in vain. you are studying this and you have presented it to us. i am wanting it to be more than just pass as a resolution. in slide five, it is called determining priority. and i was curious to know, are these policy priorities, or investment priorities, or wish lists of things that we just care about in san francisco. >> these are primarily priorities that the public

wanted the bank to cover. mostly in these cases, it is around landing, but the original list included the broader program. >> i do remember the original. we kind of took everyone's suggestions. at what point will we whittle it down and really start to focus on tangible and reachable goals? >> we try to do that particularly for the first two around affordable housing and small business lending. molly did some work saying okay, we want to do affordable housing what does that mean? what could the bank actually do? and talking to folks like enterprise and choo-choo and banks, and other folks understand what exists today in the market place where does how do the gaps aligned with some of the city's priorities around affordable housing and how can we use some of the city's relationships to pair with city

run banks to achieve some of those outcomes? getting as specific as okay. will present things. we will provide x number of loans for ten years, at this size, at this interest rate. you will see the specifics in the final report. i want to stress that we needed that to do the modelling, and those are just -- of those are ideas and those are specifics and if there are other potential products and services that you would like to see modelled, we may have already done it or we are happy to do it in the future we really had to have some of those specifics to put real numbers around this. it was a really great exercise to understand what do people really want when they say affordable housing? what does it mean? how can we do it? what could a bank add to that? >> sticking in line with that on slide five, determining priorities, looking at the under

banked line, which is the fourth line in your table, it is also a close second. it is the highest number of top choices, where a small business lending and infrastructure seem to be everyone's second choice. when was the survey conducted? how many people did you survey, how were these responses received and solicited and ultimately received? >> this is a survey of the task force itself. >> refresh me. how many members? >> twenty-one 16, sorry. >> sixteen poke. okay. is a really small pool. >> absolutely. >> okay. >> one was it conducted? >> we started at the beginning

of the process and i would say we re-examined it at the september meeting when we heard, okay, what we agreed upon early in the process is not what we wanted. so we added back and things like taking over the commercial banking functions. >> wasn't done anonymously, or do we have some information about how different groups prioritize different policies? >> it was both. it was in person. which would be public. and we allowed off-line surveys so people could send in specifics. >> all right. i'm going to slide six. back to the models. how do they relate to the stage of priorities on the previous page? >> these relate mostly to scenario two, reinvestment which is where we started, and in scenario one, the primary operations are around the city's banking operation, as well as providing participation loans. >> can you give me a range of a

rough estimate cost? a range for the cost of beginning to tackle scenario two class. >> i don't have the figures in front of me because it is not something the task force has adopted, but i'm happy to come back with those. >> would we be able to phase in scenario two? >> yes, and no. so with the challenge with creating a bank is there is pretty significant startup costs whether you are starting with a small portfolio or intending to be a small bank or a large bank, some of the initial investment is the same, and so if you were to face it in, it would mean it would take longer for it to break even. a larger bank makes more profit, as we have seen evidence to. the bigger you are, the more money you make, which is a challenge when you are starting. so private sector banks can take 5-10 years to turn a profit peer

given that our bank will serve community goals and offer a below-market rate interest rates , it is significant. it would take significantly longer than a private sector bank. >> okay. i'm not sure if i asked a question or not, but would we be able to break up the phasing in of scenario two in five or ten year chunks? in terms of identifying a goal and getting us to that goal? >> it depends -- in scenario two , to get to the point where the bank has a charger and is authorized to operate as a bank, costs the same pretty much regardless. the costs are the same whether you're starting small or starting big. the difference would be in the capitalization cost because there is a ratio between what you lend out and what you have to have been bank capital. certainly we are more than happy to show that, but again, there is a trade-off because it would be less money annually, but for

a longer amount of time. cumulatively and may be more expensive to start small. another way to address it, which i think we will provide in the report, is to think about creating a loan portfolio without a bank charter while you are working on the bank charter and the formation of a bank, so that you can start to build up a portfolio, and then when you have the bank charger, you are working with a mature portfolio, and can scale out much more quickly. that is one opportunity for a phase in that we see. it is a challenge because of the startup costs. >> the conversation is hard because you reference startup costs, but there is reluctance he to share what those costs are , so it is kind of a funny conversation to have. so i recognize that there will be started because what does cross with any endeavour. what i do want to emphasize is that in the seventies, i think

it was the early seventies, there was legislation was passed to make san francisco a transit first city. as you can imagine, we have spent hundreds of millions, if not a few billions on trying to get there. quite frankly, almost 40 years later, we are still not quite there, at least on the outer extremity. i use this as an example. people who are thinking into the future, forward thinking and big thinking, we are not so much limited to the costs associated with big picture thinking. so -- thank you. [laughter] thank you. i want to say that i want us to be very thoughtful in our approach, but i want to make sure we are not stifling ourselves because of costs. this is a budget that has been expanding. the budget that we have now today, at the end of 2018 as $11 billion.

as you know, we had a 15 million-dollar windfall that may or may not continue in years to come. the state of california is the fifth largest economy in the world his. to say that money -- i don't know. i'm just not buying the arguments that we can't do it because it is too expensive. so i just want to put the idea out that we are looking for something we can celebrate in 70 years and we can say, yeah, remember that moment? we can look back in the archives back in 2018, in 100 years from now, they will be celebrating as just for our forward thinking. i want to --dash one of the things i remember in graduate school was decision-making under uncertainty i was in my masters program.

we talked about, how do we plan for the future with an unknown or not understanding what the future restraints and constraints will be quiet so i am sensitive to them but i also think we need to really be bold thinking and in any jurisdiction is able to big bold thinking it would be this want to start that conversation. i just want to encourage you to keep pushing outside your comfort zone, to keep pushing -- my spin trainer always says this catherine you can always appreciate the spirit catherine is a certified spin instructor, if you don't know. if it doesn't challenge you, it doesn't change you. if we were really trying to see major changes in the banking system and in san francisco and how we deal with local control and transparency, that we have to challenge ourselves in order to get us through those changes. i want to say thank you. you've done a great job in answering my questions. thank you very much for all of your hard work on the data and the modelling.

to the advocates that are here and waiting for public comment, thank you very much for your diligent work, and being part of this. i know there is a whole bunch of different ideas that have come into this conversation. i really think we are scratching the surface but i do believe that we are onto something, and i want us to stay encouraged. and not get discouraged by the sheer size of this, and the amount of money this is, and so i appreciate the time. do you have something you want to say? >> i was interrupted during my questioning. i have one question about this. i just want to say,. >> shade, oh, my gosh. >> i just wanted to say, i think that what will determine much of what we can do and how we do it is how this charger, at the state level is written. and it is really important for

us, as san francisco, to have a voice in our expectations of what this charger will actually help us deliver. i think when we talk about the finances, it is important that however, i believe we are doing this in san francisco because it is the right thing to do and that we cannot rely on these big banks anymore that eat up the little banks and invest in all these things that we feel as san franciscans are destroying the world and our communities. i know that is very complex. i know there are limitations to what we can do. i think this is a good first start. i would love to have a conversation broadened around models, but also about what we hope to deliver, and i also want to thank you for all of your work, and molly, and all the advocates are pushing this conversation. i think in 70 years, i will be