Economic and Social Justice Team Members Meet with Mayor Rothschild

On May 8, 2012, Harvey Akeson, Phil Lopes and Richard Brodesky met with Mayor Rothschild. 

We presented our economic proposals and our idea for a public municipal bank.  The document follows for your perusal.

The meeting went well, and the Mayor granted all of our requests under Conclusions and Action Steps. 

Our document is a set of directions representing many people's ideas and work.  We see it as a context for discourse, community building, and constructive action.  It is NOT a set of demands. 

We will be developing these ideas with the Mayor and City officials.  Feel free to get involved!

Special thanks go to:  Harvey Akeson; Marty Diamond; Betty Fridena; Richard Fridena; Jim Hannley; Jane Kroesen; Phil Lopes; Pat Wiedhopf; Susan Willis as well as to Marc Armstrong, Executive Director of the Public Banking Institute.   

Progressive Democrats of America

Tucson Chapter

Proposal for a Municipal Public Bank and

Economic Improvements

May 8, 2012

Executive Summary

We propose a municipal public bank modeled on the Bank of North Dakota (banknd.nd.gov/) which will enrich the City of Tucson and its residents through:  a reduction in administrative costs for routine banking and the use of investments to support economic development within the City.  Additionally, we make some suggestions concerning how the money might be used. 

Background

We are facing an unprecedented economic crisis which has repercussions for the prosperity and even the personal safety of Tucsonans.  The paradigm of American life has totally shifted, yet we are still bound to the exigencies of an economy based on the boom and bust cycles of construction, tourism, and extractive industries. 

During a similar time, in 1919, the people of North Dakota faced a similar challenge.  Faced with a massive crisis in agricultural mortgages, that state created the Bank of North Dakota to stave off a wave of foreclosures.  Since then, the Bank of North Dakota has partnered with private banks to underwrite loans and/or interest and to develop programs to develop local communities or enterprises important to that state.  The BND has had a major role in local communities, state-sponsored agricultural projects like a stud, research and development in the green revolution and extractive industries and more recently support for higher education. 

This model combines the best of public and private banking and financed with a unifying non-partisan approach to problem solving.  Since 1945, the Bank of North Dakota has also returned more than $555 million to the general fund of that state. 

Why Public Banking and Not Credit Unions or Community Banks

Marc Armstrong, a business consultant Based in Santa Rosa, CA and Executive Director of the Public Banking Institute, explains:

- In all the talk about public banks it's easy for forget that banking is all about creating NEW money for an economy.  You basically monetize future revenue by creating it as a loan and then having the loan slowly disappear with every monthly payment.  Without this fundamental extension of credit, it's really hard for investments to happen, as we've so plainly seen over the last few years.  Compounding things, money "leaks" out of our economies because we buy stuff at franchises (instead of independent businesses), with profits going to remote shareholders (instead of being reinvested locally).  But, to your point, any pool of money OTHER than that generated by a depository bank is RECYCLED money -- it simply collects money from one pocket and puts it in another.  Might be a good approach if the money you are attracting is coming from the state or fed govt, but that is not like creating NEW money, like what a depository bank does.

A Brief Primer on Public Banking

Public Banks are ...

• Viable solutions to the present economic crises in US states.
• Potentially available to any-sized government or community
able to meet the requirements for setting up a bank.
• Owned by the people of a state or community.
• Economically sustainable, because they operate transparently according to applicable banking regulations
• Able to offset pressures for tax increases with returned credit income to
the community.
• Ready sources of affordable credit for local governments, eliminating the need for large “rainy day” funds.
• Required to promote the public interest, as defined in their
charters.
• Constitutional, as ruled by the U.S. Supreme Court

... and are not

• Operated by politicians; rather, they are run by professional
bankers.
• Boondoggles for bank executives; rather, their employees are
salaried public servants (paid by the state, with a transparent pay structure) who would likely not earn bonuses, commissions or fees for generating loans.
• Speculative ventures that maximize profits in the short term,
without regard to the long-term interests of the public.

PDA Tucson supports public banking because it. . .

·        Will serve as a needed economic driver

·        Bring people together

·        Assure community development

·        Keep Arizona capital in Arizona

·        Free access to credit.

Courtesy, Public Banking Institute and PDA Tucson, Issues Organizing Team on Economic and Social Justice, revised 3/3/12

Possible Misconceptions about Public Banking

·       Public banking is NOT as it involves a partnership between the public and private banks. 

·       Public banks serve as a sort of Federal Reserve Bank for banks in their service areas.

·       Public banking does not threaten the American Dream or the traditional idea of the American Way of Life as it gives velocity to capital which helps communities through supporting small businesses, development projects, and residents.

·       Public banks enhance the quality of life and provide a revenue stream for the service area by raising the quality of life in the service area over the long term. 

Our Proposals for New Economic Directions for the City of Tucson

·       Develop a community investment bank with funds from local public and private sources to strengthen the economy and the prospects of our residents and which may be used to support the following:

·       Advocate for a meaningful way to fund public education guaranteeing not only basic skills acquisition for all but also vocational education geared toward new and emerging fields

·       Strengthen the offerings and the modalities of Adult Basic Education

·       Ask educational providers to develop new curricula leading to national credentials based on reliable data dealing with emerging fields and our community’s needs

·       Work with unions to develop and enhance training experiences to make sure Tucson has enough workers in the skilled trades as the baby boomers leave the workforce

·       Utilize public/private funding to create a program to launch micro-enterprises

·       Create high quality and affordable childcare facilities so parents can work with confidence that their young are nourished

·       Solicit donations of computer equipment so that a network of “computer shacks” can be opened around the city offering not only training but safe recreational experiences for our residents

·       Require that all work receive meaningful compensation so that a person can live in this community with dignity i. e. work toward a living wage for all

·       Pass a progressive rent reduction ordinance to stimulate small and large business start-ups as well as the development of not-for-profits.  In other words, if a rental space is not let in a specific time frame, say 3 months, the asking price of the rental will be lowered by a specified factor, perhaps 15%.  Further reductions would happen at specific intervals and at specific levels. 

·       Improve air service in order to move people and materials in and out of Tucson more efficiently as well as to and from more destinations.  This capacity will only make Tucson more attractive for job development. 

·       Work with the Materials sciences Department at the University of Arizona to develop new industries such as glass, industrial ceramics, metallurgy

·       Using artisans to anchor and develop neighborhood centers e. g. the Red Star Yeast Factory Project in Kansas City, MO

·       Develop cooperative business workshops in all sectors of the city where a team of business professionals such as an accountant, a graphics designer, a word processor, an information technology specialist could work together, help new start-ups, consult with existing organizations, and pursue their own independent work. 

·       Develop an agreement with local financial planners and/or their association to teach financial planning to Tucsonans through Parks and Recreation, neighborhoods centers, the libraries, and the schools in order to encourage Tucsonans to build wealth.

·       Invest in projects that will develop civic pride in Tucson, change and improve public discourse, and increase partnerships and creativity. 

Conclusions and Action Steps

·       PDA Tucson respectfully requests that the Mayor assign a staff member to work on the concept of municipal public banking through research and the examination of projects in other states and cities.

·       PDA Tucson is willing to do legwork to answer questions and converse with different sectors of the community addressing the reasons to pursue public banking in Tucson. 

·       PDA Tucson would like to serve on any and all advisory committees to the new office of Economic Development.  We offer creativity, new ideas, research potential, and community building skills.