Financial Justice in California: A Public Bank For the Public Good

Predevelopment loans, that’s where the public bank can play a big role. The reason why that’s a big issue is that I can get and do get a ton of predevelopment loans from CDFIs, but they have a limit on how much they can put out. On predevelopment, sometimes that can be $2 or $3 million, and there are very few CDFIs that are gonna give you that much money for a long period of time. The role this bank could have is patient capital. There’s hardly any patient capital around, other than CDFIs, and their patience isn’t enough for these deals.

Tribally owned lands and reservations may not have adequate water systems to allow for new development. Those are projects that take years to execute. It’s hard for development projects to carry a large infrastructure add-on, and if there’s a community water system that needs upgrading, the community itself has to work on upgrading the system. If it’s a question of extending a water line for half a mile, that might be conceivably worked into the capital stack. If you get beyond a certain level of infrastructure, it just makes it infeasible.

Rural communities have fewer revenue streams that they can devote to affordable housing. Banks don’t have a presence, and investors ignore rural communities. Investors would rather invest in an area with a strong economy where their return on investment is fairly safe, rather than in a rural area that’s struggling. Many rural areas are struggling with high unemployment and high poverty rates. So all of those things conspire together to create a paucity of credit and capital and make the cost of borrowing and development more expensive.

A California public bank would need to respect sovereignty, understand tribal lands, and partner with native CDFIs to provide patient and flexible capital. Tribes usually have to either create a section 17 or do a resolution negotiation with a bank in order to ensure that they don’t have to waive any of their sovereign immunity. Tribes want to be able to assume full control over their enterprises and their money. Sovereign immunity, it is not a compliance issue for tribes. It’s the foundation. Most banks that I’ve come across treat tribal sovereignty as a legal risk to mitigate rather than a government status to respect. So what tribes need in the state is recognition of tribes as governments, not looking at them as non-profits or a special business entity. What’s needed is standardized banking policies that accept tribal resolutions, tribal courts, dispute resolution, limited and project-specific waivers of sovereign immunity.