Philly will consider establishing a public bank in an effort to boost Black-owned businesses
A public bank would have the power to provide loans, issue tax-exempt bonds, and finance city construction projects.
Philadelphia City Council will consider establishing a public bank, a move that lawmakers and advocates say would fight systemic racism and boost the local economy by serving business owners of color.
Councilmember Derek Green introduced legislation Thursday to establish a public bank as a city authority that would have the power to provide loans, issue tax-exempt bonds, finance city construction projects, and perform other banking functions.
Green, who has spent years looking into the establishment of a public bank, said the idea grew out of his former job as a small-business lender with Meridian Bank in North Philadelphia.
“It was during that time that I really got a real understanding of the issues of redlining and access to credit and how so many businesses in that community and communities around the city of Philadelphia were not able to grow because of historical issues of systemic racism and challenges around getting credit,” Green said at Council’s first meeting of the year.
While other large cites have also explored such options in recent years, only three public banks currently exist in the United States: a state bank in North Dakota and public banks in Puerto Rico and American Samoa.
Philadelphia commissioned a feasibility study by the New York-based HR&A Advisors that was released in September. The report found the city could establish a bank as a city-controlled authority, and by lending money to small businesses could become financially sustainable.
“A public bank differs from existing City financial programs in that it empowers the City to directly control a large flow of capital and could do so without being beholden to the City’s annual budgeting process,” the report said.
Council kicked off its meeting schedule for the year amid the ongoing pandemic and financial crisis, as the city faces scrutiny over its vaccine rollout and lawmakers prepare for difficult budget negotiations that will likely include debate over police funding.
Those negotiations may take place later in the year than usual, however, because Mayor Jim Kenney’s annual budget address to City Council will be postponed from the first week of March to April 15, according to a memo obtained by The Inquirer.
The change will allow more time for the city to see if Congress provides any additional aid for local governments and to estimate how much tax revenue it can expect to collect next fiscal year, amid uncertainty over how long the economic fallout from the pandemic will last.
After initially pitching a rosy $5.2 billion budget just before the pandemic hit, Kenney last year had to revise his proposal twice due to worsening projections. Ultimately, he struck a deal with Council for a $4.8 billion budget that included layoffs, tax hikes, service cuts, and drawdowns on reserves.
This year’s budget could be even worse if Congress does not include significant aid to local governments in its next stimulus package.
Council members and Kenney’s administration have said they will prioritize ensuring that Black and brown businesses and workers share equitably in the city’s recovery, a reason Green cited for pursuing his public bank legislation.
His bill, which has 11 cosponsors, outlines the banking authority’s proposed structure, with a 13-member board of directors, made up of nine appointees selected by the mayor and Council, plus the mayor, the Council president, the city treasurer, and a chief executive officer chosen by other board members. The authority would be audited annually by the city controller and would need to seek oversight from state or federal regulatory agencies.
A report published in August by the Center City District found that Philadelphia has a smaller share of Black-owned businesses relative to its population than other large cities. Philadelphia has just 1.8 Black-owned businesses for every 1,000 Black residents, the report found, compared with five in Washington and 3.4 in New York.
Green said only a small number of Black business owners have relationships with banks or seek loans through the federal government’s Small Business Administration — something he said he learned from his own father-in-law, who owned a gas station in Philadelphia and struggled to grow his business.
“I think the city needs to take a more active role in helping these businesses to grow,” he said. “And as these businesses grow, that creates opportunities for jobs and opportunities for us as a city to address poverty.”
Also on Thursday, Councilmember David Oh introduced a bill to offer local tax breaks for people burdened with student debt. And Councilmember Kendra Brooks announced plans to hold hearings on “payments in lieu of taxes,” or PILOTs, from the city’s large nonprofit institutions, such as universities and hospitals.
As nonprofits, those entities are exempt from paying local property taxes, and Philadelphia’s concentration of premier higher-education and health-care institutions means the city is unable to collect from some of its largest employers and landholders.
Brooks said the cash-strapped city and School District need PILOTs “as an easy way for the city to generate additional revenue that does not place the burden on working folks.” She tied the issue to the need to fix environmental hazards at many of the city’s schools, including lead and asbestos.
”If we make our buildings safe and support our schools, we need funding to do so,” Brooks said.