Banking might not seem like the answer to a healthier environment, but there’s a growing movement in Boulder that believes public banking could fund environmental projects from solar development to local organic farms… even a municipalized electric grid.
Public banking is a simple concept: it’s a bank owned by the people for the benefit of the people. Unlike a credit union, a public bank’s profits go to all of the taxpayers of whatever entity forms the bank — whether that’s a city, state or even just a community within a city — not just the members of a single credit union. Also unlike traditional banks, public banks don’t allow for individual or business checking accounts. Deposits are accepted only from the municipality or state body that created the bank. Essentially, a public bank allows a municipality to invest its own money in its own bank and make interest on that money, then the bank can issue itself — or citizens — loans for infrastructure or other projects.
“The beauty of public banking is that the public sets the agenda of the banks,” says Gwen Hallsmith, executive director of the Public Banking Institute in Sonoma, Calif. “If the mission of the bank is to foster sustainable food and renewable energy and locally created businesses and jobs, then that’s where the bank will focus its resources instead of in the risky derivatives market and overseas investments involving slave labor and environmental destruction.”
Sounds like a good fit for the environment-loving population of the Centennial State. In fact, the concept of public banking has gained enough traction in Colorado to merit a conference on the topic that took place on Jan. 31 in Denver. In addition to the Denver conference, Clean Energy Action of Boulder held a special breakout session at Impact Hub on Jan. 29, where Hallsmith discussed the role that a public bank funded by the City of Boulder could play in financing not only Boulder’s stalled municipal electric utility, but could also create affordable housing, increase farm-to-table agri culture and renewable energy, enhance energy efficiency and improve public transportation.
“In Germany, where there is public bank in every community, they have been leaders in the field of solarizing their electric grid and creating all sorts of green economic development and new job opportunities,” Hallsmith says. “That’s the important point: public banks are owned by the public and they can therefore respond to our most pressing public priorities.”
For Alison Burchell, a geologist and founding member of Clean Energy Action, Boulder’s muncipialization effort is a pressing priority. Burchell says that she began to seriously look into how public banking could push municipalization forward about two and a half years ago.
Burchell took a look at the city’s financial statement for 2013 and found that all combined — from general reserves to waste water and downtown funds — the city has $269 million in reserve funds.
“So [on average] you need $25 million to set up a bank,” Burchell says. “Every $25 million gets you $250 million in loan credits. The thing that stopped me in my tracks is what is the other $250 million number we know floating around our community?”
The estimated funds needed to municipalize Boulder’s electric utility.
“The interesting thing about that money, [and] I don’t know where that money sits, but let’s say it sits in Wells Fargo. What’s the interest we’re getting on it now — 1 percent, something like that?” Burchell says. “When we go to borrow it back we have to pay loan fees and interest on what we borrow back.
“Whether with municipalization or not, there are going to be improvements to the way we produce and consume our electrons,” she says. “It’s very, very expensive if we go through a series of banks and a series of loan agencies … These are high risk projects, and it’s very expensive to loan or bond them. If we set up our own bank, we can begin to loan to ourselves and collect interest on our own money, and it doesn’t have to be these exorbitant interests, it could be more reasonable rates of interest, 3 or 4 percent, and still make a great profit.”
As a geologist, Burchell says she is drawn to concepts like public banking because of the environmental projects such institutions can fund. She makes no attempt to disguise that for her, municipalization is key where public banking in Boulder is concerned — and she’s not alone.
Amanda Bybee, vice president of Namesté Solar in Boulder, originally hails from Austin, Texas, where the utility is municipally owned. Bybee sat on a panel at the Jan. 31 public banking conference in Denver to discuss the need for local funding.
“I think there’s a lot to be said of public institutions that are accountable to the public. In Austin the utility is the primary fund that supports every other budget the city has, and that’s a great thing,” Bybee says. “And they’re able to say, ‘We care about where our energy comes from, we care about climate change, we care about economic development’ … but it’s hard to do. Look at what Boulder has had to put in place to even get as far as it is has [with municipalization].”
Beyond municpalization, Bybee says that public banking could simply provide a better option for individuals and businesses that want to get loans to install solar systems.
“So [the] solar [industry] is in a good position in the sense we have a good number of financing options, and there are a number of groups out there that provide solar loans and opportunities to make this accessible to people,” she says. “But the question for [Namesté Solar] is less about ‘Do we have access at all?’ and more about ‘Is there a better way to go about it that benefits the local economy?’”
On the Jan. 31 panel with Bybee was August Miller, co-founder of FoodShed Productions in Longmont, a group that works with local residents and farmers to teach them how to produce organic food. Unlike the solar industry, small farmers struggle more to secure financing to purchase land or equipment because of the extremely low average pay for a U.S. farm worker — according to Miller, between $2,500 and $5,000 annually.
“My wife and I earned a little over $6,000 in 10 months working for one farm,” Miller says. That was about $80 a week, with a minimum of 50 hours a week and a maximum of 60 to 70 hours a week. When they went to a bank seeking a loan in early 2014, they were told they were “too risky.”
“In terms of the surplus of farmers without land or access to land, public banking could go a long way to address the obvious dilemma for farmers not only in Colorado or Boulder, but throughout the nation.
“Having a low-interest loan that is long term, it’s very fitting for agriculture because you can’t move your farm because your investment is the soil and your knowledge is based on that investment in the soil,” Miller says. “The two fit nicely with each other. Having a 1 percent loan for 30 years would keep people here, it would make sure that they were invested in their community not just short term. It would change the whole mentality of how we do business and who our neighbors are.”
But is public banking feasible for Boulder or even Colorado?
“This is how change happens, right? A small group of committed individuals can change the world,” says Bybee. “Who’s to say that this group at the public banking forum can’t make it happen? I’m not going to bet against them.”