SB 5188 – Concerning the Creation of the Washington State Public Bank — Fact Sheet Prepared by William A. Longbrake (January 28, 2021)
- Issuer
- Congressional materials
- Date
- 2021-01-28
Summary
A fact sheet prepared by William A. Longbrake, former Affiliate Associate Professor at the Daniel J. Evans School of Public Policy and Governance, University of Washington, for a public hearing of the Washington State Senate Business, Financial Services & Trade Committee on SB 5188, concerning the creation of the Washington state public bank, dated January 28, 2021. It summarizes a legislatively funded study of a state-chartered public cooperative bank published in two parts. The first part, published December 2018, reports a user needs survey in which 32% of respondents indicated interest, 22% no interest and 46% were uncertain. The second part, published May 2020, sets out a design framework addressing six issues, a business plan with 10-year financial proformas, and draft legislation, and the fact sheet notes where SB 5188 incorporates each recommendation.
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Cite this document
“2021 01 28 A28327 D225963 William Longbrake Evans School State Bank Study Materials.”
Original at app.leg.wa.gov, dated 2021-01-28. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-01-28-2021-01-28-a28327-d225963-william-longbrake-evans-school-state-bank-study-materials/
, SHA-256 33fc04d74b5fc6c2e604f4827bc6e8b18e372e6753d6d88d57056ba47a23902d.Full text
Washington State Senate
Business, Financial Services & Trade Committee
Public Hearing Re: SB 5188 – Concerning the creation of the Washington state public bank
January 28, 2021
Fact Sheet
Prepared by William A. Longbrake, former Affiliate Associate Professor, Daniel J. Evans
School of Public Policy and Governance, University of Washington
Highlights of “A State-Chartered, Public Cooperative Bank for Washington State: Design
Framework, Business Plan, and Draft Legislation,” a study conducted by faculty at the Daniel
J. Evans School of Public Policy and Governance, University of Washington
• This study was funded by the Legislature and published in two parts
• The first part of the study was published in December 2018 and reached three principal
conclusions:
1. Washington State could create a public cooperative bank but would need to first enact
an authorizing statute and amend various other statutes. SB 5188 fully addresses this
finding
2. Based upon a “User Needs Survey” of state governments and political subdivisions, 32%
indicated interest in public cooperative banking, 22% indicated no interest, and 46%
were uncertain whether they would benefit. Interest was greatest among smaller and
rural local political subdivisions.
3. Small jurisdictions and public utilities expressed considerable interest in specific
products and services the Bank might offer. However, many of those services are
available, entirely or in part, through existing state government programs or through
private financial institutions.
• The second part of the study was published in May 2020 and encompassed three parts:
I. Design Framework – six issues were identified that must be addressed in drafting
legislation to create a state bank:
1. Which types of entities and projects should be eligible to participate in the Bank?
• Bank be structured as a member-owned cooperative – members restricted to
the state, state agencies, local and tribal governments
• Membership should be voluntary
• Members contribute funds to capitalize the Bank and share in profits earned by
the Bank
• Services offered to members:
o Primary service: access to capital at competitive rates to be used in building
public infrastructure; the Bank would accept funds from members and issue
debt, either taxable or nontaxable, to the public and provide various types of
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loans to individual members to finance infrastructure projects and manage
timing of cash flows
o Accept deposits from members
o Manage investment of funds for members
o Provide professional technical assistance services to member governments
and to non-member governments
o Provide financial advisory services to members and to non-member
governments
o The Bank will not provide transactional depository services to members, such
as check clearing, automatic clearing house transactions, and remittance
processing
SB 5188 incorporates these recommendations
2. Where would the Bank reside within state government? Three options were
described: a new standalone agency; a new agency housed in an existing state
agency; and the expansion of the mandate and responsibilities of an existing state
agency – SB 5188 adopted the second option and stipulates that employees of the
Washington State Housing Finance Commission provide the primary
administration and operation of the Bank
• WSHFC has capital markets expertise
• WSHFC reputation and credit rating should help the Bank achieve a high rating
on bonds it issues
• Relying on the resources and expertise of the WSHFC would shorten the time
required for the bank to become fully operational and could reduce
administrative expenses compared to a standalone option
3. Who would regulate the Bank? Various options were presented; SB 5188 elected
the State Finance Commission option
• In addition the Bank would be subject to oversight by the State Auditor and
would establish an Audit Committee reporting to the Bank’s board of directors
4. Who should exercise oversight of the Bank’s programs and operations?
• The study recommended a board of directors provide oversight; directors would
be a mix of members and public-interest directors with relevant expertise – SB
5188 incorporates this recommendation
5. How could the Bank optimize its credit rating? Several layers of credit protection
were recommended all of which are provided for in SB 5188 – these layers should
be sufficient to obtain one of the top three ratings on securities issued by the Bank
• Detailed systems and procedures for underwriting, maintaining documentation,
and conducting on-going compliance and credit reviews of individual member
borrowers
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• Debt service reserve fund and replenishment mechanisms
• Member contributed loss reserve funds and replenishment mechanisms
• Member loss recovery mechanisms in the event the member defaults on a loan
• Voluntary contributions from the state – the state would have no obligation to
make contributions, an essential requirement to avoid impacting the state’s
credit rating and debt limit
• Potential to issue loss-absorbing securities to the public
• Access to other Bank funds, specifically retained earnings
• Regulatory power of the board to require members to meet specified standards
and conditions
6. What staffing resources and administrative expenses would the Bank require? The
Business Plan and financial proformas included estimates of human resource
needs and administrative expenses
II. Business Plan – financial proformas were prepared for 10 years – three scenarios were
presented based upon membership assumptions; the Bank would be financially viable in
all scenarios but profitability would be achieved sooner if more governments become
members and if human resources requirements and administrative expenses are
managed by an established state agency (WSHFC)
III. Draft Legislation – to effectuate the business plan – SB 5188 closely follows the key
elements included in the draft legislation
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- 33fc04d74b5fc6c2e604f4827bc6e8b18e372e6753d6d88d57056ba47a23902d
- Original
- app.leg.wa.gov