LOS ANGELES — Los Angeles voters will consider a ballot measure on Nov. 6 that may pave the way to creating a publicly owned bank to make it easier for cannabis businesses to access commercial banking.
The ordinance signed Friday by Mayor Eric Garcetti asks voters to approve a city charter amendment to allow for the creation of a city-run bank.
Voter approval of the ballot measure would be an initial step in what city advisers described as a complex and costly process.
A report from City Attorney Mike Feuer said that amending the city charter eliminates one impediment to creating a municipal bank, but other roadblocks remain under federal, state and possibly even city law.
The city legislative analyst’s office in a March report suggested costs to establish a bank would be exorbitant. Though the CLA didn’t provide an estimated cost it cited a 2011 study from Massachusetts that suggested a statewide public bank would need $3.6 billion to open.
Potential sources of start-up funds considered in the report were the city’s general fund, bonds or money from a philanthropic organization.
“General Obligation Bonds would not be available either due to regulations regarding their use, such as time limits on when they can be used, prohibition on use to benefit a private party, and recordation of a covenant for public benefit on properties that receive bond funds,” according to the report.
The Bank of North Dakota, the country’s only state-run bank, issued bonds to provide its initial capital when it was founded in 1919. The CLA’s report described failed efforts by numerous states including California to establish state banks since the 2008 economic crash. Among those was a 2012 effort by Hawaii that called for the issuance of $500 million in bonds.
Councilman Herb Wesson first introduced a motion to create a municipal bank in July 2017 saying that it could help finance affordable housing and help small businesses in addition to providing a safe place for cannabis businesses to keep their money.
Recreational marijuana sales and use became legal in California on Jan. 1.
Federally insured and regulated banks have refused to handle transactions from cannabis businesses, because the federal government still considers marijuana an illegal drug, one facing increasing hostility under the Trump administration.
The lack of access to banking means that marijuana businesses keep a great deal of cash on hand making them targets for robberies.
“This November, voters will have a chance to voice their support for a publicly-owned, democratically governed bank that invests in Los Angeles, not Wall Street,” Trinity Tran, organizer of Public Bank L.A., an organization advocating for the move, said in a statement. “This is an historic opportunity to take back our monetary power to invest in the long-term health of our communities.”
Oakland and San Francisco also are contemplating the feasibility of starting public banks.
State Treasurer John Chiang announced in January that his office and the state attorney general’s office would study establishing a state bank to support the cannabis business.
Fiona Ma, Democratic candidate for state treasurer, also supports a bill to create a banking system for cannabis to make it easier to collect tax revenues on the drug.