On Monday night at Oakland City Hall, civic leaders and advocates hosted a teach-in on Germany’s renewable energy revolution, which has largely been powered by municipally-owned public banks. They hope Oakland can help lead the way for the United States to do the same.
“There are more public banks in Europe,” said Councilmember-at-Large Rebecca Kaplan, who co-sponsored the event along with councilmember Dan Kalb (District 1). “The United States is not as far along,” she continued, “but we are working to change that.”
Public banks are mission-driven alternatives to Wall Street banks. They are controlled at the local level, and designed to respond to community needs. They offer more affordable financing to community-driven development, such as solar and wind infrastructure, small businesses and affordable housing.
The event was organized by the Friends of the Public Bank of Oakland, which advocates for the creation of such a bank, and the Local Clean Energy Alliance, which advocates for renewable energy development. They teamed up to host Wolfram Morales, chief economist at the East-German Savings Bank Association (Sparkasse), to learn how public banks have financed the transition to renewable energy in Germany in hopes that this model could be applied to the East Bay.
Germany currently has 400 municipally-owned public banks, known as Sparkassen, which first formed 200 years ago, said Morales. He gave a detailed PowerPoint presentation to nearly 200 people who filled the seats of the council chamber floor, as he described how this network of local banks have been essential to Germany’s “energy transition.”
Renewable energy currently makes up 41 percent of energy produced and consumed in Germany—up from six percent in 2000—and Germany’s public banks are responsible for financing 72.5 percent of that, said Morales.
According to Morales, they accomplished this through offering low-interest rates. Germany’s public banks give loans with interest rates as low as 1.1 percent to entities with a good credit score, while most commercial banks’ best rate is 2 to 3.5 percent. A normal rate is 5 to 8 percent, Morales added.
Morales was joined on the dais by Nicolas Chaset, the CEO and of the recently formed East Bay Community Energy Authority; Gregory Rosen, founder and principal of High Noon Advisors, who has 19 years of experience in financing solar development; and Jessica Tovar, staff organizer with the Local Clean Energy Alliance. They all spoke on the importance of linking the need for the local democratic control of energy—known as Community Choice Energy or CCE—with municipal public banking.
In both the United States and Germany, CCE returns control over electricity sourcing to municipalities and away from investor-owned utilities, such as Pacific Gas and Electric (PG&E). Alameda County’s version of community choice energy is the East Bay Community Energy Authority, which was created through a partnership between Alameda County and 11 cities in the county, including Oakland. It will begin offering customers the option to purchase 100 percent renewable energy beginning in 2018.
“We really have been working for the last 10 years on community choice energy,” said Tovar, referring the advocacy of the Local Clean Energy Alliance. “We see it as an opportunity, but not a solution in itself.”
She said that offering renewable energy at affordable rates, the East Bay Community Energy Authority’s mission, is an important part of the equation, but that more need to be done to invest in local wind and solar infrastructure and family-sustaining, union jobs.
That’s where the public bank comes in, she believes. “In my community there’s been a lot of redlining, and a lot of people who aren’t even able to do banking,” she said. “That’s something we need to change in our community.”
“The big infrastructure investments in things we might want to make, things like electric vehicle charging, large local solar plants, or big energy storage projects, that’s where the local bank comes into play,” Chaset added.
Rosen spoke about how public banks can fill a gap left by traditional banks. “Investment committees [at banks] will say, ‘It sounds really good, but we really just don’t know enough,’” he said. “Or they might say, ‘It sounds really good, but we’re going charge you 12 percent.’”
“Its very hard to solve issues around risk, if you don’t really understand what’s going on in the community,” he continued. “If bankers are in a community” listening to people, he said, it “helps to lower some of the risk.”
Though not part of the official presentation on Monday, members of the cannabis industry are also major advocates of a public bank. Cannabis will be become legal in California in 2018, after voters passed Proposition 64 in 2016. But because it’s still illegal federally, cannabis business are unable to access banking services.
“The cannabis community has been actively part of the strategizing meetings and the activism from day one,” said Kaplan, speaking after the presentation.
Oakland’s Harborside medical cannabis dispensary currently makes $35 million per year in revenue—$30 million of that in cash, according to co-founder Dress Wedding. He said that staff currently pay the dispensary’s state and local taxes with weekly cash payments made via armored trucks.
“The reality for most cannabis businesses is that they are dealing with entirely cash and without a safe means of exchanging funds for services,” Wedding said.
A public bank could finally give the rapidly-growing cannabis industry access to bank accounts.
“We don’t really know if the Federal Reserve will accept that as a business plan and issue us a master account, but that’s our hope,” said Wedding.
After ten months of negotiation and preparation, the Oakland City Council passed a resolution last Tuesday, authored by Kaplan, that allocated $75,000 to fund a public bank feasibility study to be conducted by Global Investment Company. The city of Berkeley also contributed $25,000, and private donors from the cannabis industry also gave an undisclosed amount, according to a statement from Kaplan’s office.
“I started working on cannabis legalization in 2003 in Oakland and people were like, “Haha, yeah right. You’re going to give out business permits in the city of Oakland that’s a license to conduct a federal felony? Like that’s going to work,’” said Kaplan after the presentation.
“Here we are 15 years later. It’s been a spectacular success. They’re paying millions of dollars in taxes. They’re not really having problems, and everybody else is now copying us.”
“Often with things like this is that somebody needs to start it,” she added. “Then more people will come on board.”
Cathy Jackson-Gent, principal at Global Investment Company, says that the study will determine whether a public bank is feasible, and what it’s structure might look like on a city, regional, or even state level. She said that “the bank is not expecting to serve individuals or businesses directly,” but instead “to financially support capacity building through relationships with existing community banks, credit unions and other financial institutions.”
But Kaplan, speaking Monday, said she thinks Oakland residents would be eager to participate in a public bank. “I believe that there are thousands of people in the area who aren’t currently excluded from banking who would move their account to a public bank because they believe in it,” she said.
Jackson-Gent stressed that public banking can potentially “provide solutions to a misalignment of banking services” by providing services to so-called “unbankable” constituencies, such as the cannabis industry and low-income people, who are often subject to predatory lending and high-interest cash advances.
She said her analysis will include “how a public bank could respond to the needs that have not been well addressed by traditional banking providers,” such as small businesses, infrastructure improvement, affordable housing, affordable lending and supplemental cash flow.
She estimates that the feasibility study will be completed in early 2018.
This story was updated on September 28th to add a quote from Jackson-Gent clarifying what kind of entities she expects the bank to serve.