OLYMPIA – A bill that would create a public financial cooperative in Washington state was approved by the Senate on Friday.
The new public cooperative created by SB 5188, sponsored by Sen. Patty Kuderer (D-Bellevue), would provide alternatives for local and tribal governments to fund critical infrastructure and economic development needs.
Profits from rates and fees charged by the public cooperative would be returned to the community through investments in local economic development and infrastructure projects. The public cooperative would have a goal of providing 35 percent of the amount it lends on an annual basis to support housing in low- to moderate-income areas after five years of operations.
“The public co-op’s core mission will be to serve the public, through reinvesting those profits back into the very communities we live in,” said Kuderer.
The public cooperative would be a public entity, independently governed, and staffed by professionals with experience in the financial services industry. It would operate under the oversight of elected state officials and, as an independent entity, its operations would not affect the state’s debt limit or its credit rating.
The idea of a public financial institution has been discussed in the state Legislature in various forms for several years. Most notably, Sen. Bob Hasegawa (D-Seattle) has been a strong advocate for a public bank since the economic crisis in 2009.
“I’d like to give special thanks to my colleague, Sen. Hasegawa, for leading this effort from the very beginning and giving me an opportunity to work with him these past several years on this important issue,” said Kuderer.
SB 5188 evolved from those original public financial institution discussions. The University of Washington Evans School of Public Policy & Governance was tasked by the Legislature to examine the idea in greater detail. The Evans School workgroup issued a design framework and professional business plan last May.
The workgroup identified benefits of a public cooperative to local governments like:
- Offering financing on public infrastructure projects at lower underwriting/origination fees than investment banks.
- Offering more competitive rates than investment banks for certain types of projects.
- Enabling local governments to make deposits at potentially higher rates of return than what are currently available through the Local Government Investment Pool and other investment options. Such deposits could also be a source of funds for the cooperative to extend short-term loans to members.
SB 5188 will now go to the House of Representatives for consideration. It has until April 11 to be approved by the House to be eligible to become law this year.
The 2021 legislative session is scheduled to adjourn on April 25.