Popular Resistance - A feasibility study concluded that the city of Santa Fe could save money by establishing a public bank.
Currently, when the city needs money to build roads, recreation centers, sewer lines, libraries or senior centers, it has to make its case to big investment firms and mutual funds that buy municipal bonds.
A debt package is compiled, analyzed, rated and then advertised — and whichever financial institution offers the lowest interest rate gets to loan the city money. The proceeds are deposited electronically, and the debt is paid off in small amounts over decades by water ratepayers, shoppers who pay taxes on goods and services, or perhaps those who play a round of golf.
But even during a time of historically low interest rates, borrowing funds has a cost to the government of 2 percent to 5 percent. That can be significant when amortized over decades. Santa Fe estimates it could have saved $10 million since 2009 on its $80 million of current debt had the government been able to borrow from its own community instead of Wall Street.
The City Council in 2014 authorized the feasibility study on whether Santa Fe could pull its cash out of financial institutions and use the funds to establish a public bank. The analysis concluded that such a bank could sustain itself and make a profit for taxpayers, but the concept should move ahead slowly, with transparency, and start small with the city paying for its own borrowing before offering loans to other governments or businesses.