The Public Bank Measure: Should Berkeley Homes and Businesses Subsidize Risky Loans for Everyone Else in the East Bay?

You may have recently been asked to support the so-called “Public Bank” measure. Here’s what the measure actually does: it imposes a new parcel tax on Berkeley homes and businesses—while authorizing a yet-to-be-approved bank to spend the money anywhere it chooses in the East Bay.

In short, Berkeley taxpayers would underwrite high-risk loans that may benefit other cities, all while driving up housing and business costs here at home. Ironically, the measure claims to help small businesses even as it imposes a 33% surcharge on non-residential properties—hitting struggling Berkeley businesses to fund ventures outside the city proper.

A Tax First. A Bank? Maybe—Later

Since 2019, Public Bank-tax proponents have sought an “initial” $40 million investment from Oakland, Berkeley, Richmond, and Alameda County to launch a Public Bank. In 2024, the Berkeley City Council approved $50,000 for a "Viability Study” to determine what capitalization would require. That report has not been publicly released (to the best of our knowledge), so we have requested a copy. City staff have concluded that a Public Bank would demand a “huge investment”—a risky proposition given Berkeley’s $28 million structural deficit.

Undeterred, Bank proponents are now pushing a ballot measure to impose a tax on Berkeley residents and businesses for up to eight years before a single loan is ever made.

If the Bank does not secure authorization to conduct business by or before June 30, 2033, the special fund may be used to offer loans which support affordable housing, green energy/infrastructure, and/or small businesses until such authorization has been secured, consistent with this Chapter. [Section 7.03.010 F]

In other words: Tax immediately. Structure later. Delay business activity until maybe  2033.

Mandatory Tax Increases….Forever

Don’t be fooled by the introductory tax rate. Like a credit card with a hidden interest spike, the measure mandates annual parcel tax increases. Each May, the City Council must raise the prior year’s rate by the greater of Bay Area cost-of-living growth or state per capita income growth. In 2025, this formula resulted in parcel tax increases of 6.44%. In periods of high inflation, the increase could exceed 10%. Council would have no discretion to stop the escalator— it is guaranteed in the language of the tax measure. The Public Bank is not.

Annually in May, the City Council shall increase the previous year's rate by up to the greater of the cost of living in the immediate San Francisco Bay Area or per capita personal income growth in the state. [Section 7.03.020 B]

Berkeley Subsidizing Risky Loans Anywhere in the East Bay

One of the most disturbing aspects of this measure is that there is no requirement that funds be spent in Berkeley. Because the bank does not yet exist, its eventual service area is unknown. A modicum of assurance to taxpayers would be a provision that guarantees a minimum percentage of subsidies paid by Berkeley taxpayers would be loaned within Berkeley. However, no such a provision exists. 

High-Risk Lending Rejected by Other Progressive Jurisdictions

Proponents of the Public Bank measure insist Berkeley property taxpayers should subsidize regional business startups because big banks deem such loans as “unprofitable or risky.” However, this measure will prioritize extremely high risk ventures:

 

• Businesses too small to secure traditional financing, 

• Startups,

• Any operation the Bank’s management believes “can grow and thrive with loan support.”

These loans are extremely risky. Nationally, roughly half of all startups fail within five years. The Bay Area’s costly environment makes the failure rate even higher. Adding a 33% surcharge to Berkeley businesses only increases financial strain locally—while subsidizing risky ventures in other cities. Further, management only needs to "believe" a business "can grow and thrive" as opposed to making an affirmative financial determination that the enterprise is viable.

Massachusetts rejected a Public Bank at the state level citing these exact concerns: the high costs, risks, and unclear benefits including a significant initial investment of capital by taxpayers.

A Redundant “Solution” in Search of a Problem

Existing mission-driven banks and credit unions already serve small businesses and nonprofits without taxpayer subsidies. The Public Bank measure would create a subsidized entity competing with these local lenders.

Besides small business, the parcel tax subsidies may be used to finance housing and green energy infrastructure. However, the state already operates the California Infrastructure and Economic Development Bank (IBank).  IBank has financed over $56 Billion in energy, infrastructure, and housing.

From Dubious Economics to Nonsensical Gaslighting

These are undeniably difficult times (as we have previously noted), with federal cuts to health care, education, and social support hitting Berkeley hard—including reductions to social safety nets, and funding for UC Berkeley and the National Labs. Bank proponents are using these hardships to justify yet another local tax—appealing to emotion and identity politics rather than fiscal sense. A Public Bank cannot replace federal funding for essential services and “provide local resilience.” Please, stop the gaslighting.

At a time when the federal government has made many sudden grant cancellations, a public bank can provide local resilience to changes in federal funding flows or from federal government shutdowns. [section 2: I]

To the proponents of the Public Bank tax, please explain under what existing conditions would bank loans be a substitute for federal funding for health services and research?

The Bottom Line

This measure asks Berkeley homeowners and businesses to:

• Fund a bank that does not yet exist

• Approve a permanent parcel tax

• Accept automatic annual increases pegged to the highest inflator

• Subsidize high-risk regional lending

• Receive no guarantee that funds stay in Berkeley (100% could be spent elsewhere in the East Bay such as Richmond or Oakland)

Berkeley faces real fiscal challenges. Layering a permanent, automatically escalating tax onto residents and small businesses to finance a speculative regional bank will not result in fiscal resilience.

In fact, a Public Bank would be a  long-term financial gamble—with Berkeley taxpayers holding all the risk.